Every member of the board of directors must adhere to a code of conduct that ensures all discussions and operations are handled in good faith. While each board member will be vetted before they’re brought into the organization, formalized policies create ethical standards for how board members should behave toward themselves, other stakeholders, and third parties.
In this article, we will explain how to craft a board code of ethics and how OnBoard’s extensive set of features can assist you in both creating and enforcing the code of ethics.
What is a Code of Ethics?
A code of ethics (also known as a code of conduct or statement of values) is a set of guidelines that outline the ethical principles and standards that govern the behavior of an organization’s board members. It serves as a framework for decision-making and ensures all actions taken by the board are in line with the organization’s mission and values.
No code of ethics can completely prevent wrongdoing, but it does set the tone for how board members and other stakeholders should conduct themselves internally and externally. This helps prevent conflicts of interest and promotes transparency in decision-making processes.
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How to Develop a Board Code of Ethics
Follow these steps to develop a board code of ethics.
1. Conduct a Needs Assessment
A code of ethics can positively influence the decision-making of your organization, but for that to happen, you first have to understand the particular needs of your internal processes. Every code of ethics is broadly similar, but the details should be tailored to better deal with your affairs.
Conduct a needs assessment to identify the ethical issues that could arise in your operations and prioritize them accordingly. Common ethical issues include discrimination, environmental damage, insider trading, conflicts of interest, employer-employee relationships, and social responsibility.
To maximize the findings of a needs assessment, gather feedback from board members and senior management.
2. Establish Clear Ethical Principles
To put it succinctly, your code of ethics should provide the answer to this question: What does your organization stand for? To accomplish this goal, your board should establish core principles that signify the overall vision for proper workplace behavior. Core principles should be based on your core values and define the ethical standards that your workforce will be expected to meet each day.
Each founding principle should relate to your mission statement and the different roles and responsibilities in your organization. Common code of ethics principles include respect, accountability, honesty, leadership, and transparency. Once these standards are set, your compliance committee or team tasked with managing governance, risk, and compliance can begin to write a code of ethics draft.
3. Seek Board Approval
After the draft is complete, present the final version of your code of ethics to the full board of directors for formal approval. This is important, as the board bears the most responsibility for the trajectory of the organization and the consequences of any unethical behavior. Executives are obligated to demonstrate a duty of care and practice sound management over the workforce and the organization’s assets.
If any element of the code of ethics is not up to standard, it should be sent back for edits. Even if it’s approved, the board should conduct an annual review of the code and consider making any updates to the language. This ensures the document continues to serve your needs as the organization evolves and surrounding regulations change.
4. Develop an Implementation Plan
Now is the time when you put the ethics strategy into action. Your code of ethics may look good on paper, but without a plan to implement it as a foundational piece of your organization, it will quickly become a performative document with no tangible power or influence. Senior management should provide clarity over how the code will be enforced, which officials are empowered to provide oversight, and the potential penalties for violating the code.
5. Conduct Routine Training
Another way for a code of ethics to lose effectiveness is if your employees are ignorant of the code. Regulatory compliance training programs can educate your workforce on the importance of ethical guidelines and teach them how to incorporate organizational principles into their workflows. Ethics training can include interactive scenarios, group workshops, and digital simulations to develop employee decision-making.
OnBoard Powers Effective Boards
Ethical conduct has been shown to benefit an organization and society in the long term. It aligns with the triple bottom line theory of profit, people, and planet and meets the growing expectations of socially responsible customers, employees, and investors.
OnBoard can support your team in creating and implementing a code of ethics. For example, the platform offers collaborative document editing. Once the code is complete, it can be easily accessed from the board portal platform.
Voting and approvals support fair and transparent decision-making while the platform’s high level of security safeguards company and customer data. Diversity reporting empowers boards to monitor board diversity and reach diversity goals.
Check out OnBoard’s free board meeting minutes template to learn how the best boards accurately capture meeting minutes.
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About The Author
- Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.
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