Code of Ethics

Jump to Section

Need help with a Code of Ethics?

CREATE A FREE PROJECT POSTING
Post Project Now

What Is a Code of Ethics?

A code of ethics, also referred to as an ethical code or statement of ethical principles, is a document that sets forth the expectations, standards of practice, and principles of conduct for a business or organization. This type of policy statement can essentially form a type of legislation if it details clear penalties for employees or members who violate the code. Absent these sanctions, the code of ethics serves more like a list of expected duties.

A code of ethics goes beyond the limitations of the law and specifies many activities not prohibited by law that are nonetheless prohibited within the specified group. Ethical behavior is more complex than legal behavior. For example, it is unethical to be dishonest, but it is not illegal to lie except under certain circumstances. Business ethics demand a higher standard of behavior.

The History of the Code of Ethics

Business ethics first became a specialty in the 1960s, spurred by the social responsibility movement. The social responsibility movement states that individuals should act in a way that benefits society as a whole rather than simply protecting one's own personal interests. In the 1980s, many governments and corporations began to set forth formalized codes of behavior.

Here is an analysis of 150 of these corporate codes of ethics completed in 1989. This found five key elements that were similar among many of them. These codes of ethics addressed:

  • The proper treatment of employees
  • How to handle whistleblowers
  • Guidelines for inter-employee relationships
  • Regulations regarding employees' political contributions and actions
  • Instructions for preventing bribery and handling conflicts of interest

Codes of ethics gained greater importance in 2002, when the Sarbanes-Oxley Act ("SOX") was passed, requiring that any corporation trading stock under the provisions of the Securities Exchange Act of 1934 publish their code of ethics if one exists. This creates a strong incentive for corporations to draft a code of ethics as it helps to increase investor confidence.

How a Code of Ethics is Published

A code of ethics must be a published document, but it can take many forms. The code of ethics might exist in several forms within a single organization with each document tailored to a specific department, such as finance or sales. In some companies, employees are required to sign a document verifying that they have read the code of ethics. This requirement may apply to all employees or only to corporate officers.

The code of ethics may stand alone , or you might find it accompanied by the organization's mission statement, corporate values, and other policies. As mentioned previously, the code of ethics must be available to the public if the corporation trades its stock publicly and is regulated by the Securities and Exchange Commission (SEC).

In addition to the code of ethics produced by an individual organization, you will also find codes of ethics which apply to entire industries, such as:

  • The National Society of Professional Engineers (NSPE) Code of Ethics for Engineers
  • The Institute of Internal Auditors (IIA) Code of Ethics
  • The Code of Ethics for the Nutrition and Dietetic Registration Board
  • Association for Institutional Research (AIR) Statement of Ethical Principles
  • The Code of Ethics and Standards of Practice of the National Association of REALTORS

Get Free Bids to Compare

Leverage our network of lawyers, request free bids, and find the right lawyer for the job.

Get Bids Now

What's Included in a Code of Ethics?

A code of ethics includes both internal guidelines for ethical behavior and an outward statement of commitments and values as well as guidelines that an individual's behavior can be measured against. The code of ethics should include:

  • Introduction: This preamble makes a clear statement about the company's values and commitment to supplying and enforcing an ethical code for conduct. This may appear as a message from the CEO.
  • Statement of Company Values: This details the company's mission statement, financial objectives, social aspirations, and professional goals. Here, the organization may refer to other professional standards or standard-setting bodies that it follows, such as the American Medical Association (AMA)'s Code of Medical Ethics, which applies to physicians and dental practitioners.
  • Rules of Conduct: This is the bulk of your code of ethics, outlining all of the rules that employees are expected to follow. It may discuss topics such as:
    • Compliance with industry regulations
    • Regulations for disclosure and privacy
    • Truth in advertising
    • Moral values, such as respect, responsibility, fairness, kindness, and trustworthiness
    • Involvement and interactions with the community
    • Discrimination policies
    • Handling of interpersonal relations
    • Rules regarding conflicts of interest
  • Implementation and Sanctions: This section details how the code of ethics is enforced and what consequences will occur if the code is violated. This will specify:
    • Guidelines for reporting a violation of the code of ethics
    • Consequences for code violations
    • Handling of employee termination or litigation
  • Additional Resources: The code of ethics should conclude with compliance resources that refer to laws, policies, and procedures relevant to this code. You should also provide contact information for your department of ethics or human resource department. These resources will make it easier for employees to understand the code in depth.

How to Implement a Code of Ethics

Image via Unsplash by sctgrhm

A code of ethics is a beneficial document for nearly any type of business that will serve the company well alongside other essential contracts . When drafting a code of ethics, it's important to carefully consider the company's values, goals, and potential challenges. The code of ethics can mitigate many problems by setting forth clear rules and guidelines that employees review upon hiring.

To develop a code of ethics, you should:

  1. Collaborate with leaders throughout the organization. Set forth clear objectives, values, and regulations that are easily agreed upon.
  2. Review laws and regulations in your industry. Ensure that your code of ethics adheres to all the latest regulatory developments in your area of business.
  3. Simplify the language. Avoid legal jargon, so the code of ethics is easily understandable for employees, investors, clients, partners, and anyone else interested in your company.

Here is an article with some common provisions to consider for your code. Once a code of ethics has been reviewed, edited, and approved, it's ready for implementation. This code is only effective when it's disseminated properly throughout the organization. To do this, you must:

  1. Have the code of ethics endorsed by the Chairman and CEO.
  2. Circulate the code throughout the company and have employees review and sign as needed.
  3. Integrate the code into daily business operations.
  4. Implement procedures for managers and other leaders to review the code with employees regularly.
  5. Set forth a schedule for corporate management to review and update the code routinely.
  6. Detail the process of enforcing the code.
  7. Train all leaders involved in enforcement in the proper way to uphold the code and implement consequences.

The Value of a Code of Ethics

A well-written code of ethics will:

  • Provide legislation for the actions of individuals within the organization
  • Provide a public statement of values which serves as a form of marketing
  • Mitigate risk by outlining the consequences of ethical misconduct
  • Establish benchmarks for personal and professional evaluation
  • Promote quality standards of practice

A code of ethics is an important document for any well-established business. Drafting and implementing this code early on will help solidify the company's values and morals. Consider having a contract lawyer review your code of ethics prior to publication to ensure that it is clear and easily enforceable.



Explore Our Network of Lawyers

We recruit and onboard great lawyers so you can find and hire them easily.

Browse Lawyers Now

Meet some of our Code of Ethics Lawyers

ContractsCounsel verified
Founder, Branch Legal LLC
9 years practicing
Free Consultation

Legal services cost too much, and are often of low quality. I have devoted my law practice to providing the best work at the most affordable price—in everything from defending small businesses against patent trolls to advising multinational corporations on regulatory compliance to steering couples through a divorce.

ContractsCounsel verified
Attorney
3 years practicing
Free Consultation

I am a licensed attorney and a member of the California Bar. I graduated from the University of Dayton School of Law's Program in Law and Technology. I love IP, tech transfers, licensing, and how the internet and developing technology is changing the legal landscape. I've interned at both corporations and boutique firms, and I've taken extensive specialized classes in intellectual property and technology law.

ContractsCounsel verified
Partner
25 years practicing
Free Consultation

Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.

ContractsCounsel verified
Attorney and Contract Guru
16 years practicing
Free Consultation

I am an unabashed contract law geek with a passion for delivering contracts that protect your business within your risk tolerance. Contracts should be clear, concise, and able to be understood by the end user. I promote Plain English contract drafting. I also pay close attention to the boilerplate traps that trip up many agreements. Some of my most frequent drafting projects are entity operating and shareholder agreements, bylaws, asset purchase agreements, commercial leases, EULA, Terms of Service, Privacy Policies, Confidentiality agreements, employment agreements, and more.

ContractsCounsel verified
Self-Employed Legal Consultant
7 years practicing
Free Consultation

I hold a B.S. in Accounting and a B.A. in Philosophy from Virginia Tech (2009). I received my J.D. from the University of Virginia School of Law in 2012. I am an associate member of the Virginia Bar and an active member of the DC bar. Currently, I am working as a self-employed legal consultant and attorney. Primarily my clients are start-up companies for which I perform various types of legal work, including negotiating and drafting settlement, preparing operating agreements and partnership agreements, assisting in moving companies to incorporate in new states and setting up companies to become registered in a state, assisting with employment matters, drafting non-disclosure agreements, assisting with private placement offerings, and researching issues on intellectual property, local regulations, privacy laws, corporate governance, and many other facets of the law, as the need arises. I have previously practiced as an attorney at a small DC securities law firm and worked at Deloitte Financial Advisory Services LLC. My work experience is dynamic and includes many short-term and long term experience that span across areas such as maintaining my own blog, freelance writing, and dog walking. My diverse background has provided me with a stong skill set that can be easily adapted for new areas of work and indicates my ability to quickly learn for a wide array of clients.

ContractsCounsel verified
Attorney at law
20 years practicing
Free Consultation

Texas licensed attorney specializing for 20 years in Business Law, Contract Drafting, and Risk Analysis. My services include: Corporate Risk Consulting; Contract Review and Drafting; Legal Research and Writing; Business Formation; Article or Instructive Writing; and more. For more insight into my skills and experience, please feel free to visit my LinkedIn profile or contact me with any questions.

ContractsCounsel verified
Partner / Attorney at Law
13 years practicing
Free Consultation

Creative, results driven business & technology executive with 24 years of experience (13+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. My engagements often include legal consultation & advisory roles, drafting of NDAs, TOS & Privacy Policies, contracts and corporate law, business strategy advice & consulting, in-house counsel, Founder & entrepreneur guidance and other roles as needed by my clients. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call