Introducing a Code of Conduct into a company requires preparation and should be the result of a process involving all stakeholders. To create ownership of your company’s Code of Conduct, every effort must be made to bring to the table all those involved in integrity matters. In this Chapter, we learn about the key steps in producing a Code of Conduct. We discuss the purpose of a Code and its content (with a focus on provisions and guidelines relating to anti-corruption and antitrust), how to promote it, and dealing with possible violations. What is essential is that your company’s Code of Conduct be genuinely credible, so that all employees can accept it as a guide to their daily business behaviour.

-

INTRODUCTION

To be a ‘responsible company’ means behaving ethically, caring for the environment, and setting an example as a business and as an employer. By developing a Code of Conduct, your company creates an agreed and shared way of behaving and operating that all employees can understand and comply with.

The Code of Conduct of your company will be the stepping stone on the way to a new integrity model. As we have seen in Chapter 5 of this Training Handbook, an organization starts by conducting a full risk assessment. Once it has mapped its strengths and weaknesses on the ethics and compliance front, it defines the basic rules which will underlie its ethical approach. Many stakeholders will provide input into the drafting of the Code, but it will be up to the Board of Directors (or the highest body of the company) to give the document its ultimate sanction, thereby expressing the ‘Tone from the Top’.

Some companies prefer speaking about their Ethical Charter, others will be more inclined to refer to their Company’s Values, and others will use yet another name. Our recommendation is simple: do not stumble over terminology, concentrate on the content.

ICC does not believe that all Codes should be the same or even that they have to look alike. On the contrary, a Code should reflect the specific culture and spirit of each individual company or of a sector of activity. The diversity of corporate Codes is proof of their authenticity. Clearly, the basic principles will always be the same, but the approach taken by every individual company will be different from one company to the other.

[Page72:]

What is essential is that a Code of Conduct be genuinely credible, so that all parts of the organization can accept it as a guide to their daily business behaviour. Compliance with it should be natural in all circumstances. In short, all members of the organization should become owners of ‘their’ Code.

Beyond that, the Code of Conduct should incite all employees to be fully responsible for their behaviour: we are not talking here about simple, servile respect for the rules, based on compliance. This process implies trusting and respecting the judgment of employees. The famous French economist Jean-Baptiste Say was saying the same thing way back in the 19th century: “If you want to be obeyed, the last thing to do is to order people to obey you. It is not enough to want people to do something; you must entice them to do it.”

Codes of Conduct are important to employees

In March 2007, Ernst & Young surveyed a large number of multinationals in 13 European countries and found that: “Employees are not hostile to corporate anti-fraud measures and would welcome clarity and encouragement to act positively in the best interests of the company.”

Ernst & Young further noted that: “Most people would prefer to work in an environment which has a code of conduct. Most respondents [to the survey] believe that people in their companies need a unified and agreed set of guidelines on what is right and wrong in the company [...]. Without a code of conduct, employees are left to work it out for themselves, and there is no clear set of standards other than their own personal ethics against which behavior can be measured.

Source: A Survey Into Fraud Risk Mitigation in 13 European Countries, Ernst & Young, 2007

WHAT IS A CODE OF CONDUCT?

The purpose of a Code

A Code of Conduct is a summary of the principles and standards of business conduct that all employees, wherever they operate, are expected to follow. The phrase ‘all employees’ means in this context: all persons on the payroll at the parent company, but also at all its divisions, subsidiaries and affiliates and, as much as possible, in the entities over which the company has a significant influence. In addition, all agents, intermediaries and other third parties with whom the company has a contractual relationship should be requested to adhere to the Code. All these persons should find in the Code, and its accompanying material, practical guidance on how to deal with important ethical issues. The Code should offer general guidance on situations that may arise in the day-to-day activities conducted on behalf of the company.

[Page73:]

A CODE OF CONDUCT SERVES TO AFFIRM THE FOLLOWING PRINCIPLES OF CONDUCT:

  • Comply with the law at all times;
  • Conduct business with honesty and integrity; and
  • Have zero tolerance for corruption.

All employees should be familiar with the Code of Conduct and live up to the standards set by it. No Code of Conduct will ever answer all questions, nor will it offer ready-made solutions to all ethical dilemmas which may arise when conducting business. It is only the beginning, not the end, of a process. A Code of Conduct should continue to evolve as the company does. New regulations may apply and new risks may arise. The guidelines contained in the Code may vary according to local laws.

How to write a Code of Conduct?

In view of the foregoing, it would be wise not to delegate the responsibility for drafting your company’s Code of Conduct to outside consultants or experts unaware of your company’s culture. On the contrary, every effort should be made to bring together around the drafting table all those segments of your company which can bring a distinctive contribution to the development of this important document. While the final responsibility for adopting the text will lie with the Board of Directors, all divisions of your company should be involved and consulted during the drafting process. Those in charge of human resources and legal matters should have a decisive role, but this should not inhibit contributions from managers of local affiliates, marketing operatives, internal auditors, accountants, treasury staff, and all parts of your organization that deal with matters concerning integrity on a daily basis.

If, at the outset, people of various professional, cultural, and educational horizons are brought together during the drafting phase, the final Code will have an enhanced legitimacy and gain greater acceptance. The drafting process will take time and may involve difficult discussions. Some drafters may opt for a hard line. They may want to impose stringent rules and impose a zero tolerance standard, while others may prefer a more lenient course. There could also be a confrontation between those who want to cover as many details as possible (to avoid future problems of interpretation) and others who prefer broader, more open principles.

A Code of Conduct should be written in a way that is easy to read and to understand for everyone. Avoid legalese and other sophisticated expressions. Translate the Code into the main languages used within your company and in the countries where it operates. If the Code of Conduct is opaque and uses overly complicated terminology, some employees may misinterpret it or simply not understand its content.

[Page74:]

Depending on the diverse regulatory provisions or local customs or practices, it may be required, convenient, or simply desirable to associate trade union representatives with the common effort, for instance in matters concerning disciplinary sanctions in case of non-compliance, or on the introduction of a whistleblower hotline or an ethical alert system. A discussion with the unions and their acceptance of the agreed rules will increase the credibility of the texts, around which everyone will be inclined to unite.

How to make your Code of Conduct known?

The Code of Conduct is a charter for the company: it should be launched and rolled out with some fanfare. It should be easy to find copies of the document, and ‘all employees’, as defined above, should be provided with printed copies. To make the Code fully accessible, upload it on your company’s intranet. In some companies, all newly hired employees are asked to sign an acknowledgement form confirming that they have read the Code of Conduct and that they agree to abide by its provisions. If possible, all employees should be required to make or repeat similar acknowledgements on a periodic basis.

Who should comply with the Code?

A Code of Conduct should be applicable without discrimination or privilege to all echelons of the company from the Board of Directors to the workers on the shop floor. This is true for all persons working on behalf of the company, be they full or part time, permanent or temporary, executive or subordinate, white collar or blue collar.

WHAT TO FIND IN A CODE OF CONDUCT

Complying with the law

As a general principle, employees should comply with the law. They should act with integrity and honesty in all matters, and be accountable for their activities. They need to use good judgment in fulfilling their job and avoid even the appearance of improper behaviour.

Integrity means doing what is right. There should be compliance with laws and regulations applicable in the countries where the company operates, pursuant to the provisions established by the United Nations, the OECD and the International Labour Organization, and the European Union, especially on matters relating to anti-corruption, competition, and employment.

Violations of the law should be avoided under all circumstances. In particular, it is expected from employees that they avoid indulging in activities and behaviour that could involve them, other employees or the company in unlawful activity. Breaking the law can have serious consequences both for the company and for the individuals involved. As a consequence, companies and their employees need to acquire sufficient knowledge of the rules applicable to their activities.

[Page75:]

WHEN IN DOUBT ABOUT DO’S AND DON’TS, EMPLOYEES SHOULD ASK THEMSELVES:

  • Is it legal?
  • Is it ethical?
  • Is it consistent with the Code of Conduct?
  • Am I setting the right example?
  • Would I want people to read about it in the newspapers?
  • Is there someone else I should consult?
  • How would the person(s) I respect the most view this course of action?
  • How would this affect our shareholders?

When in doubt, the golden rule is to speak up and to discuss the matter openly.

Don’t cut corners: antitrust is public order law

As we have seen in Chapter 3, antitrust law forbids a company to enter into agreements that would restrain competition in the marketplace. In addition, all companies should endeavour to promote fair competition among market participants and ensure equitable treatment of their partners and customers.

Competition law may vary from one country to another, making it difficult for employees to evaluate the different situations they may encounter. When in doubt, employees are expected to seek guidance and consult with their legal department. Violating antitrust laws can have very severe consequences not only for the company but also for individual employees, as antitrust infringements are sanctioned not only civilly but also criminally in certain jurisdictions.

EXAMPLES OF BEHAVIOUR THAT THE CODE SHOULD PROHIBIT

  • Obtaining sensitive information about a competitor, through theft, bribery, or communication of false or truncated information, for instance in a public or private procurement process. In general, engaging in illegal or illicit activity with a view to obtaining a competitive advantage.
  • Exchanging data about prices and other sales conditions, production costs, sales quantities, market shares, or other sensitive parameters which may determine or influence companies’ competitive behaviour.
  • Asking a former employee of a competitor about information which this person is legally obliged not to reveal (such as for instance a competitor’s trade secrets).
  • Agreeing with competitors to exclude other (potential) competitors from the market or agreeing with competitors to boycott or refuse to deal with certain suppliers or customers.

[Page76:]

Exclude all forms of corrupt practices

The Code of Conduct should make it clear that employees are required at all times not to engage in any form of corrupt practices, whether directly or indirectly, or to be complicit in any form of corruption or trading in influence. Chapter 4 of this Training Handbook (‘Glossary’) provides further detail about the terminology applicable to corrupt practices.

In addition, you should pay particular attention to the following matters when drafting your company’s Code of Conduct:

a. Dealing with government officials

Sometimes, the global nature of your business will require your company to interact with officials of governments around the world. Turn to Chapter 4 to find the precise definition of ‘public official’ in the context of anti-corruption. In addition, keep in mind that transactions with governmental representatives are covered by special legal provisions and are not identical to those covering business between private parties.

b. Dealing with customers and suppliers

The company should value its relationships with customers and suppliers. Employees should treat these partners in the same manner they expect to be treated themselves. The company should expect its suppliers not to act against the principles of the corporate Code of Conduct. The owner of each supplier relationship should ensure adherence to the Code of Conduct as a condition to the conclusion of any supply agreement.

c. Gifts and hospitality

Here again, turn to Chapter 4 to find a definition of ‘Gifts and Hospitality’ and ICC’s recommendations in this respect. Accordingly, your Code should reflect the following basic principles:

  • Employees and third parties should avoid giving or receiving gifts if such gifts may improperly influence the recipient’s judgment or may be perceived to do so.
  • Employees may only offer or accept reasonable meals and gifts of symbolical value and which are appropriate under the circumstances, and they shall not accept or offer gifts, meals, or entertainment if such behaviour could create the impression of improperly influencing the business relationship.
  • When assessing a particular circumstance, employees should seek guidance before accepting or giving any gift.

[Page77:]

EXAMPLE: THALES’S GIFTS AND HOSPITALITY POLICY

“Thales formally prohibits the offering or receiving of payments in the form of cash. The choice of a gift or hospitality for a customer must be made in accordance with the ‘4Rs rule’ – Regulations, Reasonable, Responsible, and Record – as the basis on which the Group, or where applicable a legal authority, will rule in the event of disputes or legal proceedings.

  • Comply with the REGULATIONS
    Comply with limits set by local laws and regulations.
  • Be REASONABLE
    Respect the local culture and customs of each country, company, and organization. Do the ‘newspaper test’.
  • Be RESPONSIBLE
    Act within the limits of your authority and use common sense.
  • Keep RECORDS
    Transparently record expenses, and keep specific registers when local legal requirements or management decisions require this”.

d. Conflicts of interest

Conflicts of interest arise more often than you think. They are so diverse in nature and appear in so many different circumstances that they are difficult to legislate on. They are, however, more and more the object of general public reprobation. To test the presence of a potential or actual conflict of interest, use the criteria contained in the definition of ‘Conflicts of Interest’ in Chapter 4. More generally, in the presence of a potential conflict of interest, employees should ask themselves: could my personal interests interfere with those of the company? May it appear so to others, either inside or outside the company?

Employees are expected to adhere to the highest integrity standards and to avoid any conflict of interest. Nonetheless, a corporate Code cannot address every potential conflict of interest, so employees will need not only to comply with the corporate rules but also to use good common sense and act according to their conscience.

e. Financial and accounting records

Accuracy is an essential part of running a business legally, honestly, and efficiently. Companies have a duty to make sure that their records are accurate and comprehensive and that they are in accordance with applicable regulations and with internal procedures. Ensuring accurate and complete accounting and financial records is everyone’s responsibility, not just that of accounting and finance personnel. Accurate recordkeeping and reporting and respect for the securities legislation reflects on the company’s reputation and credibility, and ensures that the company meets its legal and regulatory obligations.

[Page78:]

Employees should never engage in fraudulent or other dishonest conduct involving the property or assets or the financial accounting and reporting of the company or of any third party. Employees should strive to be accurate when preparing or transmitting information for the company. Admittedly, honest mistakes occasionally happen. Only intentional efforts to misrepresent or improperly record transactions, or otherwise to falsify a company business record, should constitute a violation under the Code of Conduct.

DEALING WITH VIOLATIONS OF THECO DE OF CONDUCT

Raising concern and whistleblowing processes

As further developed in Chapter 11 (‘Whistleblowing’), if you as an executive or an employee are aware of or suspect unethical or illegal conduct, you have a duty to report the issue or to seek guidance; you should speak first to your superior, to a manager with whom you feel comfortable, or to a human resources or legal department representative. Raising a concern in good faith means that you have make a genuine attempt to provide honest and accurate information about a potential misconduct, even if you may be later proven to be mistaken.

If you witness behaviour that rises suspicion, or that may represent a breach of the company’s Code of Conduct, you have to report the issue promptly. The company will then have the opportunity to deal with the issue and to correct it before it becomes a violation of law or a risk to health and security of your colleagues or to the company’s reputation.

The ethical alert procedure

The company should take every reasonable precaution to protect employees reporting in good faith an (alleged or suspected) infringement of the Code of Conduct. Any act of retaliation against an employee who raises an issue in good faith should be itself considered a violation of the Code of Conduct. That an employee has raised a concern in good faith cannot be seen as a justification for a separation, suspension, loss of benefits, harassment, or discrimination. However, knowingly making a false accusation, lying to investigators or refusing to cooperate will probably constitute a violation of the Code of Conduct.

[Page79:]

AN EXAMPLE: ALSTOM’S ALERT PROCEDURE

“Employees may use the Group’s Alert Procedure, in accordance with the laws and rules applicable in the country where they live or work, if they have reason to suspect a violation of anti-corruption, competition, and securities or accounting laws and regulations.

The Alert Procedure should only be used if the employee has reason to believe that informing his or her direct manager could cause difficulties or has reason to believe that the reported alleged irregularity will not receive the proper follow-up.

In this case, the employee can:

  • Use the dedicated secure web platform or hotline phone number to report the matter (…)
  • Inform the Country President in any country covered by the International Network or the Country Legal Counsel (…)
  • Contact the Group General Counsel or the SVP Ethics & Compliance, who will jointly deal with the matter (…)

Every measure will be taken to respect employees’ wishes for confidentiality. Alstom shall honor its commitment that no employee will suffer from retaliation, such as a change of status, harassment or any other form of discrimination as a result of using the Alert Procedure or disclosing information in good faith”.

Source: Alstom Code of Ethics

Disciplinary Sanctions

The Code of Conduct must clearly indicate that all those who are working for the company – executives, officers, and employees alike – will have to act pursuant to the Code’s norms and that all could be disciplined in case of infringement. It should be made clear that there is no place for exceptions, privileges, or immunities.

When a provision of the corporate Code is broken, management should step in to apply appropriate, proportionate and dissuasive disciplinary sanctions and to correct the situation. Whenever a pattern of non-compliance is discovered, measures should be taken to prevent the pattern from recurring. Serious and persistent breaches of the Code that could seriously damage the company’s reputation can be punished by the dismissal of the people directly responsible, as well as those with supervisory responsibility.

[Page80:]

OTHER TOPICS YOU MAY COVER IN A CODE OF CONDUCT

Privacy

The company should respect the privacy of all its employees, business partners, and customers. All employees should respect the personal dignity, privacy, and personal rights of every individual. The company must handle personal data responsibly and in compliance with all applicable privacy laws.

What do we mean by ‘personal information’? While the exact definition of personal information can vary from country to country, it is generally understood to mean any information that directly identifies an individual or could be used to identify an individual. This includes name and initials, date of birth, images, biometric information, contact information, health-related information, genetic information, and personal characteristics. Note, however, that this is not a comprehensive list.

Discrimination and harassment

Workplace harassment is a form of discrimination that is generally defined as any verbal or physical conduct that occurs because of a certain individual’s characteristics such as race, gender, sexual preference, age, or religious belief. It includes any action that inappropriately or unreasonably creates an intimidating, hostile, or offensive work environment.

There should be zero tolerance for discrimination and harassment. A company should be committed to a work environment in which every employee is treated fairly and with respect, and where all employees are given an equal chance to succeed. Employees should conduct their work with respect for all people, regardless of differences. A company should not make any employment-related decision, such as a decision about recruitment, selection, development, and advancement of employees, based on a person’s race, colour, national origin, religion, sex, age, sexual orientation, marital status, physical or mental disability, or other characteristics protected by law.

AN EXAMPLE: A QUESTION-AND-ANSWER ABOUT L’OREAL’S HARASSMENT AND BULLYING POLICY

“Question: What exactly does L’OREAL mean by ‘harassment’ and ‘bullying’? I don’t think we have a law on this in my country.

Answer: The first rule is that L’OREAL respects local law and therefore any employee violating the harassment laws in their country may be sanctioned. But there may be countries where L’OREAL considers that the law on harassment does not prohibit certain behaviours which the Company finds unacceptable. Depending on the circumstances, certain behaviour may be considered inappropriate, such as:

  • Actions intended to cause hurt or upset.
  • Deliberately setting a person up to make a mistake.
  • Humiliation or intimidation
  • Physical or social isolation”.

Source: L’OREAL Code of Business Ethics, 2007

[Page81:]

Intellectual Property

Intellectual property rights are crucial to protecting the investments that companies and individuals make in developing new products and ideas. Employees should respect the laws and rules governing intellectual property. In particular, they should comply with the laws and regulations that govern the rights to, and protection of, copyright, trademarks, patents, trade secrets, and other forms of intellectual property.

Employees shall not disclose confidential information, unless expressly authorized to do so by their management. Employees should classify personal information as confidential and limit access to appropriately authorized individuals who have a clear business need for that information.

Health, security and safety

A company needs to be committed to providing safe, secure, and healthy work environments at its facilities for its employees, visitors, and contractors. As a minimum, this should be done by implementing the applicable statutory provisions, monitoring procedures, preventing health risks and occupational hazards, and providing personnel training.

-

About the author

Dominique Lamoureux is Vice-President, Ethics and Corporate Responsibility, of Thales, a global technology leader for the defense, security, aerospace and transport markets. Mr. Lamoureux is in charge of defining and monitoring Thales’s policy for compliance with international trade regulations and, more globally, for the development of a comprehensive company-wide ethics policy. He is involved in various ethics and anti-corruption initiatives led by European and global business organizations. Notably, he is a member of the ICC Commission on Corporate Responsibility and Anti-corruption and chairs ICC France’s Corporate Responsibility and Anti-corruption Committee.