Is Your Global Code of Business Ethics Outdated?

By Donald C. Dowling March 6, 2019

​Multinational organizations appreciate that a robust code of conduct or business ethics is an indispensable compliance tool in globalized markets. But an out-of-date legacy code can be a dangerous compliance problem.  

Drafting or even just updating a global code of ethics to make it state of the art is a surprisingly nuanced exercise. Rushing in with a sloppy, "just get it done" approach―for example, by relabeling a U.S. employee handbook as a global code or cutting and pasting from other companies' conduct codes―risks infecting the organization with compliance shortcomings that multiply worldwide.

Crafting an effective global conduct code requires a coherent strategy to navigate the challenges and contradictions inherent in imposing a single set of rules for employees across multiple jurisdictions. Multinational organizations should apply an approach that accounts for common challenges.

Confront the Inherent Shortcomings of Cross-Border Work Rules

When you export a code of conduct or business ethics across worldwide operations, expect a tug of war between global uniformity and the parochial norms and local laws of each respective jurisdiction. You could issue aligned local codes, or a local-code rider for each country. But multinationals see their ethics codes as inherently international. Their headquarters tend to resist country-by-country tweaking because they want one code to memorialize and champion the organization's core ethical standards.

This uniform approach compels tough compromises. Certain rules in a code may comply with laws where the headquarters is located but be void in overseas jurisdictions. For example, a mandatory-reporting rule requiring staff to turn in co-workers who violate company policy may be unenforceable abroad. Also, rules in a code may comply with the law where headquarters is but be impossible to align across multiple jurisdictions (think of the listing of protected groups in a global anti-discrimination provision). Further, rules in a code may even be illegal under foreign laws. A diversity provision that requires tracking workforce metrics may be prohibited, for example.

Assess the Organization's Own Particular Needs

The code drafter begins with questions regarding code content, such as:

  • What should our global code of business ethics say?
  • Which topics should we include, and which can we omit?
  • How do we articulate each rule in a way that works internationally?

For answers, the drafter inevitably seeks a model. And finding one is easy: An online search for "code of conduct" or "code of ethics" yields dozens of excellent sample codes. At that point, the temptation sets in to use someone else's code as a first draft, or at least to track some other code's table of contents―or to cut and paste others' provisions. 

Resist this temptation. Think organically about which topics to cover, rules the code should impose to meet the organization's own business needs and topics to omit. Confine the code to what the organization must control and monitor across borders. The precise topics to address in a conduct code differ from one multinational organization to the next, because every organization has its own business interests.

[SHRM members-only toolkit: Introduction to the Global Human Resources Discipline]

Stick to Internal Ethics Topics

Ensure that the code does not morph into a hybrid of a global employee handbook and a global supply chain code of conduct. Keep the differences between these tools in mind.

Broadly speaking, a code of conduct or business ethics addresses baseline behavioral standards that apply universally at all locations (think of prohibitions against bribery, fraud, insider trading, human rights violations and antitrust collusion, and avoiding trade sanctions). Meanwhile, an employee handbook addresses day-to-day human resources topics specific to a given workplace, and daily HR matters that often differ by country or site and are best left to local employee communications (think of compensation and benefits, payroll administration, work hours and overtime, paid time off and unpaid leave, dress code, smoking policy, office hours, performance evaluations and expense reimbursement). There is overlap, but fundamentally, a code of conduct sets out universally applicable ethical rules, while an employee handbook addresses HR matters and offerings that differ by jurisdiction or location.

A global supply chain code of conduct safeguards the human rights of those who work for the companies that help your organization do business. Internal ethics conduct codes and external supply chain conduct codes often get confused and conflated because both are global, called "codes of conduct" and address employment standards. Supply chain conduct is a vital topic, but it is separate from internal corporate ethics.

Align with Other Global Policies

Align code of business ethics content with other global company policies. When a multinational has issued stand-alone global policies on ethics topics, ideally, the global code of conduct links directly to those policies without peppering in inadequate, incomplete summaries. For example, imagine that a multinational has issued global policies on insider trading, social media and harassment. The code of conduct should not provide incomplete policy abridgements that provide less information than everything employees need to know; have the code link directly to the other policies.  

With these strategic considerations in mind, a multinational organization is ready to draft or update its global code of conduct or business ethics. To do that, take a topic-by-topic approach when crafting each provision, to meet the organization's needs in a way that works effectively across borders.

Donald C. Dowling is an attorney with Littler in New York City.



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