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CHAPTER QUESTION 5: WHAT TOPICS SHOULD BE ADDRESSED IN A CODE OF
CONDUCT?
BACKGROUND
A Code of Conduct expands on the moral principles embodied in a Code of Ethics. A
Code of Ethics principle such as “We will treat everyone fairly,” for example, can be
clarified in a Code of Conduct as “All information about an employee is considered
confidential and is to be released only to authorized personnel.”
TOPICS
The New York Stock Exchange recommends that a Code of Conduct address the
following seven topics:
1. Conflicts of Interest. Avoid conflict or potential conflict between an
individual’s personal interests and those of the organization.
2. Corporate Opportunities. Do not use corporate information or assets for
personal gain.
3. Confidentiality. Do not disclose nonpublic information that could benefit
competitors or harm the organization.
Review TIPS AND TECHNIQUES, Starbucks’ Code of Conduct for Suppliers
DISCUSSION ACTIVITY
Have students respond to the situation summarized in Exhibit 4.7. A Judicial Ethics Advisory
Committee in Florida ruled that judges and lawyers linked as “friends” on Facebook creates an
appearance of impropriety. Is it ethical for a student and a college professor to be friends on
Facebook while the student is enrolled in the professor’s: (a) class or (b) school? Why?
Use Codes of Conduct to highlight specific issues of major importance. Two problem areas many
organizations have in common are the giving and receiving of gratuities and e-mail use. The
former pertains primarily to relationships with external stakeholders and the latter with internal
stakeholders.
BUSINESS GRATUITIES
A business gratuity is a “present, gift, hospitality, or favor for which fair market value is
oA fine line exists between a business gratuity/courtesy and a bribe. Did the buyer
oGratuities can be problematic when received from suppliers or given to
customers.
o Even if not a bribe, a business gratuity can cause problems for an organization if
DISCUSSION ACTIVITY
Have students discuss which of the following intended gratuities might be considered a bribe: a
$15 book about golf putting, a dozen golf balls costing $50, golf clothing valued at $150, a round
of golf for two people at an exclusive golf club for $280, or two tickets and traveling expenses
for the upcoming Masters golf tournament valued at $2,500?
At exactly what dollar amount would the students draw the line?
E-MAIL
Electronic mail (e-mail) is one of the most prominent forms of communication within and
outside organizations.
Typically, e-mail use during work hours is limited to company business only.
Organizations are concerned that employees will use e-mail for non-work related
purposes, thus a drain on workplace productivity, and confidential information might be
sent to unintended recipients.
Some employees mistakenly assume they have a “reasonable expectation of privacy” to
the content of their workplace e-mail communications.
Judges continually rule in favor of employers who own and maintain the computer and
network systems.
Review EXHIBIT 4.8 which summarizes 8 key provisions about e-mail use
DISCUSSION ACTIVITY
Have students discuss whether organizations should allow employees to use e-mail at work for
personal reasons? If yes, under what conditions? Would the number of hours an employee
worked matter – would it be okay if a person worked 50 hours a week but not if a part-time
employee?
CHAPTER QUESTION 6: HOW WOULD YOU IMPLEMENT AN EFFECTIVE CODE
OF ETHICS AND CONDUCT COMMUNICATION STRATEGY?
BACKGROUND
Codes cannot be effective if employees are unaware they exist or if rumors spread that the
code was created merely to appease legal or regulatory authorities. Enron also had a
sixty-page Code of Conduct, a list of prohibitions ignored by some traders and high level
executives.
Ethical hypocrisy, the gap between an organization’s formal ethical proclamations
and its actual behavior, damages employee morale.
ELEMENTS OF A COMMUNICATION STRATEGY
Elements of the communication strategy include:
Connect the code to the organization’s strategy
Mention the Code of Ethics in job announcements
Introduce the codes during employee orientation
OBSTACLES FOR AN EFFECTIVE CODE
Social pressure can be a major obstacle to code effectiveness.
Employees are hesitant to report code violations committed by their friends, peers, or
manager.
ANNUAL CODE OF ETHICS ASSESSMENT
The last phase of implementation is probably the most important—use the code as an
organizational assessment tool. Make the Code of Ethics a living document by annually
assessing how well the organization and its employees live up to it.
Review EXHIBIT 4.9, which provides a ten-step process for assessing an organization’s
ethical performance based on its Code of Ethics. The employee activity can be
accomplished within 60 to 90 minutes.
Step 1: Form small groups around common job tasks and have participants read
the organization’s Code of Ethics.
Step 2: Each group member independently evaluates how well the organization
meets each of its ethical aspirations using a 5-point Likert scale.
Step 3: Each group member independently highlights one weak area and writes
down strategies and action steps that can be taken to improve that score.
Step 4: Group members share their survey scores with each other and determine
similarities and differences.
Step 5: Each group member shares a story about the survey item with the highest
score. What happened during the past year that exemplifies why the organization
is doing so well in that category?
Step 6: Each group member shares a story about a survey item with a low score.
Step 7: Each group member shares a strategy and action steps that would improve
the low score, and integrates ideas and suggestions from other group members to
develop a more detailed continuous improvement plan.
Step 8: The group summarizes its scores and suggestions for improvement, and
submits the information to the facilitator for the purpose of continuous
improvement follow-up.
Step 9: The facilitator forwards the information to the responsible manager.
Step 10: Management or the facilitator updates employees about progress made
regarding the suggested improvements.
Review EXHIBIT 4.10 and 4.11 to understand how to transform a Code of Ethics into an
assessment survey instrument.
DISCUSSION ACTIVITY
Have students obtain their organization’s Code of Ethics and transform it into an assessment
survey. This could also be done for the college or school if a Code of Ethics or Values Statement
is available. Then evaluate how well the organization lives up to its Code of Ethics. Answer the
following:
1. What are the organization’s ethical strengths? (share stories)
2. What are the organization’s ethical weaknesses? (share stories)
3. What strategy can be implemented to transform the weakness into a strength?
CHAPTER 4 CHAPTER AND ADDITIONAL QUESTIONS SUMMARY
Chapter Question 1: What is the difference between a Code of Ethics and a Code of
Conduct?
The terms “Code of Ethics” and “Code of Conduct” are two unique documents.
FOR DICUSSION: Have students search the internet for “Code of Ethics” and “Code of
Conduct” and compare the similarities and differences between the two documents.
Chapter Question 2: Why are Codes of Ethics and Conduct important? What purposes do
they fulfill?
In small organizations the ethics code is embodied within the owner, and a formal one is
unnecessary because employees typically interact with each other on a regular basis.
Chapter Question 3: What values are contained in most Codes of Ethics?
A Code of Ethics expresses the principles that define an organization’s ideal moral essence.
The best codes are easy to understand and inspirational, something that unites employees
FOR DISCUSSION: Ask students if their employer or volunteer organization has a code of
ethics or code of conduct. If so, bring it to class. Do employees know it exists? Is it inspiring? Do
employees refer to it when ethical dilemmas arise?
Additional Question 1: Are there universal codes of conduct for international business?
In 1977, Congress responded to U.S. corporations paying bribes in foreign countries by
passing the Foreign Corrupt Practices Act (FCPA), making it illegal for U.S. businesses to
directly pay bribes in other nations or thorough intermediaries, such as joint venture partners
or agents.
In 1999, the Organization for Economic Co-operation and Development (OECD),
representing thirty developed nations, ratified the Anti-Bribery Convention which requires
member nations to enact legislation criminalizing the payment of bribes in developing
nations.
FOR DISCUSSION: Ask students if it is ethical for the United States to impose its value system
on other nations. Would students want other nations to impose their value system on the United
States? Should a multinational business apply one set of ethics in the United States and another
in Italy, Russia, El Salvador, or Egypt, nations whose cultures and laws vary significantly from
the United States?
Chapter Question 4: How would you create a Code of Ethics for an organization?
Have employees construct the code as a team building activity
industry associations in developing a Code of Ethics.
13-Step process
FOR DISCUSSION: Have students adopt the 13-step process to develop a code of ethics for
some organizational unit on campus, such as the School of Business, Management Department,
student organization, or staff department. Share this with the leader of the appropriate
organizational unit.
Additional Question 2: What should be the relationship between a code of ethics and
strategic planning?
Strategic planning integrates an organization’s mission with its vision and provides clear
direction on how the organization will progress from its current situation to a highly desired
future situation.
FOR DISCUSSION: Have students create a cause-based strategic message by answering the
questions in Exhibit 4.6 for the School of Business, Management Department, student
organization, staff department, or some other organizational unit on campus. Share this with the
leader of the appropriate organizational unit.
Chapter Question 5: What topics should be addressed in a Code of Conduct?
Develop different Codes of Conduct for different business units, work functions, or
The New York Stock Exchange recommends that a Code of Conduct address the following
seven topics:
Use Codes of Conduct to highlight specific issues of major importance.
Two problem areas many organizations have in common are the giving and receiving of
gratuities and e-mail use.
Organizations are concerned that employees will use e-mail for non-work related purposes,
thus a drain on workplace productivity, and confidential information might be sent to
unintended recipients.
FOR DISCUSSION: Have students respond to the situation summarized in Exhibit 4.7. A
Judicial Ethics Advisory Committee in Florida ruled that judges and lawyers linked as “friends”
on Facebook creates an appearance of impropriety. Is it ethical for a student and a college
professor to be friends on Facebook while the student is enrolled in the professor’s: (a) class or
(b) school? Why?
FOR DISCUSSION: Have students discuss which of the following intended gratuities might be
considered a bribe: a $15 book about golf putting, a dozen golf balls costing $50, golf clothing
valued at $150, a round of golf for two people at an exclusive golf club for $280, or two tickets
and traveling expenses for the upcoming Masters golf tournament valued at $2,500? Exactly
what dollar amount would the students draw the line?
FOR DISCUSSION: Have students discuss whether organizations should allow employees to use
e-mail at work for personal reasons? If yes, under what conditions? How about employees who
frequently work more than the 50 or 60 hours a week?
Chapter Question 6: How would you implement an effective Code of Ethics and Conduct
communication strategy?
Ethical hypocrisy, the gap between an organization’s formal ethical proclamations and its
actual behavior, damages employee morale.
cause.
Elements of the communication strategy include:
Obstacles for an effective code include: social pressure, employees are hesitant to report code
violations committed by their friends, peers, or manager, fear accusation of being a
“tattle-tales”, times of market and organizational turbulence
FOR DISCUSSION: Have students obtain their organization’s Code of Ethics and transform it
into an assessment survey. This could also be done for the college or school if a Code of Ethics
or Values Statement is available. Then evaluate how well the organization lives up to its Code of
Ethics. What are the organization’s ethical strengths and weaknesses, and what strategies would
transform the weakness into a strength?
