We appreciate we have probably run the risk of losing most readers at the title, such are the excitement levels normally generated by Codes of Ethics or Codes of Conduct. But bear with us!
Ethics is actually a fascinating topic. Especially when you are presented with an instance of an absence of ethics!
Some people have the view it shouldn't be a topic at all, such is the fundamental nature of it. However, therein lies the issue; what one person may see as an unquestionable part of their moral make-up, another person brought up differently may have an entirely different view and hence ethical frame of reference.
So that's why we have Codes of Ethics, or sometimes entitled Codes of Conduct, within organisations. These should help to, hopefully clearly and concisely, explain the expected values and behaviours of the organisation and of those within it. After all; an organisation does not do anything by itself. Rather it is its people who bring everything about it to life.
What type of organisations will benefit from having a Code of Ethics/Code of Conduct?
In our view: all.
However they also need to be contextual. i.e. Entity size and type appropriate, or as grandfather used to say; "horses for courses".
Your authors are Chartered Accountants and as such bound by our professional body's Code of Ethics. This is effectively an international Code written to apply to all professional accountants working in whatever area of accounting, anywhere in the world. Accordingly, it is a complex, detailed, and lengthy document extending to some 200 pages of requirements and application guidance. As much as this sometimes makes me groan, because of the wide range of activities that accountants around the world are involved in and the importance of their actions in many cases, this level of detail is appropriate. However for most organisations, a more concise Code is probably much more appropriate.
To be effective Codes should ideally be "principles based" rather than "rules based". Albeit, there may be some cases where strict rules are also appropriate. Being principles based allows them to more easily be applied to a wide range of often changing situations that people within organisations find themselves having to deal with.
Going back to our International accounting Code of Ethics; even though it has over 200 pages, it is essentially just based on 5 fundamental principles. The rest of it is largely the elaboration of these as well as application guidance to assist with the multitude of different situations that may commonly occur in practice. These fundamental principles, which we suspect would apply to many organisations, are:
1. Integrity - to be straightforward and honest in all dealings
2. Objectivity - to avoid bias, conflict of interest or undue influence of others
3. Professional Competence and Due Care - obtain and maintain the skills and experience required, and act diligently
4. Confidentiality - respect confidentiality of information obtained
5. Professional Behaviour - comply with relevant laws and regulations
While obviously designed for an environment where there is a formal structured engagement and a client and professional provider relationship, these may be of use to many other contexts. Interestingly when you look at a wide variety of different Codes, or comparative studies of the same, you will see that there are very many similarities in the core messages. And given that Codes are setting out to define or clarify expected moral behaviours or key values then this should not be overly surprising.
The Growth in the Spread of Codes in Recent Times
Without question there has been a growth in the number and different types of organisations developing and implementing Codes in recent times.
This increased interest in and spread of Codes, in our observation, is due to a mix of the following:
1. An increased appreciation that an organisation has a social licence to operate and must act accordingly
2. Increased globalisation of business and organisations - which in turn introduces different cultures, regulatory environments, and cultural norms into the mix with different frames of reference
3. The rise of social media and consumer consciousness and the ability to call out questionable behaviour
4. Generational differences and perhaps a faster pace of change
5. An increase in legislation and regulation.
However, most of the above could be characterised as reactive reasons. There is also a very compelling positive proactive reason. A study of long term successful businesses and organisations will often show they put a lot of emphasis on their clarity of purpose along with a strong and clear value set for those within it to be guided by. This in turn drives long term sustainable success.
Bringing Codes to Life
"A code is nothing, coding is everything".
An interesting statement we recently read in an article about the importance of ethical leadership for directors. In essence, it was saying that while Codes and guidelines were undoubtedly important in any organisation to set the expected behaviour, without that Code being lived behaviour it was effectively worth nothing.
Many of us will be able to relate to the concept of being part of a group of people who have collectively invested considerable time, skill and energy in wordsmithing and crafting a fine document only for it then to be considered "done", filed away, and it effectively just gathering dust from then on.
But a Code is essentially about defining expected behaviours. The culture of an organisation. And culture is a living thing. The Institute of Directors' excellent Four Pillars reference publication explains that functional culture is essential to a high performing board:
"Within the corporate structure, the board has the highest standards of accountability and liability while operating with the least amount of time and almost no day-to-day control. Some board architecture and processes provide a platform for good governance but do not guarantee it. The key is to build and nurture a healthy operating culture with effective interaction between skilled and experienced people."
One of the primary board architecture and processes to assist building and nurturing a healthy culture is the Code of Ethics/Conduct for the organisation. Some practical ways the board can integrate and keep this alive are:
- Ideally involve the whole team in its initial development
- Ensure this is a key part of the induction of new team members
- Make it easily accessible and ideally highly visible – eg posters on walls
- Share internally and externally - making your values visible to clients will positively increase accountability
- Ensure your Code is covered in team training at least annually, but ideally more frequently. (When it comes to education; a dripping tap is generally far more effective than an occasional bucket!)
- Alignment of remuneration and incentives to organisational values
- Regular celebration of those living the values
Codes of Ethics or Codes of Conduct are useful and important. Sadly, to many, they have an equivalent interest level to watching paint dry. But it needn't be that way.
Increasingly important as part of an organisation's licence to operate or social licence, done well they can also be a core part of an organisation's long term sustainable success.
Lastly, some very useful questions to make a Code of conduct come to life from Mike Bennetts, CEO of Z Energy. Mike's 3 useful questions that people should answer when they face a difficult decision are:
1. Does it feel right?
2. Can I tell my grandmother?
3. If it is in the paper, will I mind?