Why Have a Code of Conduct

Regardless of whether your organization is legally mandated to have a code (as public companies are), every organization should have one. A code has value as both an internal guideline and an external statement of corporate values and commitments.

A well-written code of conduct clarifies an organization's mission, values and principles, linking them with standards of professional conduct. The code articulates the values the organization wishes to foster in leaders and employees and, in doing so, defines desired behavior. As a result, written codes of conduct or ethics can become benchmarks against which individual and organizational performance can be measured.

Additionally, a code is a central guide and reference for employees to support day-to-day decision making. A code encourages discussions of ethics and compliance, empowering employees to handle ethical dilemmas they encounter in everyday work. It can also serve as a valuable reference, helping employees locate relevant documents, services and other resources related to ethics within the organization.

Externally, a code serves several important purposes:

  • Compliance: Legislation (i.e., the Sarbanes-Oxley Act of 2002) requires individuals serving on boards and organizational leaders of public companies to implement codes or clearly explain why they have not.
  • Marketing: A code serves as a public statement of what the company stands for and its commitment to high standards and right conduct.
  • Risk Mitigation: Organizations with codes of ethics, and who follow other defined steps in the U.S. Sentencing Commission's Federal Sentencing Guidelines, can reduce the financial risks associated with government fines for ethical misconduct by demonstrating they have made a "good faith effort" to prevent illegal acts.

For additional information about the benefits of a code, see Creating a Workable Company Code of Ethics pp. 3-4 and 6-9.