Why Does a Company Need a Code of Ethics?
The importance of a company's code of ethics can't be understated. It establishes concrete expectations for employee behavior and communicates the ethical policy of a company to its partners and clients.
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Definition
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A code of ethics is a written document detailing a company's ethical policies. It is also referred to as a code of conduct.
Types
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Depending on size, industry and location, most companies have a distinctive code of ethics. Most codes address subjects such as workplace safety, sexual harassment, violations of privacy, conflicts of interest and financial disclosure.Certain professions, like law, psychiatry and dentistry, have professional codes of ethics that must be followed by all practitioners. Violations of a professional code often result in expulsion from that particular field.
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Function
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In general, a code of ethics maintains a company's positions on integrity, fairness and conduct. A code of ethics outlines workplace rules for employee conduct; these are referred to when violations occur.
Importance
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A company with a strong code of ethics is more likely to receive the trust and confidence of business partners, clients and investors alike. Employees are more likely to be be engaged in their work when they respect the code in place. To maintain an ethical work environment, it's essential that all employees follow a company's code, particularly senior and executive management.
Recent Developments
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In the United States, the Sarbanes-Oxley Act of 2002 addressed the issue of corporate responsibility, requiring that publicly traded companies state whether they have a code of ethics for senior financial officers. If there is no code in place, these companies must explain why.
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