Deeper Dive
Like many compliance documents, Codes of Conduct have moved beyond simple one-to-two page lists of policy statements drafted to strictly meet the bare minimum requirements for which they were originally intended. They have now become part of an overall investor suite of documents available on the company’s website. As a result, Codes of Conduct are now written for a wide-ranging audience that goes well beyond the company’s employees.
In addition to its internal purpose, the Code of Conduct is a useful tool for investors, prospective employees, potential business partners, government agencies, and other stakeholders to take a look into a company’s culture to learn more about how it promotes values, drives ethical behaviors, and operates with purpose. Further, third-party organizations who provide ratings and rankings related to a company’s environmental, social, and governance programs will evaluate a company’s Code of Conduct across a number of criteria to arrive at their determination of a company’s adherence to good governance and compliance practices and its commitment to a variety of ESG factors.
Looking at Codes of Conduct with an eye towards the five pillars of transparency will help you transform your Code of Conduct into a modern document that better engages employees and drives behavior:
What then does a good and effective Code of Conduct look like?
- The Code of Conduct should be both an impactful call to ethical behaviors and an inspiring user experience to ensure “readability” created by visually engaging design, an easy to reference structure, and clear, inclusive language.
- The document should be comprehensive, explaining the purpose of the Code and who it applies to and detailing expectations around various themes, such as: anti-corruption and ethical business practices; fair labor, employment practices and work environment; employee behavior expectations; confidentiality, information security and protection of intellectual property.
- A Table of Contents should appear at the outset to help readers see what is covered by the Code and easily navigate to specific topics.
- It should begin with a letter from the Chief Executive Officer or the Chief Compliance Officer of the company setting the “Tone from the Top”.
- The document should include a section outlining reporting procedures, and making clear that the company prohibits retaliation against those that report concerns.
- Beyond content, effective Codes of Conduct benefit from design to support the substance of the Code – the goal is to create a document that employees will read, understand, and remember, so that it is considered a useful resource when they have questions.
- To that end, in addition to being visually appealing, design allows for the use of infographics throughout the Code to make important information more digestible and to provide information that goes well beyond the letter of the law – through decision trees, Q&A or examples, and other ways to highlight information such as links to other policies. These aspects create interactivity and engagement with the Code that makes it more useful to employees and ideally results in better compliance outcomes.
Benchmarking
- With focus on ESG in recent years, and ESG reporting frameworks calling for disclosure of ethical practices, it follows that codes of conduct are starting to be more consistently reviewed and updated.
- 63% have a document dated and produced or updated within the last two years
- Most companies include a letter from the CEO explaining why the policies and practices in the code of conduct are important to company culture and business, as well as setting expectations for strict compliance. This letter is often found at the beginning of the document, along with an overview of cultural values.
- 80% include a letter signed by the CEO
- 51% of the letters mention the importance of (i) ethics, compliance, and integrity, (ii) following the code, and (iii) reporting a concern
- 74% present company values at the beginning of the document
- Encouraging reporting of ethical concerns requires practical guidance and instructions. Fact patterns with guidance on how to manage the situation and Q&A formats are helpful. Codes of conduct should also have visual cues to easily locate key information and understand how to report a concern.
- 31% include decision-making tree graphic
- 8% include a graphic depicting the reporting procedure
Disclosure Examples
In the following pages, we include examples through the following lenses:
Anatomy of a Code of Conduct
The Table of Contents both demonstrates the breadth of topics covered in a modern Code of Conduct and aids the reader in navigating the document to find information.
Conviction, Ownership and “Tone From the Top”
Letter from Leadership
A letter from the Chief Executive Officer or the Chief Compliance Officer effectively sets the tone for the company’s expectations and should stress the importance of ethics, compliance, and integrity, following the Code, and speaking up to ask questions before taking actions and reporting concerns if they arise.
Purpose and Values
The most effective Codes of Conduct speak to each corporation’s values and how they are upheld through the behaviors of management and employees. Codes that align purpose, values and ethical standards create a compelling message.
How to Report a Concern
Companies should include a section dedicated to how employees (and others) raise their concerns. Infographics are particularly useful in depicting the reporting procedure.
An Inspired User Experience
The best Codes of Conduct present strong visuals that align with corporate branding to create a document that feels more like a communications tool than a legal exercise. In the most engaging documents, visual signposts, flowcharts, and graphics are used to further reader understanding. The most effective Codes of Conduct bring reality to hypothetical circumstances and provide a framework for decision-making that is practical and relevant to day-to-day business activities.
Company Brand
Anchoring the Code of Conduct to the company can be accomplished through integrating the company’s tagline or other messaging from its website, matching other reporting covers, using company imagery throughout, and highlighting company products.
Decision Trees
Decision trees are useful in helping frame employee considerations of how to act and when to reach out to others in the organization for assistance in deciding how best to proceed in a given situation.
Case Studies/Q&A
Presenting example case studies with suggestions on how to proceed helps employees understand how the Code of Conduct applies to their everyday work situations and provides them with practical solutions to address concerns that may arise.
Highlighting related Policies and other Visual Aids
Infographics and visual cues can be used throughout a Code of Conduct to guide readers to additional company information and to present useful takeaways and considerations.
