Creating a Company Code of Ethics
Whether you call it a Code of Ethics, a Fraud Policy, an Ethics Policy, or some other
name, it's important to define the expectations management has for employees as it
relates to honesty and ethics at work. It is imperative to outline expected behaviors for
employees so that they are clear about what is allowed and what is not.
The best ethics policies address general employee conduct and promote an ethical
corporate culture. A good code of ethics should provide a small number of examples as
needed to demonstrate the application of the rules. It’s not possible to create a rule for
every situation that may arise, so an ethics policy should not be aimed at specifically
defining each and every ethical dilemma that may occur.
The following general issues and topics should be addressed by your company's code of
conduct:
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General employee conduct while at work - What is expected in terms of ethical
behavior and giving an employee's best efforts to the company.
Conflicts of interest - Define conflicts of interest and give clear examples so that
employees are sure of the types of things that fall under this guideline. Distinguish
between acceptable conflicts of interest (those that are disclosed and monitored)
as opposed to those that are unacceptable.
Confidentiality - Address issues within the company (sharing information with
other employees or departments) as well as issues connected with sharing
information with people outside the company,
Relationships with customers and suppliers - What types of professional and
personal relationships are acceptable? Should they be disclosed? Will employees
be reassigned in the event of such relationships?
Gifts - Are employees allowed to receive gifts, and how large may the gifts be?
Are there any types of gifts that are forbidden?
Entertainment - Define the types of entertainment activities that are allowed, and
how often they may occur.
Unethical behavior - Define ethics in general and outline which behaviors are
strictly prohibited, such as taking kickbacks or bribes, giving out confidential
information, and falsifying employment documents.
Using the organization’s assets for personal activities - Are employees allowed to
use any company resources for personal purposes? Consider things like Internet
access, office supplies, copiers, and vehicles.
Reporting fraud or unethical behavior - Encourage employees to report suspicions
of fraud and outline the process followed when a complaint is received. Stress an
open-door policy and the availability of the fraud hotline, the supervisors, and the
managers going up the chain of command.
Antifraud training must include education on the ethics policy. The code of conduct must
be explained and demonstrated, and employees should be given a chance to ask questions
both publicly and in private.
It is dangerous to assume that an employee can read the code of conduct and
automatically understand all of its provisions. Examining the code of conduct during
fraud awareness training is time well spent.
Employees should affirm their receipt and understanding of the policy with an annual
acknowledgment. It is a good idea to repeat the ethics policy training each year when
these acknowledgments are due, in order to point out any changes or enhancements to the
policy and to make employees aware of the new provisions.
Finally, the code of ethics must be enforced in order for it to be a valuable tool.
Implement and enforce consistent and fair consequences for violations of the code.
Evaluating Your Company's Ethics
Program and Fraud Hotline
EthicsLine, a high-quality provider of cost-effective anonymous hotlines for
corporations, has put together a checklist to help companies evaluate their ethics
programs. This questionnaire asks management to evaluate the company’s training
regarding ethics and their internal promotion of the fraud hotline.
A section of the questionnaire dedicated to a company’s anonymous fraud reporting
process points out some of the critical aspects of making such a program work. The
following questions are asked, and the ideal answer to each is “yes”:
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Has your organization established an anonymous reporting mechanism?
Does your organization ensure confidentiality for those who wish to remain
anonymous?
Ensuring accuracy and detail: Do Interviewers ask probing questions to ensure
pertinent information is uncovered?
Do interview questions change according to the type of unethical behavior being
reported?
Is the hotline available free of charge to all employees?
Is there a well-defined process for immediate notice of time-sensitive issues, such
as impending illegal activity?
Is the hotline available 24/7/365?
Does the hotline enable reporting in the native languages of all employees?
Is there a process for maintaining ongoing communication with anonymous
parties?
The EthicsLine questionnaire also points out some key elements of creating an ethical
corporate culture. The questions point out the importance of consistently reinforcing the
message that management is committed to ethical behavior by all employees.
Attention is also given to the process of handling ethics complaints and completing
investigations. Namely, a company should have a case management system that requires
documentation of all key elements of a fraud report, and the established process of
investigating those complaints should be documented and consistently followed.
Companies that have not instituted an anonymous fraud hotline should seriously consider
doing so. It is an effective fraud prevention tool, and even the smallest of companies can
implement one at a reasonable cost, thanks to companies like EthicsLine that outsource
these functions.
Note: I am not in any way affiliated with EthicsLine, nor have I been asked or
encouraged to promote their product. They are simply a company that has an established
relationship with the Association of Certified Fraud Examiners, and has developed a
good reputation.