A code of conduct will not make a person behave ethically, but a code of ethics might, says an ethics expert with more than 20 years’ experience. And it provides a valuable framework for dealing with offenders against it.

Brian Moran, co-principal of Managing Values, told LeadingCompany ethical breaches are increasingly judged as a business risk.

“Increasingly companies are tying ethics to risk,” he says. “That is interesting because risk is seen as a hard system. In the past, people have tended to think codes of ethics as wooly and esoteric, classic ‘feel-good’ documents.”

Many leaders have been too slow to catch up with the notion of the “court of public opinion”, he says. Ethics are determined by society, and companies that fail to act speedily will find society makes up its own mind. Social media means that such judgments can be swift, harsh and difficult to reverse.

The timing of an organisation’s response to an ethical issue, as Julia Gillard and federal MP Craig Thomson have learnt to their detriment, is everything.

Companies often fail to distinguish between the two sorts of codes, to their detriment. “A code of conduct is a ‘thou shalt not’ document,” Moran says. “It makes the rules clear, it is prescriptive and often uses pejorative language. It is punishment-based, and used as a big stick. And it only comes out when someone transgresses.

“It is trap that is set for people but no one tells you it is there, until you break the rules. There is classically very little training about the code.”

But the comfort suggested by setting down black-and-white rules is deceptive. Because it is impossible to cover every possibility, codes of conduct invite the errant to find ways of doing wrong but not breaking rules. Leaders are left without options to discipline them.

A code of ethics, conversely, is based on the principles intrinsic to a company’s values. In a recent example of a code of ethics for a utilities company, Moran says, the issue of respect is defined us “Respect for people. This means we always maintain the dignity of others, we practise open two-way communications, we show consideration for others, and we treat each other with fairness and equity.

“That might seem like statements of the obvious,” Moran says, “but if you don’t define it, one person can say, ‘how I interpret respect is different to the next’.”

Codes of ethics define the culture of an organisation. This was once defined as being “the way we do things around here”, but leading companies no longer subscribe to that definition. It is now: “Why we do the things we do around here.”

If all an organisation’s members are going to buy into principles-based culture, its leaders must spell out why certain things are important. Moran defines the company’s values — the centerpiece of the code of ethics — and then provides examples of how to apply these.

“More important are the behaviours that exemplify values, that spell out what that value looks like in everyday situations,” he says.

It the law or rules become the default position, people will often rationalise conduct: if it not illegal, it must be OK.

“Craig Thomson is the most pertinent example of that,” Moran says. “He has been investigated, and we can talk about the comprehensive nature of their report, but that organisation doesn’t have certain powers, and so there is another round of investigation. That is taking due process.

“But — in the court of public opinion — will the person in the street take the view that regardless of any charge, his peers have acted in a way that calls him to account rather than just waiting for the law?”

*This article was originally published at LeadingCompany

Peter Fray

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