What is a Code of Ethics?

A code of ethics or ethical code refers to a set of guidelines, standards, and principles that a company adopts and that must be adhered to by its workers. 

Where Do Codes of Ethics Come From?

Codes of ethics are often determined by the trade unions, non-government associations, civil societies, not-for-profit organizations, industry, professional bodies and businesses.

What is a Compliance-Based Code of Ethics?

There are certain codes of ethics that businesses must adhere to as stipulated by the governing or oversight bodies. 

For instance, guidelines guiding how companies hire their employees, employee compensation, safety and health standards, among others are compliance-based code of ethics. 

Failure to comply by these ethical codes attract penalties.

What are Compliance Officers?

Many organizations hire compliance officers who have the responsibility of ensuring that the company and its workers comply with the codes of ethics (as well as other applicable legal standards). 

What are the Consequences for Violating a Code of Ethics?

Violations of voluntary codes of ethics are dealt with by the company creating and implementing the ethical standards. With compliance-based codes of ethics, the regulatory bodies for many industries have clear penalties and consequences for violation of compliance-based codes of ethics. 

What are Value-Based Code of Ethics

Ethical codes voluntarily created by a company are thought to represent, align with, and further the values of the company. The core values of a company often include elements, such as professionalism, honesty, integrity, unbiased approach and many others are contained in the codes of ethics. 

Code of Ethics Among Professionals

Professionals such as accountants, lawyers, financial advisers, estate managers, broker dealers and others have codes of ethics that guide the way they conduct business with their client or function at their workplaces. 

Example of a Code of Ethics

Aside form code of ethics adopted by professionals listed above, there are other good examples on institutes and professional bodies that adopt and require strict compliance to code of ethics. 

The Chartered Financial Analyst Institute (CFAI) is a professional body that outlines codes of ethics that Chartered Financial Analysts (CFAs) must strictly adhere to. 

Some of the ethics are;

• Integrity, competence and diligence in all deals and transactions.
• Ethical conduct that reflect professionalism and credibility of the profession.
• Acting in the best interest of their clients and putting the integrity of their profession first before personal interests.
• Striving to maintain and improve professional competence and promote the viability of global market.