A Code of Conduct is an essential part of compliance best practice. Most companies have one. What exactly does it entail, and are you obliged to read and sign it?

Business, Technology, Internet and network concept. Young businessman working on a virtual screen of the future and sees the inscription: Code of conduct

Various organisations use a Code of Conduct – regulators, the civil service, industry bodies, individual companies and other organisations, and even schools.

If you’ve been a new employee, you’ve probably received a Company Code of Conduct where you need to acknowledge your understanding of and commitment to it. So, what exactly are you committing to? And how might this affect your employment relationship?

Decoding the Code of Conduct Culture

What is a Code of Conduct?

A Code of Conduct is a legal document that aims to comprehensively set out the organisation’s expectations of behaviour for all individuals and entities covered by the Code.

Often, the Code will also provide a formal expression of the values and culture of an organisation as applied to the everyday workings, ensuring transparency of working practices. The Code can cover anything from the company’s dress code and timesheets to how a company expects an employee to act on social media.

A well-written Code of Conduct will help clarify an organisation’s values and principles and link them with standards of professional conduct, setting the benchmark for those it applies.

What is the purpose of a Code of Conduct?

In short, the purpose of a Code of Conduct is to express an organisation’s values and principles. But, it also serves another important purpose. When published, it publicly expresses what the organisation stands for and how it aims to satisfy compliance rules and obligations.

This publication provides transparency to internal and external stakeholders, giving them an image of what the organisation stands for. A Code of Conduct may also indicate an organisation’s commitment to preventing illegal behaviour and following sectoral best practices.

A published Code of Conduct also protects the organisation from ethical misconduct accusations.

How does a Code of Ethics fit in?

Alongside a Code of Conduct, an organisation may publish a shorter, related document called a Code of Ethics. At this point, it may be worthwhile to explain the difference between the two types of Code.

While a Code of Conduct is an enforceable set of specific rules and obligations that clearly define which actions or behaviours are unacceptable, a Code of Ethics is more of a statement of guiding principles used to define the moral position of an organisation.

For example, a Code of Ethics might include statements such as, ‘the organisation is strongly opposed to bribery at any level of the supply chain’.

While a Code of Conduct could require all staff and contractors to participate in anti-bribery training, commit to the organisation’s anti-bribery policy and ensure the performance of ongoing, appropriate due diligence when dealing with any level of the supply chain.

As a Code of Conduct is more explicit about expectations and obligations, it is far easier to enforce than a Code of Ethics. However, a Code of Conduct will often incorporate all or part of the organisation’s Code of Ethics to contextualise the formal rules better.

Key elements of a Code of Conduct

Given that a Code of Conduct sets out the values and principles of an organisation, it is often as unique as the organisation itself. Nonetheless, certain components of a Code of Conduct are generally regarded as universal.

A Code of Conduct should always specify who is covered by its provisions, and it should also provide details or links to relevant reporting, complaints and disciplinary procedures.

Most Codes of Conduct consist of several sections, and generally, each section will address a particular setting or behaviour. For example, a Code of Conduct may have separate components addressing:

  • Company policies (e.g. privacy and confidentiality, equal opportunity, gifts and entertainment etc.)
  • Company culture (e.g. ensuring commitment, care, fairness and consistency, transparency, professionalism and accountability in all dealings, whether internal or external)
  • Attendance requirements and meal and rest breaks
  • Allowances and benefits (including holidays)
  • Dress Code
  • Use of company equipment
  • Use of personal devices during work time
  • Harassment and discrimination
  • Substance use
  • Conflicts of interest
  • Financial integrity and responsibility
  • Obedience to applicable laws (e.g. financial sanctions and embargoes, anti-money laundering, fraud, competition, discrimination, insider trading, anti-bribery, safeguarding the vulnerable etc.)
  • Behaviour outside the work environment (e.g. public actions and social media posts)

Depending on the organisation, there may be more than one Code of Conduct covering different aspects of the organisation. For example, an organisation may have a separate Employee Code of Conduct, a Code of Conduct for Suppliers, a Code of Conduct for Senior Management and a Code of Conduct for Associates and Connected Third-Parties.

It is common for a Code of Conduct to be treated as an organic document, incorporating mechanisms for providing feedback, and making (and notifying) amendments. Generally, there is an ongoing requirement for those committed to the Code to reacquaint themselves periodically with its provisions.

Reading & adhering to the Code

When determining how to adhere to a Code of Conduct, the first thing to establish is whether it applies to you. As noted above, a Code of Conduct should specify who is covered by its provisions. If the Code applies to you, you’re likely to have committed to it directly or via your contract.

Once bound by the Code, its provisions apply to you as contractual terms. However, it is important to note that the organisation is still responsible for making you aware of the Code of Conduct.

The Code should be written so that it is easily understood and accessible to all bound by it. The onus falls on the organisation to provide adequate training if it is needed to explain aspects of the Code better. For example, individual corporate policies that form part of the Code.

In law, a code comprises a consolidated, systematic and comprehensive compilation of rules on a particular topic. You should read each component of the Code of Conduct as representing a separate rule to which an individual or entity is contractually bound and to which the individual should strictly adhere.

Still, when reading the Code of Conduct, it is also important to recognise the underlying principles of a provision, as your behaviour should always reflect the spirit of the Code.

The Code of Conduct or the relevant contract will include provisions outlining the disciplinary procedures associated with a breach. Depending on the severity of the breach and the consequences, certain actions may attract more severe sanctions.

For example, a person found to be in breach of a fundamental rule may face strong disciplinary action or risk termination of the contract and a claim for associated contractual damages.

Ensuring Code of Conduct effectiveness

When reading the Code, you should consider it part of the contractual relationship between you and the organisation. It sets out the expected standard of behaviour, as derived from your position.

If there are any parts of the Code of Conduct you do not understand or about which you have concerns, you should flag them with your manager, contact or the relevant team (often HR).

Organisations should regularly monitor and audit the implementation of Codes of Conduct, paying close attention to levels of compliance and effectiveness of enforcement mechanisms. Any feedback you give will help the organisation refine its Code of Conduct, making it more relevant and accessible.

To enhance transparency, organisations should always aim to share the results of any audits with stakeholders (respecting the privacy of contributors) and report on metrics such as suspected breaches, mechanisms for reporting, whether reports were substantiated, and the company’s response.

Regular reviews of the Code are also important to ensure the Code reflects any changes in the law or the organisation’s policies or norms.

A Code of Conduct is only effective if an organisation can properly enforce it. If you are aware of others’ actions that may conflict with the Code, you should report them. Equally, if you feel that you are required to act in a way that conflicts with the Code, you should raise your concerns immediately.

Building a compliance culture with the Code

A Code of Conduct provides a powerful tool to help an organisation develop a strong compliance culture. It gives clear instruction on what the organisation permits and doesn’t.

It also helps to feed into the organisation’s policies and procedures and highlights appropriate reporting channels. Take Codes of Conduct seriously – read them and ensure you understand them, and always adhere to their provisions,

They are there for the organisation’s benefit and show its commitment to the stated standards and principles.

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