Codes of Conduct – a tool for developing business ethics

The NHF issued its revised model code of conduct (the NHF Code) in May. The NHF Code seeks to provide a template for an ethical working environment, on which an organisation’s reputation can be developed. But why is this important, and what can organisations get from adopting a Code of Conduct?

When it comes to managing business risk, most organisations are concerned with two things: finance and reputation. Managing either poorly can bring down a business. Simply google “Gerald Ratner” to understand how the demise of a financially successful business was brought about by the use of a few ill-chosen words which seriously damaged the business’s reputation. Although the adoption of a Code of Conduct can’t singlehandedly avoid reputational damage, it will go some way towards avoiding such risks from happening.

All Codes of Conduct need to start with the Board agreeing the mission, vision and values of the organisation. It is then for the Chief Executive to interpret this into a complimentary organisational culture. From there the Code will develop, as will other matters like strategy, policy and practice. Ultimately, the Code of Conduct will become the ethical golden thread that runs through strategy, policy and practice and become a tool for reputational risk management.

One particular issue that regularly arises is that of conflicts of interest. This occurs when a person is able to influence a situation that will ultimately lead to their personal enrichment (or that of another person or organisation connected to them). It can occur at all levels of an organisation, to differing degrees. Although addressing conflicts of interest in a Code of Conduct can’t eliminate problems arising, it will serve to bring the matter into the open and encourage people to keep it at the forefront of their minds. A Code of Conduct will also encourage proactive declarations of interest (and reiterate their importance), which can allow potential issues to be managed before they become a reputational problem.

An interesting feature of the NHF Code is that it is written to apply to employees, non-executive board members, and involved stakeholders (e.g. customers) simultaneously. This means just one code can be applied across the organisation, which strongly suggests a “we’re all in it together” approach. The single code approach also provides assurance to the Board that when it approves the Code, everyone will be accountable in accordance with it.

If you are struggling to start the code of conduct journey, or reviewing and revisiting your current code of conduct, then the NHF Code provides a good starting point.

If you would like more information about Codes of Conduct, Codes of Governance and related policy matters, please do contact me or another member of our governance and regulatory team.

For more information, please contact Martin Lewis.

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