A code of conduct is a set of rules outlining the norms, rules, and responsibilities or proper practices of an individual party or an organization.

Companies' codes of conduct

A company code of conduct is a set of rules which is commonly written for employees of a company, which protects the business and informs the employees of the company's expectations. It is appropriate for even the smallest of companies to create a document containing important information on expectations for employees.[1] The document does not need to be complex or have elaborate policies.

Failure of an employee to follow a company's code of conduct can have negative consequences. In Morgan Stanley v. Skowron, 989 F. Supp. 2d 356 (S.D.N.Y. 2013), applying New York's faithless servant doctrine, the court held that a hedge fund's employee engaging in insider trading in violation of his company's code of conduct, which also required him to report his misconduct, must repay his employer the full $31 million his employer paid him as compensation during his period of faithlessness.[2][3][4][5]

Accountants' code of conduct

In its 2007 International Good Practice Guidance, "Defining and Developing an Effective Code of Conduct for Organizations", provided the following working definition: "Principles, values, standards, or rules of behaviour that guide the decisions, procedures, and systems of an organization in a way that (a) contributes to the welfare of its key stakeholders, and (b) respects the rights of all constituents affected by its operations."

Codes of conduct in practice

A code of conduct can be an important part in establishing an inclusive culture, but it is not a comprehensive solution on its own. An ethical culture is created by the organization's leaders who manifest their ethics in their attitudes and behaviour.[6] Studies of codes of conduct in the private sector show that their effective implementation must be part of a learning process that requires training, consistent enforcement, and continuous measurement/improvement:[7] simply requiring members to read the code is not enough to ensure that they understand it and will remember its contents.[8] Castellano et al. describe Tom Morris' book If Aristotle Ran General Motors as "compelling" and "persuasive" in arguing that in addition to codes of conduct and ethical guidelines, the creation of an ethical workplace climate requires "socially harmonious relationships" to be embedded in practice.[9] The proof of effectiveness is when employees/members feel comfortable enough to voice concerns and believe that the organization will respond with appropriate action.[10]


See also


  1. ^ "Building a compliance department". Thomson Reuters. 26 July 2021. Retrieved 20 January 2022.
  2. ^ Glynn, Timothy P.; Arnow-Richman, Rachel S.; Sullivan, Charles A. (2019). Employment Law: Private Ordering and Its Limitations. Wolters Kluwer Law & Business. ISBN 978-1543801064 – via Google Books.
  3. ^ Jerin Matthew (December 20, 2013). "'Faithless' Ex-Morgan Stanley Fund Manager Ordered to Repay $31m to Former Employer". International Business Times UK.
  4. ^ Henning, Peter J. (December 23, 2013). "The Huge Costs of Being a 'Faithless Servant'". New York Times DealBook.
  5. ^ "Morgan Stanley seeks $10.2 million from convicted former trader". GreenwichTime. January 15, 2013.
  6. ^ McMillan, Michael (2012-02-20). "Codes of Ethics: If You Adopt One, Will They Behave?". Enterprising Investor: Practical analysis for investment professionals. Retrieved 10 February 2016.
  7. ^ Doig, Alan; Wilson, John (1998). "Business Ethics: A European Review Volume 7, Issue 3, July 1998". Business Ethics: A European Review. 7 (3): 140–149. doi:10.1111/1467-8608.00100.
  8. ^ ACC. "Top Ten Tips for Developing an Effective Code of Conduct". Association of Corporate Counsel. Archived from the original on 7 September 2018. Retrieved 10 February 2016.
  9. ^ Castellano, J. F., Rosenzweig, K. and Roehm, H. A., How Corporate Culture Impacts Unethical Distortion of Financial Numbers, Management Accounting Quarterly, Summer 2004, accessed 7 January 2023
  10. ^ Barman, Tanya; White, Samantha (June 2014). "Implementing an effective corporate ethics policy". Chartered Global Management Accountant (CGMA) Magazine. Retrieved 10 February 2016.
  11. ^ Koh, Benjamin; McConnell, Pat (October 25, 2018). "Bank codes of conduct: add bars to the window dressing and make them legally binding". The Conversation. Retrieved April 18, 2024.

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