How to Create a Code of Ethics (With Examples)

A good code will inspire employees to live up to company values.

Written by Jeff Rumage
Published on Feb. 13, 2024
How to Create a Code of Ethics (With Examples)
Image: Shutterstock

A code of ethics outlines the ethical principles that govern employee behavior in the workplace. It often includes the company’s values, as well as the policies meant to guide employees in how they make decisions and conduct themselves at work.

What Is a Code of Ethics?

A code of ethics is a set of principles designed to shape employees’ behavior and decision-making processes. It aims to prevent unethical behavior that could damage the company and its reputation. 

The purpose of a code of ethics is to have “a comprehensive and formal way of telling employees and stakeholders what their expectations are around how people will behave in the workplace,” Pat Harned, CEO at Ethics & Compliance Initiative (ECI), told Built In.

A strong code of ethics will be memorable and inspire employees to live by its espoused values in their daily lives. This will hopefully prevent unethical behaviors that could hurt customer relations, scare away ethical employees and ultimately tarnish the reputation of your company.

 

How to Write a Code of Ethics

A code of ethics often begins with the company’s CEO stating the company’s values and emphasizing the importance of maintaining quality standards, ethical principles and a healthy workplace. The rest of the code elaborates on these themes in more detail, along with more specific policies about conflicts of interest, accepting gifts, workplace harassment and the mechanisms for reporting unethical behavior.

Here are a few best practices to keep in mind when writing a code of ethics:
 

1. Don’t Copy Another Organization’s Code of Ethics

If your company is in the beginning stages of adopting a code of ethics, it’s OK to look at the codes of ethics of similar-sized companies in your industry to decide which topics you might address in your code of ethics. When doing so, though, think about your own company’s values and culture to create a unique ethics policy that resonates with your specific employee population.

 

2. Reflect on Your Company’s Values

Begin your code of ethics with a statement about the company’s values, such as treating people with respect, acting with integrity and being accountable for one’s actions. These values will serve as the ethical foundation for the code of ethics, and all of the policies referenced in the document should tie back to these values.

“People want to align their expectations of conduct in the workplace with the company’s direction and objectives and believe that it’s contributing to the overall culture and performance of the organization,” Asha Palmer, senior vice president of compliance solutions at Skillsoft, told Built In.

 

3. Think About the Risks Your Organization Faces

Take into account the ethical and legal risks your organization is likely to encounter. The code of ethics may be a place for you to educate employees about potential risks and conflicts, like accepting gifts or mishandling customer information, and advise them on what they should do to mitigate and manage those risks. 

To keep the code from being too long, don’t feel like you have to address every potential ethics issue. Those topics might be better addressed through additional employee training. In fact, companies should make ethics training a routine practice, even if their code is fairly comprehensive.

 

4. Spell out Consequences for Noncompliance

When creating a code of ethics, make it clear that employees will be held accountable for not complying with it. Disciplinary actions should be tiered, depending on the severity and scope of infractions. An employee might receive a written warning after the first violation, for example, and face termination on the second or third violation. This information could also be included in a supporting piece of compliance documentation, like an investigation protocol. 

Either way, it’s important to stick to the disciplinary actions outlined in the ethics code to prevent employees from thinking that some people, especially those in leadership positions, are above the law.

“If there are similar breaches to the code of ethics that are being handled dramatically differently, you’re going to see huge problems within your workforce,” said Allison Mairena, vice president of people at NewGlobe. “Following true to what you have written down and being consistent and constant about talking about it and how you implement it is very important.”

 

5. Keep It Short and Accessible

The first draft of a company’s code of ethics will often start out long and overly inclusive, but Palmer said the real work of an effective ethics policy is the ability to make it accessible and relevant to a company’s workforce. Otherwise, they are just words on a piece of paper.

“The reality is you want people to live those words,” Palmer said, “and see how those words apply to the jobs they perform.”

While some codes of ethics can exceed 40 or 50 pages, others are more engaging and interactive, incorporating videos, visual aids and colorful text boxes. Some companies have created chatbots to answer employees’ ethical questions, which reduces the hassle of looking through a long legal document.

 

6. Solicit Input and Feedback From Stakeholders

Don’t write a code of ethics in a silo. Let it be informed by input from leaders, employees and other stakeholders. Once a first draft has been written, have department leaders from across the organization review it and advise whether it will resonate with their team.

 

7. Encourage Whistleblowers to Speak Out

A code of ethics should also inform employees how to report wrongdoing when they see it. Many companies set up an ethics and compliance hotline, which offer employees anonymity and the opportunity to bypass managers who may be involved in unethical behavior. Harned said companies should also tell employees what to expect when they report an ethics breach. 

“That is one of the leading reasons why people don’t report,” she added. “It’s because they don’t have any clue what’s going to happen and they’re afraid.”

Related ReadingWhat Is Ethical Leadership?

 

Code of Ethics Examples 

There is no one right way to create a code of ethics. For instance, Costco, which has been hailed as a “testimony to ethical capitalism,” has a short code of ethics:

Here at Costco, we have a very straightforward, but important mission: to continually provide our members with quality goods and services at the lowest possible prices. In order to achieve our mission, we will conduct our business with the following Code of Ethics in mind:

 

• Obey the law.
• Take care of our members.
• Take care of our employees.
• Respect our suppliers.

 

If we do these four things throughout our organization, then we will achieve our ultimate goal, which is to reward our shareholders.

Many companies have a longer code of ethics or code of conduct, typically ranging from 30 to 50 pages long. Some companies, like Starbucks, have their code of conduct broken up into multiple webpages to make it more digestible.

To get a sense of a more comprehensive code of conduct, here’s the table of contents of Mastercard’s code of conduct:

  1. Who does the code of conduct apply to?
  2. Culture of accountability
  3. Speak up
  4. When should you speak up?
  5. Responsibilities of managers
  6. We respect each other
  7. We avoid conflicts of interest
  8. Anti-corruption
  9. Business hospitality, meals and gifts
  10. Related party transactions
  11. Anti-money laundering, sanctions and export controls
  12. We succeed honestly
  13. Financial books and records
  14. Political activities
  15. Protecting company assets
  16. Protecting information assets
  17. Insider trading
  18. We Communicate with a single voice
  19. Conclusion 
  20. Resources

If you want to take a look at other comprehensive codes of ethics, you can check out the policies in place at Microsoft, Google, Apple, BP and Goldman Sachs.

Toxic Work Culture: 18 Examples and How to Improve It

 

Code of Ethics vs. Code of Conduct

Traditionally, a code of conduct is more specific than a code of ethics. While a code of ethics may talk about company values and ethical principles, a code of conduct will be more prescriptive, posing hypothetical situations and specifying which behaviors are allowed and not allowed.

That said, the two terms are often used interchangeably, and it’s rare for a company to have both. The code of ethics — if it exists at all — is typically folded into the beginning of the code of conduct. Palmer said there has been a trend in the ethics and compliance profession to simplify these codes with the goal of making them more memorable.

“You want a sentiment or an ethical principle or value to resonate with people in a way where they think about whether and how it applies to what they’re doing,” she said.  

 

Frequently Asked Questions

A code of ethics is a set of ethical principles that guide employee conduct in the workplace. Employees should refer back to this document to determine if their actions are in alignment with the organization’s values.

A code of ethics will set clear expectations about what is acceptable and unacceptable behavior in the workplace. By aligning employees on a set of shared values and ethical principles, an organization can hopefully prevent unethical behavior that will hurt employees and the organization.

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