Do companies have a moral compass? Often leaders try to impart their philosophy about business to employees in an annual address or a global email. This type of communication is good, but not frequent enough to offer consistent guidance. This is where a company code of ethics is useful. Employees can refer to this manual at anytime for guidance on appropriate business conduct.
Significance
Industries with high incidents of fraud and abuse benefit from a code of ethics. The home care industry suffered from widespread fraud and abuse at one time. The utilization of patient visits far exceeded what was appropriate to take care of the patient. The government subsequently implemented compliance programs for all agencies. Many agencies went a step further and created customized codes of ethics that served as guides for employees in administering care.
Features
A good code of ethics plan is reviewed by all employees and stakeholders within a company. They are also very clear in scope and duties. There should be little room for interpretation in any plan. Employees should walk away knowing that when there is a problem related to how company business is conducted, this tool will provide an answer.
Time Frame
All code of ethics plans need to have a set date where they are reviewed for updates. Depending on the industry, this could be annually or every five years. Government legislation and societal trends may affect some of the guidance within a code of ethics plan. All stakeholders should be clear on exactly when a code of ethics plan is effective. This is as simple as placing an effective date range at the beginning of the written document.
Warning
Failure to implement a code of ethics may result in confusion throughout the company. A bank, for example, may fail to communicate a code of ethics for loan officers. As a result, some loan officers may process loans that pass official requirements while the loan officers may have knowledge of the applicant's pending termination. Pressure to perform well may delude the officer's ethics related to appropriate loan procedures. A code of ethics is there to provide a clear stance on where the company is on these types of issues.
Theories/Speculation
Most companies want to believe that they hire ethically sound employees. They fail to implement these types of plans because they don't want to bring light to negative issues that have occurred in the past. In both cases, this is akin to placing one's head in the sand. A code of ethics is a good move for any company regardless as to whether incidents occurred.
