IT Best PracticesIT Governance

How Company Code of Conduct Can Boost Employee Governance

Corporate codes of conduct have existed for a long time. Today, they are a legal requirement. A company code of conduct addresses key compliance, morality, and legal risk areas to support employees in making challenging moral decisions. According to LRN’s report published last week, deep discrepancies were found in the codes of conduct for the largest publicly traded corporations. This suggests that most of these organizations have a long way to go before they can reach the minimum standards of code effectiveness. This article at Corporate Compliance Insights reviews the LRN report and discusses ineffective codes of conduct.

LRN’s Report on Code of Conduct

According to LRN’s analysis, top publicly traded companies’ codes of conduct show deep disparities. This indicates that companies need to do more to meet the basic requirements of code effectiveness. In the study, while only half of the codes reviewed met what LRN calls ‘minimum expectations,‘ one in six companies exceeded or met more effective codes of conduct. Nearly 150 public companies in France, Germany, the U.K., and the U.S. had codes of conduct reviewed by LRN researchers. The study by LRN determined that 33 percent of codes were ineffective.

Insights from Report

Only 8% of the least effective codes define the procedure for reporting misbehavior. 60% of all codes explicitly declare that speaking up would not result in retaliation.

Only 50% of the biggest corporations have company codes of conduct that LRN evaluated as “effective,” while 17% were classified as “less effective.”

A company’s code of conduct is less effective if it has fewer employees and less revenue. A lower level of effectiveness was found in the company code of conduct for organizations with 5,000 to 25,000 employees.

Companies listed on France’s CAC40 have the lowest code effectiveness scores compared to those on the US S&P index.

Furthermore, the author shares code insights on speaking up, discouraging retaliation, and reducing liability and risk issues.

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