A Model Code of Conduct
A training presentation sponsored by SHRM’s Ethics Special Expertise Panel
Topics to Be Covered
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Purpose
Why a code of conduct?
The impact of a code of conduct
Legal implications
Considerations and recommendations
“Complementing” the code
A model code of conduct
Case study: Time Warner Inc.
References
Open forum
©SHRM 2008
Purpose
• The purpose of this training presentation is to
establish a guideline for HR practitioners who
would like to benchmark best practices in the
development of a code of conduct for their
companies.
©SHRM 2008
Why a Code of Conduct?
• A code of conduct represents a commitment to
integrity and high ethical standards in a
company’s business operations. The code of
conduct is a document that summarizes the
standards of business conduct for a company of
any type—be it a public or private company,
large corporation or small business.
©SHRM 2008
The Impact of a Code of
Conduct
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Ethics and Integrity
• Embracing the need for a code of conduct and
making it visible to employees, shareholders
and any other stakeholders demonstrates a
commitment to ethics and integrity in every
aspect of running the business operations. This
commitment is essentially embedded in the
company’s mission statement and is inherent in
its strategic objectives.
©SHRM 2008
Principles and Values
• A company’s code of conduct showcases its
principles and values, giving clarity and unified
purpose to the company’s employees,
shareholders and any other stakeholders.
• It is the “face” of the company culture.
©SHRM 2008
Practically Speaking…
• A code of conduct defines acceptable practice
and behavior in the workplace and helps guide
them.
• Employees know where they and others stand
and can use the code to support raising their
concerns about unethical, discriminatory,
unsafe or illegal work practices.
©SHRM 2008
Legal Implications
©SHRM 2008
Sarbanes-Oxley Act
• The Sarbanes-Oxley Act of 2002 established corporate
obligations and responsibilities, including governance of
the day-to-day conduct of employees of publicly traded
companies.
• SOX primarily sets forth requirements for financial and
operational controls and disclosures.
• Note: Publicly traded companies must publish a code of
conduct and ethics (i.e., a “business conduct statement”)
that must be proactively communicated to its employees,
including “live” or online training.
Source: Falcone, P. (2006, June). Management tools: Reporting for SOX duty. HR Magazine,
51(6). Retrieved from
www.shrm.org/Publications/hrmagazine/EditorialContent/Pages/0606managementtools.aspx.
©SHRM 2008
International Matters That Support
the Need for a Code of Conduct
Miscalculations by hungry hedge funds in a giant game
of brinksmanship appear to be the key reason behind the
crash of an AUD$11 billion takeover offer for Australia's
Qantas Airways, analysts said. (May 7, 2007)
Siemens AG, embroiled in a six-month corruption probe, was ordered
by a German court to pay 38 million Euros ($51 million) as two former
managers were found guilty in a bribery case. (May 14, 2007)
An investment banker in Credit Suisse's Global Energy Group allegedly
netted more than $7 million from improper trading in advance of the TXU
buyout and eight other transactions and now faces criminal charges of
insider trading. (May 7, 2007)
©SHRM 2008
Considerations and
Recommendations
©SHRM 2008
Consider…
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Public or private corporation
National vs. multi-national
Company size (<100, 100-999, >1,000)
“Ownership”
Relationship to P&P Manual/Employee
Handbook
Labor relations
Communication
Accountability
Enforcement
> Certification
> Disciplinary action
©SHRM 2008
Not One Size Fits All
• The extensiveness of a code of conduct
depends on the company.
> Public and private corporations will likely have a more
detailed and lengthy code of conduct and publish it publicly
on their web site along with internal communications
> A smaller company may have a less detailed and less
extensive code of conduct, depending on the scope of its
business operations.
> Regardless of size, any global company or one that has
business dealings globally needs to address its commitment
to the Foreign Corrupt Practices Act to prevent bribery and
other unethical dealings with agents, representatives and
contractors.
©SHRM 2008
Recommendation I
• Work with your company’s legal counsel to
determine the code of conduct that best fits:
> The scope of your organization’s business
operations
and
> Your culture
©SHRM 2008
Recommendation II
• For companies that have multiple subsidiaries and
affiliates, consider creating a template of the code of
conduct. The template will outline business principles
common to all parts of the company and will also allow
for “localization” to address specific operations or
functions.
• Write it in “layman’s” terms so it is best understood.
• Include key contacts who can assist with interpretation
and address concerns.
• Include answers to frequently asked questions for
emphasis.
©SHRM 2008
Recommendation III
• Similarly, for companies that do business globally,
consider creating a template for the code of conduct to
ensure awareness of standard business principles.
• For international offices, translate the code into the
national language and require local employee
acknowledgement.
• There may be a need to “localize” to address specific
global operations or functions or applicable laws.
• Write it in “layman’s” terms so it is best understood.
• Include key contacts who can assist with interpretation
and address concerns, particularly corporate contacts
who can speak on behalf of the company and explain
and give guidance on the tenets of the code.
©SHRM 2008
Recommendation IV
• Get buy in
> Ensure that all senior managers of the company have
an opportunity to review and comment on the code
before it is finalized.
> Address any questions and resolve any concerns that
are raised.
> You may not be able to gain total agreement, but it is
necessary for the management team to fully support
and exhibit the tenets of the code in their everyday
roles.
©SHRM 2008
Recommendation V
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Consider multiple methods of communication to those inside
the company:
Hard copy
> CD
> Online
> Video
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Include the code in your Employee Handbook.
Feature articles in your company’s newsletter or on your
bulletin boards.
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Include testimonials from your employees and managers.
Emphasize aspects of the code during employee meetings
and business meetings.
Provide links on the home page of your company’s intranet
or from other related sites, such as policies and procedures,
human resources, etc.
Issue special communications or progress reports on matters
of significance.
©SHRM 2008
Recommendation VI
• Consider multiple methods of communication to those
outside the company.
• Post the code of conduct in the main reception areas of
your company facilities.
• Provide links on the home page of your company’s web
site or from other related sites, such as investor relations,
corporate governance, etc.
• Include the code of conduct in your company’s annual
report and feature key accomplishments.
• Sponsor awards or foundation efforts to recognize ethical
practices in the business community.
©SHRM 2008
Recommendation VII
• Consider training
> Conduct computer-based training on the code.
> Include important and related concepts from the code
in any compliance training.
> Hold “live” seminars to focus on certain aspects of the
code.
> Provide an overview of the code as part of your newemployee orientation.
©SHRM 2008
Recommendation VIII
• Consider certification
> Require all employees to attest to their understanding
and acceptance of their responsibilities under the
code.
> As part of new employee orientation.
> As part of incumbent employee recertification any
time the code is updated.
©SHRM 2008
Recommendation IX
• Where a collective bargaining agreement is in
effect, engage in discussions with the union
leadership to adopt the code of conduct as part
of the CBA.
• Note: Disciplinary procedures may still need to
revert to the CBA.
©SHRM 2008
Recommendation X
• Keep it dynamic!
• Revisit the code annually or at any time that
your business operations significantly change:
> A merger/acquisition or divestiture
> Plant closing
> Large expansion
> New product line, new market or new business
development initiatives
> Engagement of outside resources (agents,
contractors, etc.)
©SHRM 2008
Recommendation XI
• Make it yours!
• Ensure that the code—in every aspect—reflects
the fundamental tenets of your company, its
guiding principles and its culture.
©SHRM 2008
“Complementing”
the Code
©SHRM 2008
Ethics and Compliance Hotlines
• Hotlines support the reinforcement of the code
of conduct.
• Third-party providers collect information about
critical issues involving ethics and risk.
• Key Advantages:
> Anonymity for callers
> Timely alerts to your company to ensure prompt
investigation
> A call-back process to advise the caller of the results
of the company’s investigation
©SHRM 2008
Ethics and Compliance Training
• Companies have the responsibility to educate their
employees about the code of conduct.
• Online learning companies can help provide situationbased training on a variety of courses that the company
designates.
• Broad-based or targeted training can occur through the
company’s identification of specific employee audiences.
• References to the code or other company policies can be
woven into the course content.
• Most online courses are less than 60 minutes and
generally include interactivity, feedback, animated
graphics, role plays, case studies, learning aids, job aids,
multiple-choice testing/certification.
©SHRM 2008
A Model
Code of Conduct
©SHRM 2008
Sample Outline of a Code of Conduct
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Introduction
Employment practices
Corporate assets
Customer relations
Relationships in the marketplace
International relations
Public and investor relations
Government relations and political activity
Miscellaneous (table of contents, index, FAQs)
©SHRM 2008
Sample Outline: Introduction
• The introduction is a message from the CEO
and/or chairman reinforcing the code of conduct
as the documented vehicle to guide all
business and employment practices within the
company’s workplace.
©SHRM 2008
Sample Outline: Employment Practices
• Statement of equal employment opportunity
and zero tolerance for discrimination in any
hiring practices
• Zero tolerance for sexual harassment
• Worker health and safety
• Environmental protection
• Other employment practices
• Disciplinary action
©SHRM 2008
Sample Outline: Corporate Assets
• Accuracy of books, records and representations
• Proper use of corporate assets
©SHRM 2008
Sample Outline: Customer Relations
• Honoring commitments to customers
• Conflict of interest
• Gifts, gratuities and entertainment
©SHRM 2008
Sample Outline: Relationships in the Marketplace
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Unfair competition laws
Disparagement of competitors; marketing
Gathering intelligence on competitors
Protecting proprietary, confidential and
classified information
• Relations with vendors
• Retention and use of consultants, agents,
representatives and lawyers
©SHRM 2008
Sample Outline: International Relations
• International activities
• Bribes, kickbacks and other unlawful payments
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Sample Outline: Public and Investor Relations
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Relations with media
Insider information
Relations with investment analysts
Relations with the financial community overall
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Sample Outline:
Government and Political Activities
• Relations with government representatives and
agencies
• Political contributions and political activities
• Regulatory policies
©SHRM 2008
Sample Outline: Miscellaneous
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Table of contents
Topical index
Key contacts
Frequently asked questions
©SHRM 2008
Case Study:
Time Warner Inc.
©SHRM 2008
Time Warner
• The Time Warner family of companies:
> AOL Domestic, HBO, New Line Cinema, TBS, Time Inc.,
Time Warner Cable and Warner Brothers
• The Time Warner Code of Conduct is located on its
corporate governance site at www.timewarner.com
• The codes of conduct adopted by Time Warner include:
> The Standards of Business Conduct, which applies to all
corporate employees of Time Warner Inc.
> A supplemental Code of Ethics for Senior Executive and
Senior Financial Officers
> A set of Guidelines for Non-Employee Directors, and the
Policy and Procedures Governing Related Person
Transactions
©SHRM 2008
The Time Warner Standards of Business Conduct
• In June 2005, the company's board of directors
revised its Standards of Business Conduct,
which applies to all corporate employees of
Time Warner Inc. This code has served as a
model for similar codes of conduct that have
been adopted at each of the company's
businesses.
©SHRM 2008
Outline of the Time Warner
Standards of Business Conduct
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Overview
Maintaining a professional workplace
Protecting company records and information
Conflicts of interest
Conducting business in a global marketplace
Designated internal contacts (appendix)
FAQs included in each section
©SHRM 2008
Overview
• The Time Warner Standards of Business
Conduct emphasizes the company’s
commitment to the highest standards of ethics
and integrity.
• It is expressly stated that the Standards of
Business Conduct not a contract of
employment.
• A toll-free ethics and compliance hotline is
provided.
• Comprehensive ethics and compliance training
is offered.
©SHRM 2008
Maintaining a Professional Workplace
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Equal employment opportunity
Harassment and sexual harassment
Drug-free workplace
Environmental, health and safety laws
©SHRM 2008
Protecting Company Records and Information
• Integrity of financial records and statements;
public disclosure and reporting
• False statements
• Dishonesty and fraud
• Code of Ethics for Senior Executive and Senior
Financial Officers
• Securities trading
• E-communications and information security
©SHRM 2008
Conflicts of Interest
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Gifts and entertainment
Investments in other companies
Providing service to other companies
Working with family members
Corporate opportunities
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Conducting Business in a Global Marketplace
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Fair dealing
Foreign corrupt practices act
Antitrust laws
Export, import and anti-boycott laws
Political activities and solicitations
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Designated Internal Contacts
• Ethics and compliance department
• Legal department
• HR department
©SHRM 2008
FAQs
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General information about the code
Definitions of certain terms
How to apply the code in certain situations
Key telephone numbers and address
Key company representatives or departments,
such as legal and HR
©SHRM 2008
References
©SHRM 2008
Professional Associations
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Ethics and Compliance Officer Association
www.theecoa.org
Professional Association for Compliance and Ethics
www.pacecompliance.com
©SHRM 2008
Corporate Codes of Conduct
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Time Warner Inc.
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Dow Jones
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www.att.com/gen/investor-relations?pid=5595
SHRM
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www.ups.com/content/corp/code_conduct.html
AT&T
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www.investor.jnj.com/governance/conduct.cfm
UPS
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www.shareholder.com/dowjones/governance/CG_conduct.cfm
Johnson and Johnson
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www.timewarner.com/corp/corp_governance/pdf/SBC_External_06
2205.pdf
www.shrm.org/ethics/
Ethics and Compliance Officer Association
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www.theecoa.org
©SHRM 2008
Sample Outline
for Code of Ethics and Business Conduct
• For SHRM members only
> www.shrm.org/hrtools/policies_published/CMS_014093.asp
©SHRM 2008
Articles
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Business Ethics
www.shrm.org/research/briefly_published/Business%20Ethics%20Series%20Part%20I_%20Bus
iness%20Ethics%20Overview.asp
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Business Ethics-Corporate Governance
www.shrm.org/research/briefly_published/Business%20Ethics%20Series%20Part
%20II%20-%20Business%20Ethics%20---%20Corporate%20Governance.asp
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Business Ethics-Codes of Conduct/Ethics Programs
www.shrm.org/research/briefly_published/Business%20Ethics%20Series%20Part%20III_%20Bu
siness%20Ethics%20---%20Codes%20of%20Conduct_Ethics.asp
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Business Ethics in the Global Arena
www.shrm.org/research/briefly_published/Business%20Ethics%20Series%20Part%20IV_%20B
usiness%20Ethics%20In%20the%20Global%20Arena.asp
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Management Tools: Reporting for SOX Duty
www.shrm.org/hrmagazine/articles/0606/0606managementtools.asp
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The Corporate Governance and Compliance Hotline
Benchmarking Report
www.secureworldexpo.com
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Compliance is Not Enough: Law Enforcement Looks to a
Company’s Ethical Culture
www.shrm.org/hrresources/lrpt_published/CMS_009941.asp
©SHRM 2008
Other Resources
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Ethics and Compliance Hotline
www.lrn.com
> www.twinc.com
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Ethics and Compliance Training
www.integrityinteractive.com
> www.lrn.com
> www.skillsoft.com
>
©SHRM 2008
Open Forum
©SHRM 2008