New Best Practice Alert! Board Code of Conduct

It never fails.

Just when you think you’ve got all the best practices in place, another comes raging to the forefront. And that’s exactly what’s happening today with Codes of Conduct, specifically for the board of directors.

It used to be that board members would be asked to attest to the company’s Code of Conduct.  That seems fine at first until you think about all the sections of the Code that simply do not apply because a board member isn’t an employee.

For instance, does the section on resale price maintenance really apply? How about the requirement to begin a privacy impact assessment before starting new uses of data? Hence the reason for a board-specific Code.

Sound hard to create? It’s not. See the step-by-step process below.

Step 1: Pull Out Your Current Code

Print a copy of your current Code of Conduct and cross out everything that only applies to employees. If there are sections that would apply to board members but don’t in their current form, highlight those sections. 

Step 2: Think about Additional Topics

Think about whether additional topics could be necessary.  Some topics typically covered include:

• Conflicts of Interest

• Charitable donations on behalf of the company

• Political donations on behalf of the company

• Reporting of concerns

• Ethical decision making

• Complying with the law generally

• Insider trading

• Protection of confidential information

Note what needs adding.

Step 3: Enumerate Duties

Next, enumerate the high-level duties of the Board with respect to compliance and ethics at the company. This may include:

·      Promoting an ethical culture

·      Overseeing the compliance and ethics program

·      Participating in compliance training given to the board

·      Attesting annually to the Board Code of Conduct

·      Disclosing any conflict or potential conflict

·      Acting with a duty of care

Step 4: Edit and Draft

Take the sections of your current Code that will apply to the Board and re-draft them. Ensure that any employee-specific portion is removed and shifted to reflect Board activities.

For example, it is unlikely that a board member would call the anonymous whistleblower hotline if they needed to report unethical conduct. Instead, board members would more likely report to the General Counsel or Chief Compliance Officer directly. Reflecting that in the Code will make it more relevant. 

Add the new topics as required. If possible, add design elements to make it attractive. Get sign-off from whoever needs to review it before it goes to the full Board.

For reference, most Board Codes of Conduct that we’ve seen at Spark Compliance are dramatically shorter than full Codes of Conduct, often reaching only two to five pages.  

Step 5: Present the Board Code

You’re now ready to present your Board Code. Explain the rationale behind it, ask for review and feedback, then finalize and request the signatures of the Board members. 

Voila! You’ve now met the latest and greatest best practice. No doubt another one will come soon, so get this one out of the way as soon as possible.