A code of ethics is a policy statement of sorts, a formal document that employees within a company must follow – along with specific sanctions if the code is violated. Unless a crime has been committed, the toughest sanction is dismissal from the job.
It’s easy though to confuse ethics with the law – obeying the law is the absolute minimum code of ethics and is enforced by society as a whole through law enforcement and the courts. For example, we all know it’s illegal to steal. Lying is unethical, but it’s only illegal in certain limited circumstances. Business ethics demand a higher standard, not merely obeying the law.
Code of ethics were born out of the social responsibility movements of the 1960’s as many people began to recognize the effects mass consumerism have on the environment.
After the Enron and Worldcom debacles earlier this decade, the Code of Ethics took on a whole new meaning. Current law, specifically the Sarbanes-Oxley Act of 2002, now requires a company to publicly disclose their code of ethics if their stock is traded under the auspices of the Securities Exchange Act of 1934.
After you incorporate your business online, you may be wondering if you need a code of ethics. It can’t hurt, even if you’re not a publicly traded firm – instill confidence in your customers and investors that your company adheres to a higher standard.
