Importance of Creating a Code of Ethics for a Business

A code of ethics is important for businesses to establish to ensure that everyone in the company is clear on the mission, values and guiding principles of the company. It provides employees with a framework of which rules exist, from a regulatory and law-enforcement standpoint and how to act in the gray areas of value-based ethics that aren’t always clear. Create each section of your code of ethics with a specific purpose to develop the company culture you desire.

Follow the Law

At a minimum, ethical behavior entails following the law. Many ethical issues boil down to legal issues. While many business owners don’t feel the need to tell employees to follow the law, it is important that the code of ethics addresses it. The reason it is important to address in your code of ethics is that employees might not think what they do will affect their job status.

For example, a plumbing company that has plumbers use company vans needs to know that the drivers aren’t driving under the influence either at work or after hours. After hours has a direct impact on the company because employers must insure every driver; drivers with bad driving records might lose their license and be unable to perform job duties.

Handling Regulatory Issues

Regulatory issues are also legal issues but have more to do with processes and procedures than actually breaking the law. For example, privacy policies require keeping client information confidential and secure. That is a regulation. Stealing the customer’s identity goes beyond violating the regulatory portion, it breaks the law.

When defining regulatory issues in your code of ethics, state what the regulations are and how the company expects employees to maintain ethical practices in that area. For example, mortgage brokers have to complete a specific number of continuing education credits before license renewal. It would be unethical for two brokers to do the continuing education together online to complete it collaboratively rather than individually.

Value-Based Ethics

Of course, ethical behavior can go beyond the minimum required by laws and regulations. Value-based ethics get to the heart of your corporate culture. It defines how you want your business to be seen by the community. It establishes a component of your brand beyond your product or service.

For example, a value-based section of your code of ethics might involve community involvement. Another value-based code of ethics statement might involve going green with office practices and product packaging.

Professionalism Defined

The last component of a code of ethics you need to address is the level of professionalism you expect from employees. This could include integrity, honest sales practices and respectful conduct to co-workers. You can also include dress code, desk organization and general office conduct rules. Where one business might not be concerned with men wearing a tie to the office, a financial services company might. Consider your professional standards and outline them, so that there is no confusion in the office.

When Actions Seem Wrong

Your company code of ethics should certainly stress the importance for all employees to engage in ethical behavior. But it can do more. It can also offer guidance for steps employees can take if they become aware of behaviors that do not live up to the company’s ethical standards and policies. These can range from simple one-on-one conversations reminding employees of the ethical code to formal reporting mechanisms for something considered a serious lapse in ethical behavior.