Why you need a code of ethics policy

In “We Should Speak Up About Ethical Violations More Often,” Joseph Grenny makes a somewhat surprising claim.

Whistleblower laws aren’t the way to more ethical companies, he says. Instead, leadership needs to develop a culture that encourages employees to speak up—as a matter of course—about all the “minor” transgressions occurring in workplaces every day. When that happens, Grenny hypothesizes, major ethical breaches will be less likely to occur.

Grenny has a point, but companies without a code of ethics policy won’t get very far with his advice.

That’s because employees need to know what you believe and that you’re willing to stand by those beliefs, or they probably won’t be willing to come forward and report possible wrongdoing. It’s just too risky.

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When Grenny et al surveyed 926 employees from around the world, they gave the following reasons for NOT reporting ethical breaches to company officials:

  • It might damage my career
  • It would have made the offender harder to work with
  • I didn’t think I would be taken seriously
  • I wasn’t sure how to bring up my concerns

Nothing on this list should come as a surprise. According to The Workplace Bullying Institute, it’s practically common knowledge that every whistleblower gets bullied.

Overcoming the objections

If you’re serious about operating an ethical business, you’ll want to overcome the common objections employees have for keeping mum in the face of ethical violations. Again, a code of ethics policy is the first step.

A code of ethics toolkit published by the Society for Human Resource Management (SHRM) recommends that a code of ethics policy include the following:

  • Leadership letter—Demonstrates your company’s commitment to the code from top management on down.
  • Introduction—Expands on the ideals described in the leadership letter. What is the purpose of the code?
  • Statement of core values—Should include clear examples of the code and how the code applies to the organization’s work.
  • Code provisions—Can be brief or comprehensive depending on the purpose of the code but should cover the company’s intent for providing the code followed by company core values and examples.
  • Information and resources—Who should your employees contact if they have questions or concerns about possible unethical behavior?

The financial benefits of acting ethically

Doing the right thing is the right thing to do, but there are financial benefits to running an ethical business, too.

According to an index compiled by Corpedia, an online corporate compliance eLearning company, ethical companies outperformed the S&P 500 by more than 370 percent over 5 years.

That’s a big deal.

The index also showed that companies with a reputation for being ethical are more attractive to customers and workers.

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