Code of Business Conduct | Ethics, Standards & Examples – Video & Lesson Transcript | Study.com

Video Transcript

Definition of Code of Conduct

A code of conduct is a set of organizational rules or standards regarding organizational values, beliefs, and ethics, as well as matters of legal compliance that govern the conduct of the organization and its members. Organizational members are responsible for adhering to the code of conduct and will be held accountable for failure to do so. Most large businesses will have a code of conduct, which are often developed in response to legislation regulating business activities and behavior or some sort of ethical scandal.

What Are Ethics?

Ethics refers to a system of belief regarding right courses of action or conduct. Ethical conduct is often viewed as conduct that is good for individuals or society as a whole. Ethics establish obligations and duties that people owe to others and society. Ethical standards are rules or principles established either by authority, such as a government, professional association, or employer, or a custom.

It is important to understand that ethics is a philosophical endeavor and not a legal one. Laws can coincide with a particular standard of ethics, deviate from it, or be neutral. What some people may view as ethical conduct may be illegal, and what some people view as unethical conduct may be perfectly legal. In any event, it is important that any business code of conduct requires compliance with the law.

Types of Business Codes

You can actually break business ethical codes into three broad categories that are based upon the approach each takes in maintaining ethical and legal compliance. Let’s take a short look at each.

Codes of conduct typically prohibit behavior and inform employees what is expected of them. Codes of conduct often outline penalties for failure to comply with the code. Common topics include conflicts of interest, political contributions, and acceptance of gifts.

Codes of practice attempt to explain and illustrate the values and principles of the business. Instead of providing strict rules to follow, codes of practice educate employees on how things are done in the business. These codes attempt to empower the employee by making the employee an ethical decision maker.

Codes of ethics codify the values and principles of the company and define the responsibilities, duties, and obligations organizational members have to the organization and its stakeholders.

Common Topics in Business Codes

While the content of codes will vary from organization to organization, many will address common topics, including:

• Conflicts of interests
• Confidential information
• Employment discrimination
• Use of the organization’s property
• Financial reporting and accounting
• Health and safety issues
• Political contributions and campaigning in the office
• Legal compliance issues relevant to the organization

Examples

While many businesses have developed customized codes of conduct, some international organizations have developed international codes of conduct. Some examples include:

• International Chamber of Commerce
• Organization for Economic Cooperation and Development
• International Labor Organization
• United Nations Global Compact

Professional organizations also have developed codes of conduct that govern members of their professions. In fact, a professional’s failure to comply with these codes can sometimes result in the professional being kicked out of the profession, such as a disbarred lawyer. Examples of professions that have developed professional codes of conduct include:

• Doctors – Hippocratic Oath
• Lawyers – Rules of Professional Conduct
• Engineers – National Society for Professional Engineers Code of Ethics for Engineers
• Nurses – American Nurses Association Code of Ethics
• CPAs – AICPA Code of Professional Conduct

Lesson Summary

A code of conduct is a set of organizational rules or standards that describe a business’ values, beliefs, and ethical standards to which the business and its employees must adhere. You can break business codes down into codes of conduct, codes of practice, and codes of ethics.

Ethics refers to a system of beliefs regarding correct behavior towards other people and society. Common topics in business codes of conduct include conflicts of interests, confidential information, employment discrimination, use of the organization’s property, financial reporting and accounting, health and safety issues, political contributions, and campaigning and legal compliance issues.

Vocabulary & Definitions

Code of conduct: A code of conduct in business is a set of organizational rules or standards regarding organizational values, beliefs, and ethics, as well as matters of legal compliance that govern the conduct of the organization and its members.

Ethics: Ethics refers to a system of belief regarding right courses of action or conduct.

Learning Outcomes

After viewing this lesson, you should be able to:

• Define ethics
• Provide examples of business codes of conduct
• Give examples of popular professions and their applicable codes of conduct