A company’s official Code of Conduct is often a valuable driver for culture and performance – it affects employee behavior by reinforcing the good and discouraging the bad, helping a company thrive and perform to its fullest. But a new report from LRN Corporation, based on an analysis of nearly 100 publicly-available company Codes, found that only 30% are in line with the practices that really make a positive difference.
In fact, a full third of the Codes reviewed by LRN were below overall minimum standards, a framework aligned with guidelines put forth by the New York Stock Exchange, Nasdaq and U.S. Department of Justice, according to From Rules to Values: Effective Codes of Conduct.
“At the core of every ethics and compliance program lies a Code of Conduct. And the best Codes of Conduct align values-based behaviors with business goals, inspire commitment to ethical behavior, connect people with purpose and integrate values through behaviors,” said Jim Walton, LRN ethics and compliance advisor and report coauthor. “When you give employees the tools to make the right decisions, you instill trust and reinforce your values.”
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Some of the key areas that were lacking in most company Codes reviewed for the LRN report:
- Discussing risk areas and topics is crucial to mitigating risk through awareness and behavioral guidance. But only 68% of Codes covered data privacy, 53% social media, 55% diversity and inclusion and 45% human rights.
- Only 67% of Codes reference organizational values and just half of those articulate values in behavioral terms. Codes should be oriented as a guide for ethical behavior with a theme, branding and consistent communication that reinforces it as a foundational company instrument.
- Just 58% of Codes extend applicability past employees, officers and directors to contractors and agents. And only 45% explain the procedure for investigation of misconduct. Codes should clearly apply to anyone working on behalf of the company, and transparently state responsibilities and enforcement.
- While 70% of Codes include details on hotline reporting, only 35% discuss confidential reporting and just 19% discuss anonymous reporting. Including detailed resources of where employees can go for guidance and reaffirming the organization’s stance against retaliation for reporting are critical to the success of Codes.
- Only 10% of the Codes assessed were considered strong in reinforcing knowledge. The best Codes integrate learning aids, such as real-life scenarios and visual representations, to help all types of learners better connect to difficult topics.
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“A Code should be a ‘gateway’ to a company’s entire E&C program, policies and training. Employees should be able to come back, easily, to the Code time and again for answers to questions, more information or when they simply need support to do the right thing,” said Dana Vazquez, LRN ethics and compliance advisor and report coauthor.
“The days of text-heavy, legalistic, rules-based Codes of Conduct have long passed. Your Code should be ‘your culture written down.’ It’s a great tool to bridge the gap between compliance and ethical behavior,” said Walton.
LRN’s mission is to inspire principled performance. Since 1994, LRN has helped over 25 million people at more than 700 companies worldwide simultaneously navigate complex legal and regulatory environments and make ethical decisions, and has also helped hundreds of companies foster ethical, responsible, and inclusive cultures. LRN’s combination of practical tools, education, and strategic advice helps companies translate their values into concrete corporate practices and leadership behaviors that create sustainable competitive advantage.
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