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Essay on Code of Ethics in the Organization


organization understands the importance of a clearly defined code of ethics as part of its set of rules and policies. The organization’s ethics policy statement is quite comprehensive, and can be described in three levels: code of ethics, code of practice and code of conduct (IFAC, 2006).

The code of ethics defines the purpose and value of the company in regard to its stakeholders. It helps managers and other employees to understand the context of ethics in the organization and also defines the obligations of the employees to one another.

The code of practice takes a further step. Here, value propositions are translated to organization-wide principles. By doing so, ethics is emphasizes as any other mission of the organization. In other words, just as an employee understands that she must increase sales in order to help the company to grow, her commitment to the ethical codes of conduct discussed below has the same roots in the company’s mission statements. The practices also help to make every employee an ethical decision-maker.

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Finally, the organization’s code of conduct states clearly what behavior is expected from employees, suppliers and customers and what is strictly forbidden within the organization’s jurisdiction. In addition, it is clear for everyone that violations of the code will not be tolerated.

These codes are obligatory at all levels, enforced by managers and include, among others:

  • The obligation to disclose any conflicts of interest, in particular insider trading
  • Use of company property, information and customer base
  • Discrimination and harassment
  • Specific professional issues such as marketing and HRM ethics
  • Reporting and control
  • Health, safety and dress codes

In order to ensure effective implementation of the codes, the organization makes sure to document and communicate the ethical standards to all relevant stakeholders. The communication method is comprehensive enough to the degree that it is adjusted to the characteristics of every stakeholder. For example, managers receive memos regarding the codes, while customers can learn about the codes that oblige them in the point of sale. Special attention is given to translating the codes to match all stakeholders’ native languages. Other means of communication, including ethics bulletins, ethics sections in business plans and managers’ obligation to discuss ethics policies in staff meetings help to keep the codes “alive” and promote their execution.

Finally, compliance with the codes of ethics is ensured in several ways. Since ethical behavior is only part of the organizational citizenship (except when it is also required by the law), the organization must apply internal means of enforcement, similarly to the ways it “legislates” the codes. In order to do so, not only managers are required to ensure ethical conduct among their subordinates, but the employees themselves must report immediately when they suspect that the codes are not followed. The organization has “hotlines” and anonymous mailboxes in which complaints can be filed. In case of a breach, the organization defined proper (and proportional to the person, the offense, etc.) sanctions, which range from warnings to termination. In contrast, cases of superior ethical conduct are also communicated and remunerated.

Ethics Training
As its importance to the organizations’ values, missions and goals, ethical training is also a significant component of the training programs. Broadly speaking, the goals of these programs are to communicate ethical codes and standards, to develop ethical decision-making, to introduce new employees to the ethical environment they will work in and to build ethical framing in the organizational culture. In addition to specific ethical training programs, ethical questions arise in most of other trainings, such as in the sales and customer service departments. Obviously, some of these programs are required by law (e.g. sexual harassment training).

The extent of training may vary according to many factors, but the organization makes sure that every employee will deal with ethical issues for at least one hour a month, including full-days seminars at least once a year. Managers, on the other hand, are obliged to conduct ethical training themselves to their subordinates in addition to management-focused ethical training. In addition, training programs are also offered by external consultants, cross-departmental training and e-learning programs, in particular among distant workers. New employees cannot start working before graduating the organization’s ethical training program for newcomers. One popular way of training, especially among managers, is to positions themselves as role models for ethics and use almost every opportunity to deal with the issue.

The ethical training programs consist of case studies, simulations, lectures and discussions, with emphasis on real-work situations. The importance of ethics is also emphasized by presenting the devastating results of ethically questionable behavior, which leads to lawsuits and corporate scandals, to the degree of tangible risk to jobs. Case studies from within the company and/or the industry are used as much as possible, as the organization believes that this is how the details and implications of the case can be best felt.

Making sure that employees follow ethical rules and procedures is a complicated issue, which should be addressed carefully. While many argue that a law without enforcement is worthless, employees should also get a feeling that their integrity is valued. As discussed below, in addition to creating an honorable atmosphere with a sense of mutual respect, the organization’s management refrains from excessive policing and particularly resists surveillance and monitoring measurements, which may be an ethically questionable deed on the management’s part.

Nevertheless, the organization does not wait for a problem to explode before it acts. The level of ethics and integrity of employees, teams and departments throughout the organization is always evaluated. The measurements are made in reference to performance standards. Most of these standards are derived from the codes of conduct, while other standards are based on benchmarking, legal definitions, trade regulation and so on.

For example, one category of the codes of conduct at the organization deals with preventing discrimination of mentally and physically disabled persons. A manager may not harass disabled employees and customers, but this is not enough for ethical appraisal. Higher “scores” will be given to those managers, who make sure that all their premises are accessible to disabled persons. The scales and measurements also allow overall or point-by-point analysis and enables annual comparisons.

At deeper levels of the organization, many types of unethical conduct are hard to reveal without those employees that decide to become whistle-blowers. Such behaviors include some of the most destructive types of breaches, including bribery, fraud and theft. Whistle-blower, who stands up and testify against colleagues, may be thus extremely important to eliminate corruption from the organization. Consequently, whistle-blowers have the possibility to report to ethics officers within the organization or to an external consultant, who is instructed not to make any use of personal data without the whistle-blower’s explicit permission. Furthermore, reporting is a part of the organization’s ethical training programs and those who do so are granted full support to make sure that their careers would not damage because of their decision but actually will be promoted.

In contrast, an employee who becomes aware of an immoral conduct that must be reported and refrains from doing so, is held accountable for the deed in the sense of passive cooperation. There is practically no reason why not to report, even if the situation is unclear. As reporting is confidential and can be even anonymous, good organizational citizen should report and let the organization to investigate and to manage the case.

Ethics play a key cultural at the organization. This has nurtured ethical framing, which affects concepts such as “gain” and “loss” also from the ethical, and not only from the business side, point of view. For example, bids of potential suppliers must also include relevant ethical issues (e.g. working conditions of the suppliers’ employees). Low biddings of suppliers with ethically questionable behaviors are not likely to be accepted by the procurement department.

Similar processes also happen within and among the various units of the organization. Increased sales after ethically questionable campaign, for instance, are perceived as a clear loss to the company, a loss that can be quantified thanks to the ethical appraisal system. Similarly, costs will never be reduced on the expanse of immoral conduct (e.g. pollution, exploited labor force).
As mentioned earlier, ethics also play a key role in planning and management.

Ethical issues to be considered in designing and executing plans are plentiful, adjusted to the underlying business activity, and include, among others:

  • Relationships with, and expectations of the plan’s stakeholders
  • Corporate social responsibility in terms of compliance with the law as well as activism issues
  • Implications of the plan on sustainable operations and environmental friendlier alternatives
  • Safety and well-being of employee and other stakeholders on-site
  • Ethical appraisal of promotional strategy and sales methods
  • Accounting, reporting and financial standards
  • Ethical dilemmas that may arise during the execution
  • Product safety
  • Ethical training within the framework of the new operations

As mentioned earlier, ethical standards without proper enforcement are perceived are rather ineffective, even at this organization, which perceives itself and its stakeholders as highly aware to ethics. Enforcement is needed because unlike state laws, obedience to ethical codes in technically voluntary.

The aim of the enforcement mechanism is to support ethical conduct and to handle violations of ethical principles. It does not aim, however, to be the main incentive for employees to act ethically. If this was the situation, the only determining factor for compliance with the organization’s ethical codes of conduct was the extent of enforcement in regard to a specific location or issue.

Nevertheless, the organization has established a clear process for enforcement and case management.

This process is comprised from five steps: (AFP, 2008)

  1. Complaint: a company’s official, employee, customer or any other stakeholder files a complaint regarding ethical misconduct of an employee. The complaint does not have to be fully detailed; also partial information from anonymous whistleblowers is considered as complaints.
  2. Investigation of complaint: the organization’s ethics committee (at the HQ or SBU level, depends on the case) starts with a quiet investigation of the information. In cases of criminal offences (e.g. theft and sexual harassment), the committee reports the local law enforcement authorities. At no case will the committee handle criminal offences without full consent and cooperation of the police or any other relevant institution with higher enforcement authority (e.g. the medical association’s board of ethics).
  3. Hearing: if the details justify the complaint and the organization’s ethics committee is authorized to handle the case, the employee will be invited for a hearing. It is imperative to ensure that there is no conflict of interests between anyone of the hearing panel and the case or the employee in question. The employee will receive all the information before the hearing and will be allowed to prepare for it. A lawyer is allowed to be present during the hearing, which will be documented.
  4. Decision: the hearing panel may decide to find the employee guilty of the offence, not guilty or ask for additional steps such as further investigation, to invite other employees to hearings and so on. Disciplinary actions and other types of penalties must be proportional and fully justified. There should also be a link between such actions and the overall needs of the organization. For example, a manager who was found guilty of a felony cannot continue to lead other people, of course, but instead of terminating her, the organization can offer the employee a non-managerial position, in which she can continue to contribute the organization.
  5. Appeal: the CEO, SBU manager or, in extreme cases, the board of directors, can receive appeals to the decision. The appeal procedure aims to examine the hearing board’s decision, not to reexamine the case itself. The appeal process is also documented, although it takes the form of dialogue instead of a structured hearing process.

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The Association of Fundraising Professionals (AFP). (2008). AFP Enforcement Procedures for the Code of Ethical Principles and Standards. Retrieved August 9, 2009 from <http://www.afpnet.org/content_documents/ethicsenforcementprocedures.pdf>
The International Federation of Accountants (IFAC). (2006). Guidance for the Development of a Code of Corporate Conduct. Retrieved August 9, 2009 from <http://www.iasplus.com/ifac/0601ifacedcorpcode.pdf>
The Global Fund to Fight AIDS, Tuberculosis and Malaria. (n.d.). Whistle-blowing Policy for the Secretariat and Governance Bodies. Retrieved August 9, 2009 from <http://www.theglobalfund.org/documents/oig/Whistle-blowing_Policy_for_the_secretariat.pdf>

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