Code of conduct is a reference book for every ethics & compliance professional and every compliance officer probably knows company’s code of conduct by heart. But, have you ever asked yourself why code of conduct is so important for businesses all around the globe? Does it bring any tangible value to a company? Lastly, what happens if a company chooses not to have one?
According to the Guide to the U.S. Foreign Corrupt Practices Act, “company’s code of conduct is often the foundation upon which an effective compliance program is built. The most effective codes are clear, concise, and accessible to all employees and to those conducting business on the company’s behalf”.
Azim Premji, Chairman of Wipro Ltd., a global information technology and consulting company named as the World's Most Ethical Company 2015, once said: “The real threat to business is from within, from poor ethical standards and lack of integrity that can do incalculable harm.” There is no doubt that Code of Conduct is a heavy weapon when it comes to building reputation and setting behavioral standard for managers and employees. Here is why:
- It builds reputation (enhances trust of the stakeholder’s to the company, company’ investment attractiveness, and is one of the elements of corporate PR);
- It sets the tone for managers (defines priorities, decision-making processes, and sets appropriate forms of behavior of the company); and
- It nurtures corporate culture (develops corporate culture, transmits company values to employees, sets unified corporate goals, and enhances corporate identity).
In your opinion, how many companies in Ukraine do have a code of conduct?
Being curious, I made a small research that I would like to share with you. I analyzed how many of first 30 companies in Forbes Ukraine top-200 ranking do have a code of conduct available on their website. It appeared that 54% (16 companies, to be precise) of these companies do have a code of conduct. Then I assessed the statistics from another angle: out of 30 companies, 30% (nine companies) are international and 70% (21 companies) are Ukrainian. You will not be surprised that all nine international companies from upper part of the ranking have a code of conduct. But, at the same time, I was a bit disappointed that only 33% among Ukrainian companies have a code of conduct. I am pretty sure that if we go further down the ranking, the situation for Ukrainian companies will be even worse.
So, what is the reason for Ukrainian business to underestimate the importance of the code of conduct? Just to name a few of them from the top of my mind:
- the most obvious reason, in my opinion, is a lack of understanding by Ukrainian businesses of the benefits of code of conduct. Implementation of the code requires significant resources (monetary, time, human, managerial, etc.), while its dividends are long-term, mostly of non-monetary value and hard to estimate.
- another reason is a prejudice that ethical norms will not be effective in Ukrainian realities, where even formalized legal norms supported by enforcement mechanisms are not working properly. Moreover, there is certainly a misunderstanding on how to ensure enforcement of ethical norms in case of violation of the code of conduct.
- finally, ethical standards are usually more demanding than respective legal norms, and businesses might not be willing to be exposed to higher standards that put them in a competitive disadvantage comparing to companies that do not have a code of conduct.
Despite the fact that compliance is currently one of the hottest topics in legal and corporate areas in Ukraine, statistics shows that mostly international companies do really care about ethics & compliance. Ukrainian businesses still lack understanding of its importance and benefits for a sustainable development. Therefore, it is up to us, compliance professionals, to advocate and promote code of conduct as an inevitable foundation of effective corporate compliance.
While on the way - stay tuned and promote compliance!
Volodymyr Grabchak is a legal counsel with an international FMCG company, responsible, inter alia for anti-corruption compliance issues in Ukraine and Moldova. He got his law degree in Ukraine and LL.M. degree in the Netherlands.
Volodymyr is attorney at law admitted to Ukrainian Bar and a member of the International Bar Association (IBA).