Rules of behavior: the adoption of a code of conduct is a step toward improving the ethical culture in today's business world.

EVERY ORGANIZATION HAS ITS OWN ethical philosophy, which reflects the values embodied in the company's culture and is enforced by senior management's behaviors and leadership style. It is of utmost importance that the organization formally commits itself to this philosophy by documenting it in a code of conduct and taking responsibility toward the general public for compliance with the code over time. The adoption of a code of conduct is a fundamental step in the attempt to improve the ethical culture in today's business world and, more specifically, to prevent unethical and fraudulent behavior within the organization.

Even though the first company codes of conduct date from the 1960s, only in the last decade has it become good practice to develop and adopt one. The international regulations focused on corporate governance that followed the financial scandals at the outset of the millennium have placed a growing emphasis on the importance of these codes. Most often, the code includes thematic issues such as compliance with laws and regulations (including those concerning harassment and discrimination in the workplace), avoiding conflicts of interest, the security of assets and information, restrictions on gifts and entertainment, and the general behavior expected of employees. Some policies also include expectations regarding societal issues such as banning the use of child labor, upholding minimum wage regulations, recognizing freedom of association, respecting the environment, and engaging in philanthropic activities or social investments.

Organizations can gain several benefits when they adhere to a core set of ethical values embodied in a code of conduct, including:

* Greater motivation among company staff. Although many employers have yet to fully recognize the significance of staff morale, in a recent U.S. survey, 94 percent of responding employees declared company ethics to be an important, if not critical, aspect to their working lives. According to "Ethics Study: The Effect of Ethics on Ability to Attract, Retain, and Engage Employees" (June 2006), conducted by consulting firm LRN, 82 percent of the employees surveyed would accept a decrease in wages if they were assured that their company would operate under acceptable ethical standards.

* A demonstrated respect for the law. When top management makes a formal commitment to endorse an ethical company culture, the subject becomes of greater significance and, consequently, the company's personnel pay more attention to compliance with the laws and regulations affecting the organization. Additionally, according to the Association of Certified Fraud Examiners' "2006 Report to the Nation on Occupational Fraud and Abuse," it is more likely for staff to rationalize fraud in unethical workplaces.