Harley davidson code of ethics

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9.2 Developing a Code of Conduct

The ethics office is typically responsible for creating the company’s code of conduct, which forms the foundation of an ethics and complianceprogram. Employees of companies with a formal code of conduct report greater satisfaction with outcomes of ethical dilemmas than thoseworking for companies without one (Adams, Taschian, & Shore, 2001). A study by Erwin (2011) found that companies with a high qualityethics code are seen as leaders in corporate citizenship, sustainability, ethical behavior, and trustworthiness.

Despite these findings, Enron’s accounting scandal and Alcoa’s corruption scandal occurred with corporate ethics codes in place, which begsthe question of whether a code of conduct has an impact on ethical behavior. One European study shared the following perspective of formalcorporate codes:

The head of sales at an investment bank explained, “It is very good that everyone has to read them, but as long as something is notillegal, people will do it anyway.” Ethics activities would be empty, symbolic gestures with no intention of having a practical impact.(Norberg, 2009, p. 218)

Much research in behavioral ethics looks beyond the mere existence of a code of conduct to explain ethical behavior in the workplace,recognizing that the quality of the content and familiarity with the code are key factors for creating an ethical culture (Andreoli & Lefkowitz,2009; Kaptein, 2011; Treviño, Weaver, Gibson, & Toffler, 1999). Individual and organizational factors affect employee acceptance of a code ofconduct (Andreoli & Lefkowitz, 2009). For example, familiarity with an industry code of conduct and perceptions of usefulness lessen whenan uncertain business environment creates role ambiguity (Chonko, Wotruba, & Loe, 2003). Additionally, managers with a relativist ethicalorientation (believing that it is impossible to make claims of right or wrong) are less likely to consider the ethics code binding than idealists(people who act on their moral ideals in all situations) (Chonko et al., 2003).

Even the title of the code can influence whether employees uphold the desired conduct of the organization (see Consider: What’s in a Name ofan Ethics Code?). The title should convey the purpose of the document. A rules-based code appears punitive, with a “thou shalt not” aspect,and typically includes company standards and rules applicable to an issue area (Ethics and Compliance Officer Association Foundation,2008). Naming the document a compliance code sends a message to the workforce that following the law is sufficient, rather than the conceptof business ethics being about choice and judgment in following company values. Values-based codes like Every Day Values: The HarleyDavidson’s Code of Conduct connect company values with employee behavior (Harley-Davidson, n.d.; Martens, 2012; Treviño et al., 1999).

Multinational companies need to consider the wording of the code’s title carefully as some concepts may present difficulties in translation.For example, the term ethics can have moralistic connotations in some regions, while compliance can evoke feelings of imposition of companystandards (Martens, 2012). A review of the 200 largest global corporations found strong variances in the titles of codes with 36% containingthe word conduct, 17% containing principles/guidelines, 9% containing ethics, 6% containing values, and 4% containing integrity (Kaptein,2004).

Consider: What’s in a Name of an Ethics Code?

The document that summarizes the company’s ethical and legal standards can go by many names, including:

· Code of conduct;

· Code of ethics;

· Code of business conduct;

· Code of ethical and legal standards;

· Ethics guide;

· Code of employee conduct; or

· Standards of professional and business conduct.

The title of the document can create a brand for the company’s ethics and compliance. The content becomes relevant to the workforcewhen the code ties the ethics and compliance program to the company’s mission or business strategy. The title can make thatconnection and serve as a theme throughout the document. Consider these titles for company code of conduct documents:

· Setting Our Sights High (Bausch & Lomb Incorporated);

· Follow the Right Road (The Auto Club Group); and

· Inside the Lines (Nike).

Sources: Ethics and Compliance Officer Association Foundation, 2008, p. 58; Martens, 2012.

Questions to Consider

1. How does the title of a company’s ethics document affect your attitude about the content? Is one title more attractive thananother?

2. What is the overall message that the title of the code of conduct conveys? Does it reflect the purpose of the document to provideemployee guidance on expected conduct?

3. Propose creative titles for ethics codes for a pharmaceutical company and a restaurant.

Implementing an effective code of conduct is not a simple task. One study found that a code for equal opportunity in the hiring process limitsdiscrimination only when enforced by management and integrated into normal practice (Petersen & Krings, 2009). Enforcement of thedocument requires close attention to the tone and terminology, such as phrases like “may result in disciplinary action.” The U.S. courts findthat such ambiguous penalties for noncompliance negate contractual obligations to comply with a code of conduct (Kenny, 2007). The designof the document and the communication of the code play a critical role in embedding the ethical standards for conduct throughout theorganization (Kaptein, 2011; Verbos, Gerard, Forshey, Harding, & Miller, 2007). The following sections outline best practices in designing acode of conduct document.

Code Content

Designing a code of conduct includes identifying the topics and tone that will resonate with the workforce, as the code’s purpose is to guideemployee behavior. This is particularly important as studies have shown that employees generally have difficulty naming specific behaviorsthat the code requires or prohibits (Adams et al., 2001). To make the content more memorable, The Ethics and Compliance Handbook cautionsagainst codes that are generic, bland, or legalistic (Ethics and Compliance Officer Association Foundation, 2008). In reality, there is no suchthing as a generic organization. Therefore, those designing the code should tailor it to reflect the organization’s unique culture, risks, andhistory, which ultimately shape the ethical issues covered by the code and the manner of conveying acceptable conduct. Content may varybecause of the regulatory environment for the industry or geographical region. Some content is applicable to all employees, while others maybe specific to a function such as accounting or sales. The code of conduct should clearly address expectations on topics relevant to theintended audience in language that is readily understood.

Recommended Elements of a Code

Given that an organization can tailor a code of conduct to meet the needs of its workforce and industry, the elements or sections of the codewill vary accordingly. As the foundation of the ethics and compliance program, the code of conduct should provide sufficient guidance todevelop an ethical culture. The Ethics and Compliance Handbook identifies eight sections recommended in a code of conduct (Ethics andCompliance Officer Association Foundation, 2008). They include:

1. An introductory letter from senior management or the CEO reinforcing top management support for ethics and compliance in theorganization;

2. A mission statement, statement of values, and guiding principles of the company;

3. An ethical decision-making framework to guide employees in making choices;

4. Resources for seeking advice and reporting misconduct;

5. Substantive rules and guidance for acceptable and unacceptable behavior for risk areas;

6. Disciplinary rules and enforcement procedures for unethical behavior;

7. Protection against retaliation for reporting misconduct; and

8. An acknowledgment or certification that employees have received and read the company code of conduct.

The quality of the code of conduct contributes to its effectiveness in deterring misconduct. A review of company codes in the 1970s showedlimited inclusion of relevant ethical issues and few procedures for seeking advice, reporting misconduct, or taking disciplinary actions(Cressey & Moore, 1983). By sharing best practices, more companies are developing codes of conduct that incorporate all eight recommendedsections. Ethisphere Institute has developed criteria to evaluate the quality of a code of conduct, as shown in Table 9.3. Codes of conductmeeting these components are effective tools in setting and reinforcing expectations for ethical behavior.

Table 9.3: Evaluation components to benchmark the quality of a corporate code of conduct

Component

Component Description

PublicAvailability

The code should be readily available to all stakeholders. What is the availability and ease of access to the code?

Tone from theTop

Level at which the leadership of the organization is visibly committed to the values and topics covered in the code.

Readability andTone

What is the style and tone of the language used in the document? Is it easy to read and reflective of its target audience?

Non-Retaliation& Reporting

Is there a stated and explicit non-retaliation commitment and dedicated resources available for making reports of codeviolations? If so, is it presented clearly?

Commitment &Values

Does the code embed corporate values or mission language? Does it identify the ethical commitments held to itsstakeholders (e.g., customers, vendors, communities)?

Risk Topics

Does the code address all of the appropriate and key risk areas for the company’s given industry?

ComprehensionAids

Does the code provide any comprehension aids (questions and answers/frequently asked questions, checklists,examples, case studies) to help employees and other stakeholders understand key concepts?

Presentationand Style

How compelling (or difficult) is the code to read? This depends on layout, fonts, pictures, taxonomy, and structure.

Sources: Erwin, 2011; NYSE Governance Services, 2014.

The Morgan Stanley code of conduct titled “Doing the Right Thing” is an example of a document that meets the Ethisphere Institute’sevaluation criteria. A common element in both The Ethics and Compliance Handbook and Ethisphere Institute evaluation criteria is ademonstration of top management’s commitment to the ethics and compliance program. The first page of Morgan Stanley’s code of conductincludes a statement by James P. Gorman, the chairman and CEO, stressing “an unwavering commitment to the highest standards of ethicalconduct” and concludes with, “Like you, I am proud to be part of a Firm that has such a distinguished heritage and promising future. Thankyou for doing your part to uphold our greatest tradition” (Morgan Stanley, 2014, p. ii).

The code of conduct is values-based, tying ethical behavior to Morgan Stanley’s values of putting clients first, leading with exceptional ideas,doing the right thing, and giving back. Throughout the document, sections begin with the word we, denoting that the code of conduct appliesto everyone. The section titled “We Make Ethical Decisions” includes a series of questions to assist employees in choosing the right actionwhen faced with an ethical dilemma. Disciplinary procedures, resources for reporting, and non-retaliation procedures are presented early inthe document. The following are the major headings featured in the code:

· What This Code Means to Us;

· We Make Ethical Decisions;

· We Treat Others with Dignity and Respect;

· We Support Our Communities;

· We Protect Our Franchise and Address Conflicts of Interest;

· We Protect and Prevent the Misuse of Confidential and Material Nonpublic Information;

· We Follow the Letter and the Spirit of the Laws and Regulations;

· We Protect Our Interests;

· We Are Honest and Fair in Our Communications with the Public;

· We Report Information and Cooperate with Requests Relating to Litigation, Investigations, Inquiries and Complaints; and

· Code of Conduct Acknowledgement.

The key ethical issues and acceptable behaviors outlined in Morgan Stanley’s code of conduct guide employees in everyday conduct throughsimple, concise language and concrete examples to aid in comprehension. The document specifically states, “Throughout this Code, weinclude questions and answers that address situations that commonly arise and illustrate how particular policies apply in practice” (MorganStanley, 2014, p. 2). The code is 15 pages long, with detailed policies and procedures for 34 ethical topics. It is unlikely that all of the ethicalissues are relevant to all employees. Therefore, in addition to the full table of contents, the code of conduct provides a summary listing of the15 ethical issues that have generated the most questions from employees.

Focusing the Code on the Organization’s Key Risk Areas

The focus of company codes of conduct changes over time and varies by geographical location. A review of codes of conduct in the 1970srecognized a focus on misconduct that directly impacts company profit, such as conflict of interest, rather than responsibilities to others(Cressey & Moore, 1983). A review of global companies’ codes in 2009 found that U.S. companies focus more on accounting fraud, conflict ofinterest, and insider trading, while global companies tend to emphasize security, human rights, bribery, and money laundering(Sharbatoghlie, Mosleh, & Shokatian, 2013). Table 9.4 lists possible topics for codes of conduct from The Ethics and Compliance Handbook. Thelist is extensive and inclusion of all topics is neither practical nor necessary for most organizations.

Table 9.4: Possible topics for codes of conduct

· Anticorruption

· Gifts, entertainment, and gratuities

· Antitrust/competitive information/unfair competition

· Government contracting, transactions, and relationships

· Billing for services

· Government relations and lobbying

· Books and records/financial reporting and recordkeeping

· Harassment (sexual and otherwise)

· Community or civic activities

· Investigations (internal and government)

· Complying with laws

· Licensure and professional certifications

· Confidential and proprietary information

· Marketing, sales, advertising, and promotions

· Conflicts of interest

· Media relationships

· Copyrights, patents, and intellectual property

· Money laundering

· Customer service and customer relations

· Political contributions

· Discrimination

· Privacy and safeguarding information

·

·

· Document retention

· Procurement/purchasing

· Environment, health, and safety

· Professional standards, competence, and due care

·

·

· Equal employment and affirmative action

· Respect and fair treatment

· Expense reimbursement and time reporting

· Securities trading and insider information

· External inquiries/public disclosure and reporting

· Security

· Family and personal relationships (e.g., nepotism)

· Social media

· Fraud

· Work-life balance

·

· Workplace violence

When identifying key risk areas to include in a code of conduct, executives must consider external forces, internal perceptions, and historicaldata. The first consideration, external forces, represents the legal, regulatory, and competitive environment that can elevate an issue towarrant attention in the formal code of conduct. For example, in the United States, regulations provide specific topics that should beaddressed, including policies on conflict of interest, insider trading, and bribery (Ethics & Compliance Officer Association Foundation, 2008;NYSE Governance Services, 2014).

Second, internal forces such as the industry, size, or international scope of the company can determine topics to emphasize in the code ofconduct. For example, a company manufacturing products in emerging markets may place more emphasis on environmental impact, humanrights, and safety. Additionally, a survey of employees can reveal internal perceptions regarding what ethical issues they consider likely tooccur, providing issues to include in a code of conduct.

Lastly, the ethical topics that the company has struggled with in the past should be included in the code of conduct. Audit findings, regulatoryinvestigations, or common employee violations are sources for historical data of relevant ethical topics. It is useful to organize the key issuesby stakeholders, corporate values, or internal employee conduct (Kaptein, 2004).

Global Considerations

International companies have additional considerations when designing a code of conduct that applies to employees in multiple countries.The first decision is whether to develop one common code for all countries or separate documents for each country. Some organizations mayconsider one code impractical or unrealistic because of variations in legal requirements, cultural norms, and languages among the countries.Benefits of a common code include: a) there is only one definition of what is right or wrong, b) employees are clear on expected behavior nomatter where they travel on business, and c) the company avoids liability associated with inconsistent practices. One solution is to create onecommon code with regional or country variations that bridge gaps between local laws or customs and company standards (Martens, 2012).

Companies that intend to implement a global code of conduct that applies across the organization must make careful considerations duringthe code drafting process. Best practices dictate that companies seek input from a legal team, managers, and workers while developing thecode. This team can help identify and address:

· Key ethical and legal concerns;

· Cultural or historical issues that affect business operations;

· Workforce dynamics that could either promote or interfere with the adoption of the code of conduct in their country or region; and

· Language or terminology issues. (Ethics & Compliance Officer Association Foundation, 2008, p. 62)

An effective code of conduct provides guidance for employees to manage contradictions between individual or local norms and the company’sstandards. Chapter 5 described how cultural differences influence ethical positions and increase the potential for conflicts within a globalorganization. One study relates how an ethics officer investigating a report that “a high-level executive had been making sexist and ageist‘jokes’ during business-related conference calls” discovered that the executive, who worked outside the United States, was unaware that hisremarks were offensive and potentially discriminatory because they would be acceptable in his country (LRN, 2006, p. 3).

Halff (2010) found that the majority of the world’s largest corporations fail to acknowledge contradictions between local norms andcorporate norms, leading to hidden and overt violations of the company code of conduct. Global codes that include negative language such as“employees must never” can lead employees to feel that the company is not considering local norms (Martens, 2012). Organizations that doacknowledge differences take varying approaches such as to seek advice, apply the stricter rule, follow local norms, or comply with corporatecode. Companies like Lockheed Martin and Cisco serve as role models for multinational companies striving for a global code of conduct. Theircodes of conduct are provided in multiple languages, include symbols for navigation, and provide examples relevant to diverse employees.Global companies can follow practices suggested for a suitable global code of conduct such as:

First acknowledge that sets of norms might contradict, second give clear priority to one set of norms (local or corporate) and thirdlyprovide specific instances and/or examples of how and when to apply the priority rule. They are particularly precise about gift-giving, facilitating payments, employment of relatives, and the entertainment of public servants. (Halff, 2010, p. 364)

Global companies should avoid region- or country-specific terms or phrases when drafting the code for an international audience. Forexample, a U.S.-based firm should not refer to a non-U.S. government employee in anti-bribery sections as a foreign government official. Thelocal employees would not consider their government officials, customs agents, or public employees as foreign. Some terms in codes ofconduct relate to country regulation, such as affirmative action or equal employment opportunity in the United States. Use of country-specificterms fails to convey the ethical standard of nondiscrimination to workers in other countries. Table 9.5 provides suggestions for replacementterms to make culturally-specific terminology more global.

Table 9.5: Replacement terms for culturally-specific language

Term

Country

Replacement Term

Equal employment opportunity

United States-centric

Fair hiring practices/no discrimination

Antitrust

United States-centric

Fair competition

Antimonopoly

United Kingdom-centric

Bullying/mobbing

United Kingdom and Europe

Harassment, disrespectful treatment

Anti-bribery

United Kingdom

Improper payments

FCPA

United States

Source: L. T. Martens, 2012, Globalising a Business Ethics Programme, p. 25. Copyright 2012 by the Institute of Business Ethics.

The graphic design of the document should reflect cultural sensitivity through the use of color, symbols, and photos (Martens, 2005). Forexample, red print may trigger negative feelings of forced compliance in Western countries where red is used as the symbol for danger.Universal symbols are preferable, although not always practical when a standard or example requires a currency amount. For example, areference to accepting or giving gifts over $25 should include the equivalent amount in euros or yen. Photos should represent theinternational character of the company and not be offensive in any part of the world. A global code of conduct should be a useful guide toappropriate behavior for all employees.

Implementation of a Code of Conduct

To implement a code of conduct, organizations must formulate a plan to ensure that workers receive the code and understand its purpose.The plan should include distributing the document to all employees, providing tools to help them apply the code in their daily activities, andrecording their acceptance of it. All communication surrounding the code is vital to its success. Employees become more familiar with andsupportive of a code of conduct when senior management demonstrates support for the code and employs diverse communication activitiesfor educating workers on the content and application of the code (Kaptein, 2011).

Distribution of the code can take various forms, but it should remain easily accessible to employees and available to all stakeholders (NYSEGovernance Services, 2014). Every new employee should receive a printed copy upon hiring and during orientation. Current employees couldreceive copies through the company mail or e-mail communications periodically or when the code has been revised. Companies often createwebsites to communicate information regarding the ethics program and code of conduct. Some companies require an online course tointroduce the policies and procedures contained within the code of conduct.

To increase accessibility and use of the code of conduct, many companies have begun offering an electronic version. More than just a PDF, anelectronic code provides employees with an interactive tool for finding specific information, links to resources, and a variety of learningscenarios (NYSE Governance Services, 2014). Morgan Stanley includes a statement in its code of conduct that says “The electronic version ofthis Code includes links to policies and procedures” (Morgan Stanley, 2014, p. i). See Business Best: Cisco eBook Code of Conduct for an exampleof a company that delivers the code electronically to a global audience.

Business Best: Cisco eBook Code of Conduct

In 2012, Cisco released an interactive eBook version of the company code of business conduct (COBC) to its mobile, global workforce.The online interactive COBC is able to reach the 85% of Cisco employees working from home or traveling (World Watch, 2013). TheCOBC eBook provides many tools to make it easier for employees to find information on ethical issues, such as pop-up frequentlyasked questions, links to other Cisco tools and resources, an “Ask/Report” list of ways to obtain help on any topic, embedded videos,and pop-up definitions (Cisco, 2014). Cisco’s 2013 Corporate Social Responsibility Report states:

Our Code of Business Conduct sets out our expectation for everyone at Cisco to behave ethically in everything they do.Through regular training and a new interactive eBook version of the Code, we equip employees with the knowledge and skillsto make the right decisions if they are ever confronted with an ethical dilemma. (Cisco, 2013, p. B2)

The eBook is easy to navigate and includes universal symbols for interactive functions. See Figure 9.3 for a snapshot of the instructionsfor the user on the first screen. Though the interactive eBook is only available in English, an introductory video features employeesfrom all countries stating, “I know the code” in their native languages. Translations of the Cisco COBC are available on the Ethics@Ciscowebsite page as a PDF with hyperlinks.

Figure 9.3: Instructions for navigating Cisco’s COBC eBook

Cisco’s COBC eBook contains universal symbols for the interactive functions.

A snapshot of Cisco’s interactive e-book, which features the following universal symbols: turn pages, use the tools, play video, jump to a page, What If?, tools/resources, and ask/report.

Source: Reprinted with permission from Cisco. (2014). Code of Business Conduct.

Following the launch of the eBook, an employee survey showed improvement in almost all measures regarding the ethical culture(Cisco, 2013). More than 92% of employees in 2013 felt that Cisco was taking ethical business concerns seriously (up from 90% in2011). In just two years’ time, the percentage of employees who agreed with the statement, “The management team sets a goodexample of company values, culture, and the Code of Business Conduct” increased from 81% to 89%. Finally, by 2013, 89% ofemployees knew where to report an ethics question or concern compared to 83% in 2011.

Questions to Consider

1. What are the advantages and disadvantages of an interactive online code of conduct? Why should printed or PDF formatscontinue to be offered, even when there is an online version?

2. Does an electronic format provide advantages in Cisco’s ability to make further improvements to its code over time?

3. Access the eBook to view the table of contents and a few pages. Would the eBook meet Ethisphere Institute’s evaluation criteriafor an effective code of conduct?

Many organizations require employees and management to sign a statement certifying that they have received and read the code of conduct.Certification statements are one way a company can demonstrate to regulators that it is committed to the ethics and compliance program(NYSE Governance Services, 2014). These statements allow companies to:

· Confirm receipt of the code of conduct;

· Obtain acknowledgement from employees that they have read and understood the code of conduct;

· Establish that employee abides by, or will abide by the code of conduct;

· Obtain confirmation that employees reported any breaches of the code;

· Confirm that management has discussed the code with their team. (IBE, 2012)

Code certification holds employees accountable for their actions. In a study by the Institute of Business Ethics, about half of the companiesreferred to code certification statements during disciplinary decisions involving code of conduct violations (IBE, 2012). Whether a companycan obligate an employee to sign an acknowledgement form may depend on local labor laws (IBE, 2012). Should an employee refuse to sign,additional ethics training or discussions with the employee’s manager may occur.

As the foundation of the ethics and compliance program, companies recognize the importance in thoroughly educating th