8/25/24, 8:56 AM How to Create a Code of Ethics and Code of Conduct

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Updated Nov 02, 2023

Does Your Business Need a Code

of Ethics or Conduct?
These documents can help clarify murky situations and set behavior standards for organizations.

Written By: Jennifer Dublino Editor Verified: Shari Weiss

Senior Writer & Expert on Business Operations Senior Editor & Expert on Business Operations

What are a code of ethics and a code of conduct?

If you’re a solopreneur, you won’t need a code of ethics or a code of conduct because the
ethical values you abide by are internal. However, things change once you hire employees
who may have different ideas about what is ethical. A formal code of ethics and code of
conduct can help ensure consistency in behavior. These documents ensure employees
don’t violate the business owner’s ethics and help avoid situations that could damage a
company’s reputation or even land it in legal trouble.

A code of ethics defines the company’s ethical standards; it gets all employees on the
same page regarding operational honesty and integrity. A code of conduct drills down to
day-to-day expectations. Together, these documents help create your company’s ethical
business culture, guide employee behavior, and protect your brand reputation from the
consequences of questionable practices.

What are a code of ethics and a code of conduct?

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While related, these two documents have different takes on ethical employee behavior.
Some companies combine them into a single document because there’s significant
overlap. However, for clarity, we’ll examine each code individually.

Code of ethics

A code of ethics lays out the company’s overarching ethical principles and values. A code
of ethics does the following:

Promotes high standards against which employees can evaluate themselves

Broadly defines professional expectations and enhances your brand

Communicates how the company will act in its dealings

In essence, a corporate ethics code reflects your core values. It contains broad statements
that demonstrate your company’s commitment to values and goals, including the
following:

Protection of intellectual property

Diversity, equity and inclusion

Promotion of good community relationships

Cultural competence, including respect for cultural differences and how to respond
when customs and laws in other countries conflict with your standards and

expectations

Environmental responsibilities and actions

Workplace safety practices

Financial and accounting maintenance and reporting practices

Employee compensation standards

Regulatory and legal compliance

Professional standards and expectations

Examples of business codes of ethics

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Your code of ethics should include easy-to-interpret language with clear parameters on
what employees should do to remain ethical at work. Here are a few examples of
directives that may appear in your code of ethics:

Be inclusive. Foster an environment where all employees from all backgrounds are
supported and made to feel welcomed.

Ensure the safety of employees and customers. Always make the safety of

those around you a top priority.

Conduct yourself professionally at all times. Never act in a way that could be
construed as harassment or exclusionary.

Be lawful and just. Always follow the rules and regulations at the local, state and

federal levels. Remain objective and fair in all business dealings.

Did You Know?

Provide an honest and ethical user experience to build trust with customers and breed
confidence in your brand.

Code of conduct

A code of conduct is a list of company rules. While an ethics code is a philosophical

statement that provides decision-making guidance, a code of conduct defines specific
required and prohibited behaviors.

Code of conduct topics might include the following:

Standards of professionalism, such as punctuality, dress code, absenteeism and

attendance policies

Courtesy toward co-workers, customers and vendors

Protection of financial, physical, intellectual and digital company assets

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Anti-bribery and corruption

Harassment, including sexual harassment, dating co-workers and harassment based

on race, ethnicity or disability

Substance abuse and use

Conflicts of interest, such as fiduciary responsibilities, running for public office, and

investing in competing companies

Adherence to regulatory and legal requirements

In addition to reinforcing positive behavior expectations, a conduct code must spell out
behavior that is not tolerated within each category. A separate section should explain
how to report a violation of company policy or ethics and the consequences for not
reporting a violation or for providing false information to conceal the violation.

Examples of business codes of conduct

Your code of conduct allows you to be specific about what you expect from employees
daily. Here are a few examples of guidelines that may appear in your code of conduct:

Protection of company property. All employees are expected to treat company

property with care and respect, whether tangible or intangible. This includes
refraining from misusing company equipment, using it frivolously, or using it for

personal purposes. Employees are expected to respect the company’s intellectual

property by protecting confidential information — such as proprietary processes,

pricing and cost — from disclosure unless specifically authorized by a supervisor.

Employees should follow their work schedules, arriving on time each work day. The

company offers flexible schedules upon manager approval, so long as the total hours

worked each day equal at least 8.5. Vacation and flextime must be approved by your
supervisor at least 30 days beforehand. Any unapproved absences will result in

salary being docked in the daily amount.

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Employees should be friendly and collaborate well with others. They should not

undermine, sabotage, or otherwise disrupt or create obstacles to their colleagues’

work.

Tip

To encourage workplace collaboration and improve performance, allow each team

member to play to their strengths, eliminate competitive performance rankings, and unite
employees with your company values.

Does your business need a code of ethics and a code of

conduct?
A code of ethics and code of conduct may not seem necessary to some business owners
who feel that knowing right from wrong is intrinsic. However, people and situations can
be complex, and formal guidance can be valuable. Here are a few reasons why your
business might need a code of ethics and a code of conduct.

1. A code of ethics and a code of conduct can clarify murky situations.

While you shouldn’t have to point out that “borrowing” money for personal use from
company coffers without authorization is stealing, the line between right and wrong can
sometimes be unclear.

Consider the following: Is it ethical to partner with a company that thinks an “extra
payment” to a senior manager is a routine part of doing business?

In the U.S., we consider this a bribe and an example of unethical behavior. However, in
other countries and cultures, such payment is part of doing business. That’s where a code
of ethics comes in.

There can be no ambiguity about a policy that states: “We do not enter into side
agreements that are not clearly stated in the contract terms. Terms and amounts of all
payments are completely specified and transparent. We do not engage any ‘off-the-book’
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payments under any circumstances. If a contractor, partner or customer requests such an

arrangement, we will decline, even if it ultimately results in losing the business.”

2. A code of ethics and a code of conduct can establish standard

policies across locations.

Most large corporations have both a code of ethics and a code of conduct, and may
combine them into one governing document. This guidance sets a consistent standard of
employee behavior throughout multiple departments that cross national and
international boundaries.

Even if your business is small now, it may grow and open new business locations. Ethical
and conduct codes will establish consistent standards throughout the organization.

3. A code of ethics and a code of conduct help define company culture.

The culture you create for your business impacts employees, customers and the bottom
line, for good or ill. Culture encompasses “the way we do things here.”

A positive and strong company culture encourages the following:

Feelings of cohesion and trust among co-workers and management

Fairness and consistency in how employees are treated

Valuing and caring about employees, customers, vendors and the community
Acting in an ethical, considerate and professional manner

Creativity and team innovation

Responsibility and adherence to laws, regulations and social norms of behavior

When you set out your values and expectations in a code of ethics and a code of conduct,
you make those expectations clear to current and prospective employees, along with an
understanding that deviating from them will not be tolerated.

FYI

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If you need to change your company culture to a more positive atmosphere, eliminate
toxic employees, hire team members who fit your vision, and stay consistent with
boundaries.

4. A code of ethics and a code of conduct set standards for employee

behavior.

Having ethical and conduct information in writing — and communicating it clearly to

your employees — ensures that the standards will be applied consistently and fairly. For
example, if it’s unacceptable for lower-level sales team members to lie on sales reports, it
is equally unacceptable for the vice president of sales to fudge the numbers when
reporting to the CEO.

5. A code of ethics and a code of conduct improve the work

environment.

When employees know how they’re expected to treat one another — and the
consequences for acting contrary to the code of conduct — they will strive to comply.
Promoting values like collaboration, mutual respect, courtesy and communication creates
a good work atmosphere that leads to success. A positive work environment will improve
job satisfaction and reduce employee turnover.

6. A code of ethics and a code of conduct serve as marketing tools.

Once you’ve established a code of ethics, you can use it externally as a marketing tool.
Publish it on your website’s About page, write a blog post about it, and include it in
product packages.

Seeing that your company is concerned with being ethical makes customers feel more
comfortable doing business with you. Additionally, many potential customers and
partners prefer to do business with those who share similar values.

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7. A code of ethics and a code of conduct offer protection from legal or

regulatory enforcement.

Having and disseminating a code of ethics and a code of conduct won’t guarantee that
your company will never get into trouble with the government or regulatory agencies.
However, it will drastically reduce your risk.

These documents will clarify to employees how they should act in certain ambiguous
situations and reduce the likelihood that they will make poor snap judgments

8. A code of ethics and a code of conduct attract quality talent.

In the hiring process, you seek the absolute best possible candidates for the position. A
public code of ethics helps job candidates determine if they want to work for your
company. When their values align with yours, you’ll find yourself with new hires who fit
the company culture and have an excellent chance for success.

Did You Know?

According to a Hibob report, 91 percent of job candidates consider company culture

before accepting a position. They'll look at a business's social media and website, read
reviews, and talk to employees to determine if it's a cultural fit.

How do you create a code of ethics or code of conduct?

Like writing a mission statement, creating a code of ethics or a code of conduct involves
deep consideration of your values and how you want others to view your organization.
Here are some tips for creating a code of ethics and a code of conduct.

Creating a code of ethics

A code of ethics is a more general document, so consider writing that one first. Here’s
how to do it:

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1. List your top 10 values.

These values may depend on your priorities and business type. For example, Amazon’s
top priorities are compliance with laws, rules and regulations and avoiding conflicts of
interest. But for Ford Motor Company, quality and safety for customers and employees
are top priorities.

Focus on the following areas:

How employees should act toward each other (e.g., no workplace bullying)

How employees should act toward customers

How employees should act in regard to producing, managing, marketing and selling

the company’s product or service

How employees should treat the company itself
How employees should treat vendors and other stakeholders

How employees should act in regard to the community and environment

2. Get feedback from others.

Talk to your management team and employees to discover their priorities.

Ask them what they think you should include in your code of ethics to create a
positive workplace.

Discuss what kind of workplace culture they would ideally like to have and whether
or not your current culture is living up to their expectations.
Share your list of top values and solicit their opinions. They may think of principles

you hadn’t considered before.

Add, subtract or modify your draft code of ethics as you receive employee feedback.
Having a code of ethics your employees accept is essential since it will make them more
likely to implement it in their behavior.

3. Prioritize your values.

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Once you have a complete list of the values you want your company to embody, work to
prioritize them. Which are the most important?

Some values may be important in general but not when applied to your specific industry
and company. For example, it’s wonderful to be safe. Safety should be a top priority for a
manufacturing or food service company, but it isn’t really a relevant value for a resume-
writing business. Likewise, collaboration may be necessary for a consulting company but
not as critical for a dry cleaner.

After this exercise, you can focus on the most critical values that should go into your code
of ethics.

Creating a code of conduct

Everything in your code of conduct should spring from the values laid out in your code of
ethics. Follow these steps to create your code of conduct document.

1. Examine each value in your code of ethics.

For each value in your code of ethics, identify specific employee behaviors that put the
value into action. Depending on each value, some of these behaviors will be in relation to
co-workers, customers, the work itself, the company, vendors and stakeholders, and the
community and environment.

For example, the value of collaboration relates mainly to how employees act with each
other. For that value, your code of conduct may include the following:

Break down silos. While each department has its function, we’re all part of the
same team, working toward a common goal. Cooperate and communicate with

people in other departments.

Work together. We get more done when we work together. Help colleagues, be

friendly, and collaborate with others.

Don’t obstruct. Do not disrupt the workplace or make it more difficult for co-

workers to accomplish their goals. Persistent disruption will be cause for

disciplinary action.
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2. Decide how employees should report violations.

Let’s say a co-worker is harassing an employee, and the code of conduct prohibits
harassment. How should this employee report this violation? Should the employee report
the incident to the department head, the employee’s immediate supervisor, or the human
resources department? Who will write up the employee who committed the violation?

The code of conduct should make the reporting protocol clear. Specify the procedure in a
section of your code of conduct.

3. Communicate the disciplinary process.

Rules are useless unless they’re enforced. A section of your code of conduct must inform
employees about your disciplinary action policy. This shows employees that you’re
serious about enforcing these rules and that the company will fairly evaluate any
accusations to protect employees from being falsely accused.

Formalize your core values

Having a code of ethics and a code of conduct will standardize your core values, ensure
employees are on the same page, and improve your workplace environment. As your
company grows, it will act as a tool to attract top talent and clearly communicate the
company’s expectations and culture.

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Written By: Jennifer Dublino

Senior Writer & Expert on Business Operations

Jennifer Dublino is an experienced entrepreneur and astute marketing strategist. With over three decades of
industry experience, she has been a guiding force for many businesses, offering invaluable expertise in market
research, strategic planning, budget allocation, lead generation and beyond. Earlier in her career, Dublino
established, nurtured and successfully sold her own marketing firm. At business.com, Dublino covers customer
retention and relationships, pricing strategies and business growth. Dublino, who has a bachelor's degree in
business administration and an MBA in marketing and finance, also served as the chief operating officer of the
Scent Marketing Institute, showcasing her ability to navigate diverse sectors within the marketing landscape.
Over the years, Dublino has amassed a comprehensive understanding of business operations across a wide
array of areas, ranging from credit card processing to compensation management. Her insights and expertise
have earned her recognition, with her contributions quoted in reputable publications such as Reuters, Adweek,
AdAge and others.

EMAIL | LINKEDIN

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