How Optimized Is Your Company's Code of Conduct: The E&C Pulse - November 13th, 2019

November 13, 2019 Ben DiPietro
 

Nov. 13, 2019

How Optimized Is Your Company's Code of Conduct?

 

LRN’s research shows an optimized code of conduct communicates a message from leadership that binds employees and other stakeholders to the organization’s purpose and heritage, then integrates and provides behavioral guidance about its purpose and values.
 

An optimized code references specific responsibilities and expectations of managers and employees; promotes accessible resources for reporting concerns; provides values-based reasoning for its risk-mitigation decisions; is easy to read, and is logically organized.


A review of 96 codes of conduct by LRN identified 30% as optimized, showing there is significant room for improvement. The study looked at eight characteristics of an optimized code. They are:

  • Tone from the top;
  • Applicability and administration;
  • Orientation and positioning;
  • Seeking advice and raising concerns;
  • Risk areas and topics;
  • Knowledge reinforcement;
  • Look and feel; and 
  • Usability

All of the codes rated as optimized reference organizational purpose, and how that purpose relates to the company’s business operations. These optimized codes were 2.3 times stronger in providing business rationales in their guidance than codes rated as established or developing, and 2.9 times stronger in integrating values into their decision-making models.

 

While most of the 96 codes rated well for their tone from the top, applicability, and usability, few scored high in knowledge reinforcement, even those ranked as optimized. Many codes also can improve their look and feel.
 

One of the reasons organizations scored well on tone, applicability, and usability is these are relatively easy things to do, and are the areas where many companies will first turn their focus, said LRN’s Dana Vazquez, who helped to analyze the research. 
 

“What we find is that while these dimensions are impactful, most codes do well here,” she said. Organizations should see these as the bare minimum for having an effective code, but having just these components isn’t enough to have an optimized code.

 

Given the significant opportunity a code of conduct provides for educating employees, one of the most surprising findings was the small number of organizations that had codes which scored well in knowledge reinforcement. 

 

One reason, said Vazquez, is companies still are transitioning their codes into true learning documents, and codes that once were seen as a compliance manual now are looked at as a useful reference guide to help employees understand a company’s ethics and compliance requirements.
 

“The codes that scored high in knowledge reinforcement utilized the code to reinforce annual training,” she said. “They provide multiple learning opportunities through scenarios, FAQs, multimedia, decision-making models, and additional context and insight to risk-area topics.”

 

Another area where organizations can strengthen their codes is through improving how they look and feel. It matters because presenting the code as a gateway to the compliance program is important, and the code should reflect the unique character, brand, business, and culture of the organization, said Vazquez.  
 

Optimized codes are 1.5 times stronger in use of meaningful images that enhance the readers’ experience, 1.7 times stronger in the use of call-out boxes to emphasize important points, and 1.6 times stronger in use of white space and avoiding large blocks of text.
 

“By engaging professional designers who understand what makes a document such as this appealing to its audience, organizations can have a tremendous impact on this dimension,” she said.

 

                                                                                                            BEN DIPIETRO
                                                                                                       @BENDIPIETRO1
                                                                                       BEN.DIPIETRO@LRN.COM

 

 

PRINCIPLED PODCAST

In this week's episode, Jonathan Drimmer of law firm Paul Hastings talks about how multinationals can tailor their values-based programs.

 

LISTEN AND SUBSCRIBE→

 

FROM THE LRN BLOG

New research provides further correlation between better economic performance and having a diverse and inclusive culture.

 

READ THE ARTICLE→

 

MIND NUMBERS

40%/25%/61%

A survey of 125 sustainability professionals by BSR found 40% said their organization cites investor interest as a key driver of their sustainability efforts, up from 25% last year. The biggest driver is reputation, at 61%.

 

THE ELEVEN

 

A federal court ruled warrantless searches of international travelers at U.S. airports are unconstitutional, Associated Press reports.

 

Are investors able to spot greenwashing? Bloomberg reports on efforts in Europe to create a measurement for ESG analysis.

 

Executive recruiter Janice Ellig explains why more women are needed on boards.

The Harvard Law School Forum on Corporate Governance and Financial Regulation published a report on boardroom conflicts and biases.

 

Investor groups are unhappy with the SEC's decision to raise requirements for shareholders to file motions, and on firms that advise shareholders how to vote, MarketWatch reports. Also: Does activism have much impact? 

 

An executive of Alstom SA was found guilty of violating the U.S. Foreign Corrupt Practices Act for bribing a public official in Indonesia, WSJ reports.

 

Hui Chen writes about the compliance burdens of small businesses.

 

Michael Peregrine writes in Forbes about three reports that say it's time for companies to fundamentally change how their boards are composed.

 

Harvard Business Review looks at whether AI bias is a corporate social responsibility issue.

 

Human Risk says compliance officers shouldn't be so risk-averse.

 

Pope Francis says economics that lack ethics leads to throwaway culture.

 

Procurement compliance is coming, Matt Kelly writes in Radical Compliance. 

 

THE QUOTE

"Every country needs its whistleblowers. They are crucial to a healthy society. The employee who, in the public interest, has the independence of judgement and the personal courage to challenge malpractice or illegality is a kind of public hero."

- Fuad Alakbarov, commentator, human rights activist

 

THE NUDGE

Check out the new book "Gloom to Boom" from Andrea Bonime-Blanc, a compliance professional, board director and head of her own advisory firm. The book looks at how business leaders and board members can turn environmental, social, governance, and technological risks into opportunity and value.

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