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Software Development

The benefits of having a code of ethics in business

date: 27 September 2022
reading time: 7 min

A code of ethics documents will outline the company’s mission statement, their values, methods for which their staff will approach issues, the ethical principles they must follow based on the organisation’s values and the basic standards to which they pledge.


What is a code of ethics and why is it important?

A code of ethics refers to a set of guidelines that are there to make sure that professional individuals and organisations conduct their business with integrity and honesty. It seeks to establish behaviour expectations that a company has for their employees and any third party collaborators.

Once tech companies have identified their future digital plans, they may choose to implement a code of ethics as part of their digital transformation strategy. This is not unique to tech though, many industries successfully implement a code of ethics into their operations, such as the UK Police Force, the Professional Association of Social Workers, and the Institute of Business Ethics. According to the job site Indeed, 28% of applicants may reconsider accepting a job with a company if their missions and moral values did not align – even if the job was perfectly suited to them in every other way.

Morality and ethics are important to individuals in the workforce as well as customers, so they must be considered carefully.

A code of ethics is similar to an ethical code of conduct, however, there are some key differences. The code of ethics document goes deeper into the principles that provide the foundation of a company’s actions and even goes so far as to outline issues such as conflict of interest, harassment, safety and whistleblowing.


The importance of having a code of ethics

Having an effective code of ethics in place is essential. It details the manner in which all staff members and associates conduct themselves on a day-to-day basis in order to maintain a respectful and socially acceptable working environment. It is essentially the ‘moral compass’ of the company to which all employees are held, even upper management.

It also serves as a useful tool to cite when providing employees warnings about their conduct for any infractions that have been committed. If the actions of a staff member violate the code of ethics too severely, it can be used to justify termination from their position.

As well as individual organisations, codes of ethics are also important for setting industry-wide standards in a range of sectors. This guarantees that the methods and practices in place are of the highest standards by enforcing the ethics code by punishing violations with financial or legal action. This helps to mitigate risks across the industries and remove people from any potential harm.


What are the Benefits of Having a Code of Ethics in the Workplace?

There are many advantages to having a code of ethics implemented within an organisation. Some of them are obvious, others less so. When it is implemented well, a code of ethics for business can provide a huge competitive advantage and result in an upturn in the company’s performance, increasing their financial position (which is the whole point of even having a company, right?). Have a look at some of the most important code of ethics benefits below.

  • Guidance

    It helps to steer a company or employee’s ethical course of action when it is not obvious or apparent.

  • Reinforce company values

    A code of ethics helps to acquaint its staff members with their values and company culture, and serves as an everyday reminder. This also extends to the company’s associates, third party contractors, and even customers.

  • Consistent management standards

    It helps to standardise management standards in terms of their responsibilities to their staff and serves as a layer of protection for staff in positions of power who may otherwise, with or without malice, abuse said power.

  • Regulations compliance

    Complex government regulatory standards can be tricky to manage and a code of ethics helps in traversing these issues. For example, in the USA the Sarbanes-Oxley Act of 2002 requires that all public companies must have a code of ethics in place for all senior financial officers in order to protect the company, its staff and their customers.

  • Building a trustworthy brand

    A code of ethics goes a long way to ‘walking the walk’ in terms of being a good, honest business that customers and colleagues alike can understand your transparent values. It demonstrates that the company is taking their ethical responsibilities seriously which will attract responsible investors and build trust in the brand.

  • Self preservation

    Having a code of ethics ensures that there are mechanisms in place with which to defend the company in case of a lawsuit (as long as it is followed correctly).

  • Morality and social awareness

    When it comes down to it, the main, and most obvious, benefit is that it maintains a high level of moral standard. This demonstrates with actions the lengths to which a company will go to prove their commitment to good ethical practices, which in turn will translate into high morale with their staff, investors and customers. This promotes and develops positive social change, ultimately contributing in a highly positive manner to good business practices.


How to create an effective code of ethics for your business

There are a few best practices for a code of ethics that must be followed when implementing your plan. The following code of ethics template should serve to be a guide when successfully setting up a code in a business.

  • Identify your priorities

First and foremost, it’s important to establish what your business priorities are when it comes to your code of ethics. Doing this from the outset will help to facilitate company growth in alignment with the overall company ethics. As the business scales up with success, onboarding and maintaining new staff members will be much easier with a clear ethical code which visibly details the company’s values, priorities and moral lines.

When determining the company values, first consider what you feel is ‘unacceptable’ behaviour in a business, e.g. when searching for new clients or deciding on profit margins. These ‘unacceptable practices’ will help to understand where you draw the line when it comes to your operations and can help begin your code of ethics document.

This can also extend to less serious issues, but important nonetheless, such as company dress code, working times, sick leave and so on.

  • Build your code together

Collaborating in a team-wide effort to create your code of ethics is a key process as it not only gets everyone involved and having a say in the final outcome, it helps all staff members to really understand its value and importance, especially the small details when it comes to understanding why certain elements are included.

Involving your team will result in better support for the idea and adherence to the code moving forwards will be much smoother. In addition, as the old saying goes, ‘many hands make light work’, and it is likely that your team may suggest additions to the code of ethics that could have otherwise been overlooked.

This will help to establish a much more well-rounded final code.

  • Assign a lead staff member responsible

Typically known as the ethical or compliance officer, it’s important to assign one employee to have the overall responsibility for not only the creation of the code of ethics, but also the ongoing duty to ensure that it is adhered to. Even if you have the support of senior management, having one specific person be responsible for the document creation and maintenance ensures that it is not overlooked and is constantly being considered in the day-to-day operations.

This person may typically be from HR (human resources), and will most likely have a strong commitment to the success of the organisation, be highly reliable and with good integrity, and have great interpersonal skills. As the business grows, so will the scope of the code of ethics.

The compliance officer will be responsible for updating the document in line with the expansion of the company’s operations, and will take the lead in any cases of abuse or misconduct.

  • Have support systems in place

If you are a large company with a well-established HR department, then you will probably be able to create a wide-sweeping code of ethics without issue. Likewise, if you are a small company who operates in a low-risk field, you will most likely to put a basic code in place easily.

However, it’s worth at least having a communication pathway open to a human resources professional just in case you get thrown into a situation that could potentially cause some difficulty for the company. Their expertise will be on hand, even from afar, to guide you in employee behaviour and company conduct to make sure that your code of ethics is drafted and adhered to in the proper manner.

Even in larger companies, having a specialist to hand when needed is useful, especially if you don’t have a robust code of ethics in place.


The Importance and benefits of a code of ethics in the organisation

The benefits and importance of having a well thought out and wide-reaching code of ethics in an organisation in place are clear. All organisations both large and small should seriously consider putting a code in place, regardless of how much ‘risk’ their operations are. A code of ethics is the moral standard to which the company and its employees must hold themselves. It will be a firm set of guidelines that will help steer an organisation in times of trouble, and an invaluable asset to a well-functioning and successful enterprise.

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