BY: ComplyLog|July 5, 2022|General Compliance
Legislators continually attempt to eradicate misconduct in the workplace. For example, the European Union implemented a range of laws in recent years, from the EU Whistleblowing Directive to the Markets in Financial Instruments Directive II (MiFID II). To keep up and remain compliant, many companies choose to draw up a code of conduct by which employees should abide. This article will help you discover how to write a company code of conduct that reduces the risk of financial penalties and reputational damage.
The effects of misconduct can be far-reaching. In a June 2022 speech, Frank Elderson, Member of the Executive Board of the European Central Bank (ECB), looked back to the end of the 2000s to show the potential consequences of the failure to communicate proper conduct. He said “banks’ governance came under close scrutiny during the global financial crisis, when weaknesses in governance, such as excessive risk-taking and misconduct by board members, were identified as some of the root causes of the crisis.”
This encourages the case for creating a comprehensive and effective code of conduct for your company.
Table of Contents
IV) How to write a company code of conduct
V) Common mistakes to avoid in your code of conduct
The company code of conduct is a document that describes how employees, directors and other internal stakeholders of a business should behave and interact. It should feature details essential to compliance with relevant legislation, as well as expectations for how colleagues work together and act towards each other. The code can also cover standards for dealing with clients.
Organisations usually distribute the document with the employee handbook. You should always provide access to the code, with many companies uploading their code of conduct to their intranet.
There are many reasons why having a code of conduct is important. They include:
A great code of conduct should include the following general themes:
The compliance department should be instrumental in developing the code, but a number of other stakeholders should also contribute. To ensure it is as wide-ranging as possible, collect opinions from management, senior employees, directors, HR and anyone else with relevant insight.
This task force or committee approach increases the potential input and ensures the code is relevant to the largest section of the company possible. This allows you to target the code to the exact and unique requirements with greater precision.
There are many components that combine to create an effective code of conduct. Here are the elements you should include:
|Mission statement and values||Align the core values that you want to promote with your company’s mission statement. The two should connect, as this code is the guide that tells your employees how to conduct themselves to achieve the mission effectively.|
|Policy brief and purpose||This sets out your expectations of your employees and tells them that you require them to read, understand and adhere to the code.|
|Workplace policies and procedures||You do not have to detail all of your business policies and procedures here, but you should add a statement relating to your expectations regarding reading, understanding and acting on workplace bullying, data protection, bribery and other company policies.|
|Industry compliance and regulations||State your expectations of employees’ adherence to relevant legislation. This might include requiring staff to read, understand and action your policy for employee personal trading compliance, inside information and other compliance topics.|
|Conflicts of interest||A statement detailing what comprises a conflict of interest and what to do in the event employees find themselves faced with such a situation.|
|Recording and reporting information||Detail the recording and reporting information relating to relevant legislation. For example, workers at investment firms must record all conversations regarding a trade so they can reconstruct the events later if required.|
|Anti-bribery and corruption||Note what constitutes an incentive that could be considered a bribe and alert your employees to the list and what to do if they think someone is attempting to bribe them.|
|Protecting company assets||Ensure employees understand that they have a duty to protect physical assets required to run the business, such as computer equipment. In addition, detail their duties concerning digital assets, such as personal data.|
|Disciplinary actions||Inform employees about the types of violations and what to do when they need to report them. In addition, add information about sanctions for contravening the different aspects of your code of conduct.|
|Attendance and punctuality||Set your expectations for attendance and punctuality, as well as acceptable reasons for absences and how to report non-attendance.|
|Absence without notice||Detail how you follow up on unauthorised absence, how you will try to contact the employee and when, and the sanctions you may implement.|
|Anti-harassment and sexual harassment policy||State that the company will not accept any form of harassment and note the potential sanctions in place for violation.|
|Process for reporting complaints||You should have a clear escalation policy so that employees know exactly where to go with details of contraventions. State the internal reporting channels that you have in place for reporting.|
|Whistleblowing policy||Reassure your employees that you will protect whistleblowers from retaliation and offer them confidentiality after making reports.|
When considering which types of conduct issues to include in your code, look back at those that have occurred previously in the organisation. This will give you a good idea of those likely to happen again unless you tackle them in your code of conduct.
You can tighten up your policies and procedures by spotting previous weaknesses and learning from historical behaviour.
Another idea is to analyse conduct issues from other businesses in your sector. If you understand the most likely risks, then you can preempt them and prevent them.
With so much to consider for your code of conduct, you should note everything down as you think of it, creating a long first draft. You can edit at a later date, but it is better to write down every potential problem and then finesse it rather than trying to prioritise and edit as you go. The risk with that approach is that you leave compliance gaps in your code.
Once you have your rough draft, your task force or committee can collaborate to edit out repeated details and unnecessary information and tighten the language you use.
This feedback is essential, as having multiple people working on the code keeps everyone accountable and ensures you do not miss anything vital.
Once you complete the collaborative process, you have a final draft. You should publish this on your intranet and distribute it to all staff. It should form part of your welcome pack for new starters, and it is essential that all employees read and understand it.
A code of conduct is an organic document that grows and changes as new legislation occurs and the industry evolves. This is why you should reassess your code regularly and make the necessary changes.
The code should fit the tone of the organisation if employees take it seriously. For a major law firm, legalese is more acceptable to staff than it would be for a disruptive tech start-up. You should also check that you are being specific enough with your content. Vague references to violations or procedures could prevent employees from aligning the code with their working life and lead to them not enacting your requirements.
Think about the reality of your code of conduct. Could an employee realistically meet all of its requirements and still have time to complete their work? You might add additional reporting requirements above and beyond those necessary under the law. Whilst this ensures compliance, it might not be realistic and could overload staff.
Try to find realistic alternatives to reduce workload. For example, rather than tasking managers with manually clearing employees’ personal trading in an investment firm to fulfil the requirements of MiFID II, use an automated pre-clearance tool that saves time and reduces workload. You input the parameters relating to acceptable personal trades into TradeLog, and it allows or declines the trade accordingly.
Employees must understand what is required. If you don’t give enough direction, it is difficult for them to adhere to your code. You should answer their questions rather than inspire more questions in return.
If your code doesn’t direct your employees towards the company culture that you want to foster and to your business objectives, it could create inefficiencies. The more people adhere to your code, the less likely you will achieve your goals, or the more they work towards your business goals, the less they adhere to the code of conduct which can cause compliance issues.
Your code of conduct is essentially the written version of your company culture. It is the building block for how you will achieve the culture you desire in your organisation.
Although many people use the terms code of ethics and code of conduct interchangeably, there is a subtle difference. The code of conduct relates to the actions employees must take, whereas the code of ethics relates to decision-making.
It might be that your code of conduct encapsulates both conduct and ethics. Although technically they are separate entities, combining them in one document makes sense to keep all the relevant information together.
We hope these tips on how to write a company code of conduct will help you create a document that guides your employees to maintain compliance as you strive toward your goals.
When you write your code, you realise exactly how many policies and procedures there are in this ever-growing legislative environment. It can be overwhelming for both compliance professionals and employees.
This is where automated compliance tools can help streamline your processes. TradeLog automates the pre-clearance of employee personal trades and trade monitoring. Request a free demo for your organisation today.