What Type of Company Is Required to Have a Code of Ethics

Verschoor, Curtis C. “Benchmarking Ethics and Compliance Programs.” Strategic funding. August 2005. In the Commission`s code, the requirement for full disclosure or honesty is perhaps the most complex. It can be difficult to make a final decision on whether or not to exchange information with the public, as it can both mislead and enlighten. Disclosure also includes consideration of accounting principles that are interpreted multiple times and could be manipulated to achieve the desired result. In many cases, the desire to meet the expectations of securities analysts regarding certain performance measures takes precedence over an honest presentation of a company`s results. Conversely, many well-meaning companies may have favored conservatism over openness, for the sake of legal responsibility. Codes are typically divided into three different elements: 1) an introduction or preamble, 2) an explanation of objectives and values, 3) specific rules of conduct that can be divided in different ways, and 4) the implementation of the code that defines administrative processes, reporting, and sanctions. The introduction or preamble to a code of ethics ideally includes a statement from the company`s senior executive setting out their personal commitment and support for the code. Experts and scientists in business ethics repeatedly stress the importance of leading senior management, also through examples. Pro forma codes of ethics, possibly linked to some rumors of scandals, carry little weight among employees unless there are tangible signs of entrepreneurial engagement. The preamble to a code of ethics provides an opportunity to send such a signal.

A code of ethics, also known as a “code of ethics,” can include areas such as business ethics, a code of conduct, and a code of conduct for employees. A code of ethics for companies is generally broader than a code of conduct that deals with how employees should behave in certain situations. However, many companies use a central document for ethics and a code of conduct. Use your company`s core values to guide your code of ethics. For example, if you`ve built your business on integrity and trust, incorporate these values into your code by explaining how you and your employees will follow them. If one of your company`s values is focused on sustainability, you can add information about how the company is working to reduce its carbon footprint. Although this requirement seems less complex or open to interpretation than the requirement of honesty, the codes often go further. Many organizations recognize that being legal is not the same as being right, and urge their employees and others covered by their code to seek the highest standard – the spirit or intent of the law, not just the letter. These codes reflect the idea that legality is a necessary but inadequate standard for ethical behavior. Decision-makers are expected to apply laws, regulations, policies, procedures, corporate values, personal values and company expectations as criteria for determining what is “fair” or appropriate for the company.

In addition to the current Code of Ethics, there are generally many support mechanisms that determine the effectiveness of the entire corporate ethics program. The focus is on a formal program to convey the company`s core values to the company`s employees. These programs, as well as the conduct and involvement of senior management, are much more important than the terms of the Code. Under the Commission`s rules, disclosure on Form 8-K must be made within five business days of amending the company`s code of ethics or granting an exemption in a manner that affects the CHIEF Executive Officer or senior tax officials. Alternatively, a company may use its website to disseminate this information, but only if it stated in its most recent annual report that it would disclose these events online by providing the address of its website. Ethics programs are not only the engine of business success. Organizations that focus on ethical business conduct are often more respected by regulators and law enforcement agencies. In many cases, ethical organizations have a positive reputation with law enforcement and regulatory agencies and enjoy the “benefit of the doubt.” For example, an effective ethics program can mitigate the penalties imposed in the course of legal action.

[ See e.B. Burlington Industries, Inc.c. Ellerth, 524 U.S. 742 (1998).] In general, companies report that “violations of the Code may result in disciplinary action up to and including dismissal.” But predetermined consequences are not required by paragraph 406 and compromise the undertaking`s ability to make decisions based on the unique circumstances in question. .