Why a Company Needs a Code of Ethics

By hrlineup | 09.01.2020

A business code of ethics is a guiding principle that is clearly designed to help companies run their businesses with integrity and honesty. The code of ethics is a prepared document which outlines the values and mission of an organization or business and how professionals should approach problems in that organization as well as the ethical principles that the organization is built on. The core values and the standards that the organization is built on are also included. Basically, the code of ethics will include all areas relating to code of professional practice, business ethics and employee code of conduct in an organization.

Why do we need a code of ethics?

Every business needs to have an ethical guide on how the business should conduct its operations. Issues arise every now and then in an organization and so, there must be a guide on how such issues as employer-employee relations should be handled. What of discrimination, bribery, social responsibility, insider trading or environmental issues? Even in the presence of so many laws regarding ethical standards within the business community, leadership of every business needs to have a unique code of ethics for their organization that will guide them on day-to-day handling of issues.

One of the reasons for code of ethics is in order for a company to remain compliant with the statutes that regulate such issues as business conduct and ethics. Compliant code of ethics will set a clear guideline for the conduct of a business and its employees and penalties for any forms of violation.

Again, a code of ethics is a valuable tool in any type of business as it brings out the business’ core value. It will clearly spell out the standards of responsible behavior that relate not just to individuals working in the organization but also to the public at large and the environment within where the business is located.

Why do companies prepare a code of conduct?

As part of the code of ethics, code of conduct clearly spells out how everyone in an organization or business should behave themselves. Both acceptable and unacceptable behavior and actions should be clearly spelt out to draw a line on how employees should behave while still working for the organization and what they will not be expected to do. The code of conduct should also explain in detail how employees should report a violation of the company ethics and policies. In addition to that, there must be clearly spelt out consequences for those who fail to report or those who provide false information in an attempt to conceal a violation.

The code of ethics of an organization is the guide every organization needs for proper decision making. It will define the company culture, define acceptable conduct as well as promote high standards of business practices. A well-formulated code of ethics will also promote and enhance your brand as well as set you apart from other similar brands in the business market.