‘IN the next century, a company will stand or fall on its values,” Robert Haas, Levi Strauss CEO, was quoted as saying around year 2000. I would believe he was proven right after all the humongous financial scandals in America, Europe and Australia exploded. Indeed if we were to dig deep down on what did them all in, we could really conclude that it was when corporations and their executives began to sashay around values and play around the semantics of right and wrong that they began to slide down the primrose path to perdition.
Corporate governance became a byword after those events. One of its more important aspects is the Code of Conduct which is expected of corporations. In the Philippines, the three regulators—the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP, the Central Bank of the Philippines) and the Insurance Commission (IC)—encourage a Code of Conduct specifically or implicitly in the Codes of Circulars that they have issued to promote good corporate governance among publicly listed and other public companies, banks and financial institutions and insurance companies in the Philippines.
A Code of Conduct for the institutions mentioned above is aimed at promoting the highest ethical and professional standards in boards of directors and individual company directors. Such a code should guide directors and help them carry out their duties and responsibilities, and should define the standards of professional competence and conduct which companies and their stakeholders must expect of their directors.
In crafting a code of conduct, we need to answer questions such as: “What ought one to do?” or, “What may be done and what may not be done?” or “Am I acting rightly or wrongly?” Further, one has to ask, “According to what, or according to whom?” In other words, the company should define what are the right things to do, and what things the company will not tolerate. Moreover, in implementing such a code, policy must definitively state the sanctions for misbehavior or acts that violate specific provisions of the code. The one thing that a Code of Conduct must never be, is to be just a wish list, a grandiose description of good behavior perhaps enshrined in a bronze plaque in the company’s main lobby.
Some guides to craft a code of conduct may include:
• Business must be conducted in keeping with the highest moral, ethical and legal standards and be absolutely committed to ethical standards;
• Maintain a workplace environment that encourages frank and open communication in matters of ethics;
• Strive to make decisions that are “good” from a business standpoint, and that are “right” from an ethical standpoint; and
• To determine if a decision is right or wrong, consider the likely consequences for all stakeholders, the company’s policies and procedures and its values;
Benefits that companies derive from the adoption of codes of conduct and ethical behavior include:
• Enhancement of the company’s reputation for fair and responsible dealing;
• The maintainance of high standards of behavior throughout the organization, thus providing a greater degree of transparency and accountability for professional behavior;
• The provision to all employees of a clear idea of what the company sets out to do, and how it will do it, thus developing a sense of pride among the staff;
• A degree of permanence in a code of behavior that is distinct from sometimes changing legal and regulatory tenets; and
• Enhancement of the image and standing of companies before regulators, investors and of the public as a whole.
Finally, companies that develop codes of conduct provide tangible evidence that they are committed to meet the expectations of their shareholders, stakeholders, and the general public. Such codes, especially if these are made public, help companies with their compliance and fiduciary obligations.