How to Create a Code of Ethics for Your Business

A code of ethics and professional conduct outlines rules for proper behavior in the workplace — usually based on a company’s core values. It lets employees know how they should behave, and it gives guidance for handling harassment, safety and other issues.
 

A code of ethics for businesses is usually broader than a code of conduct that discusses how employees should act in specific situations. However, many businesses use one centralized document for a code of ethics and professional conduct.
 

Post a Job

What is a code of ethics in business?

A business code of ethics, also known as an ethical code, is a set of principles companies provide to employees so they can approach their job with integrity. A code of ethics often includes a company’s core values, ways for employees to resolve problems they encounter and the standards of performance they need to meet.
 
A company could also list laws and regulations in its code of ethics depending on the industry. For example, a banking organization might list government regulations that employees must follow to perform effectively in their roles.
 

Why is a business code of ethics important for your company?

Creating a code of ethics for your business is important for the following reasons:
 

  • Explains your expectations: Business codes of ethics outline how you expect your employees to work in order to accomplish goals and live your company’ values. It also provides a framework for how employees need to interact with each other and clients in order to demonstrate a positive public image.
  • Showcases the drive for success: List your overall objectives and goals in your code of ethics to give the public and your employees an idea of what you want the future of your company to look like.
  • Improves employee retention rates: A commitment to maintaining and building on your company’s culture translates to higher retention rates for current employees. In your code of ethics, discuss how you plan to take care of your employees and explain the methods you’ll take to create stronger bonds between team members.
  • Builds trust with external stakeholders: A strong business code of ethics builds trust with industry leaders and local communities. To make a code of ethics generate interest among external stakeholders, create a list of community leaders in your area and research their values.
  • Attracts quality candidates who share similar values: An Indeed survey found that 28% of job seekers would reconsider accepting an offer from a company if the company’s mission/vision didn’t resonate with their values — even if the job met all of their other personal requirements and they had a positive interview experience.*

Common types of business codes of ethics

Codes of ethics can include many different policies. Here are some examples of common types of codes of ethics in business:
 

1. Being inclusive

Businesses should welcome people from all backgrounds, and they should not discriminate against anyone based on a variety of factors, including:
 

  • Sex
  • Race
  • National origin
  • Sexual orientation
  • Gender
  • Social or economic class
  • Education
  • Immigration status
  • Age
  • Political beliefs
  • Religion

2. Being considerate and respectful

People depend on each other to do their best and make the business they work at successful. When managers and employees make decisions, they should think about how those decisions could impact clients and the team as a whole. When people discuss actions and next steps, they need to focus on what’s best for the company. They should speak calmly and rationally to make everyone as comfortable and productive as possible.

 

3. Acting professionally

By acting professionally, you can increase your company’s reputation, reduce turnover and make employees’ jobs less stressful. Make all of your interactions positive and professional by focusing only on business-related topics. These rules should apply to your emails and phone calls as well. When you set a professional example, your employees will likely follow suit.

 

4. Considering your actions

It’s important to think about what you do in the workplace and how it affects others. Certain actions, like taking personal calls near others, could distract employees and make it difficult for them to focus. Think about any rules you may need to add to your code of ethics to encourage a positive working atmosphere, such as keeping phones on silent or having meetings in designated areas.

 

5. Admitting when you make a mistake

People need to take responsibility for their actions and learn from their mistakes. They should also listen to the perspectives of others to implement the best idea. Acknowledge your employees’ suggestions to show you value their opinions and suggestions.

 

6. Avoiding conflicts of interest

Many companies have rules against managers dating employees, running for public office or investing significant amounts of money in competitors or companies that employees do business with. By asking employees to avoid conflicts of interest, you can ensure that they remain productive and have a positive impact on the company.

 

7. Protecting company assets

Businesses need to protect their property, including records, computer systems, equipment and intellectual property, such as patents. They should have the IT and physical security they need to prevent hacking or thefts. Consider including a rule in your code of ethics about how to treat company assets and data.

 

8. Being punctual and avoiding absences

Most companies have an attendance policy to encourage people to come to work on time. For example, if someone is sick and they can’t make it to work, what steps should the employee take? Many businesses require a doctor’s excuse for an unscheduled absence, but you can come up with your own policies to suit your business.
 

How to write a code of ethics for your business

Here is a framework to help you establish a code of ethics for your own business:
 

1. Define the company’s priorities

Meet with your key leaders to identify how they make important decisions. Use this discussion to identify the customers you want to sign, the quality expected from employees and the allocation of resources. Creating a code of ethics based on your top priorities makes it more focused and clear to your employees and the public.
 

Use your company’s core values to guide your code of ethics. For example, if you created your business based on integrity and trust, incorporate these values into your code by explaining how you and your employees will follow them. If one of your company’s values is focused on sustainability, you could include information about how the company is working to reduce its carbon footprint.
 

2. Speak with employees about content to include

Schedule a meeting with employees to talk about what they want to include within your business’s code of ethics. Discuss the kind of culture they want to work in and if the current environment meets their expectations. Use their suggestions to determine what to include in your code to foster a positive workplace.
 

Ask employees for additional feedback on how to improve your company’s current code of ethics if you already have one. Find out if employees are comfortable collaborating, if they have a role model or mentor and if they believe they’re growing. The responses help your organization live by your values and ensure consistency when communicating this message to influential stakeholders.
 

Related: Creating a Positive Feedback Loop in Your Business (With Examples)

 

3. Underline acceptable workplace behavior

Explain the type of behavior you expect your employees to have. Companies with a zero-tolerance policy for misconduct show that they have high standards for conduct in the workplace and commit themselves to doing the right thing at all times.
 

4. Note who is in charge of compliance

Consider designating a compliance manager to hold employees accountable. Search for someone who has a track record in upholding ethical procedures. Either hire a dedicated compliance officer to be a part of your human resources team or choose a current employee. Your compliance officer needs to have a thorough understanding of your company’s values, policies and procedures and feel comfortable serving as a liaison between you and your employees.
 

5. Get approval from management

Ensure your managers approve of the code of ethics before implementing it. Approval from leaders makes it more likely that employees will follow it.
 

6. Initiate a code program

A code program outlines the steps your employees need to take to implement your new code of ethics. Training, reinforcement and metrics help employees understand the purpose of the code program and how you plan to uphold it.
 

Things managers should remember about ethics in the workplace

To keep their employees happy and make their businesses successful, managers should consider these tips:
 

Give people credit for their work

If you give employees credit for good performances or new ideas, they’ll be more likely to do their best. Give praise and recognition when an employee excels. Acknowledging an employee publicly will motivate their team to work harder as well.

 

Show all your employees that you appreciate them

Thanking someone for working overtime, asking how their weekend was or having lunch with employees occasionally will show them that you value them. People want to have a good relationship with their manager so they feel comfortable approaching them with questions or ideas.
 

Related: Samples of Appreciation Letters: Templates and Examples

 

Let people make their own decisions

Employees often prefer when they have a certain amount of autonomy and freedom to make their own decisions. Try giving your employees a general set of instructions or even just a goal, then let them find the best way to do their work. Make yourself available if they have any questions or need guidance, but allow them to work independently if possible.

 

Treat all of your employees fairly

Managers may get along with some of their employees better than others, but this shouldn’t impact their business decisions. They should reward everyone who works hard, and consider ideas from all team members.
 

Related: How to Address 12 Types of Bias in the Workplace

 

Lead by example

Managers should follow company policies and rules to encourage their employees to do the same. For example, if there’s a company policy against using company computers for personal reasons, make sure managers are leading by example.
 

*Indeed survey, n=10,000

Post a Job

Codes of ethics FAQs

Are codes of ethics required by law?

Companies generally aren’t required by law to have codes of ethics. However, the Sarbanes-Oxley Act (SOX) of 2002 requires corporations with publicly traded stock to publish their codes of ethics if they exist. They also have to publish any updates or changes to their codes of ethics.

Are codes of ethics legally binding?

Ethical codes in business are generally not legally binding. Companies and their employees need to follow anti-discrimination and other laws no matter what is in their codes of ethics.

Where can employees find their company’s code of ethics?

The code of ethics is usually part of the company handbook, along with other policies and procedures.

How can you educate employees on the code of ethics?

Include your code of ethics in the employee handbook or as part of your onboarding materials so all new hires have access to it. You can also post it on your website for additional visibility. Make sure managers cover the most important aspects of the code as part of your new hire onboarding and training.

Ready to get started?

Post a Job

*Indeed provides this information as a courtesy to users of this site. Please note that we are not your career or legal advisor, and none of the information provided herein guarantees a job offer.