A new report from the International Bar Association Global Employment Institute (IBA GEI) details the findings of a survey aimed at understanding the prevalence, purpose, application, jurisdiction, legal effect, enforceability and efficacy of multinational companies’ codes of conduct.
The Code of Conduct Report can be downloaded without charge from the IBA website.
Scope
Carried out during 2016, the survey of 36 multinationals found that 90 per cent attested to having a code of conduct in place, with the majority in effect for more than ten years and four in existence, in various forms, for more than 25 years.
Of the surveyed companies – from a broad range of industries including automotive, legal, mining, financial and insurance – almost 50 per cent had adopted the practice of incorporating the code as part of the employment contract, with 96 per cent citing a ‘desire to foster a culture of integrity and ethical corporate behavior across their organisations’.
On the question of whether codes of conduct influence the behavior of employees, respondents were unanimous in their belief that they do.
Dirk Jan Rutgers, IBA GEI Council Vice-Chair for Knowledge Management, commented: ‘The survey demonstrates that multinational companies are exporting norms of behavior through the implementation of codes of conduct. They are effecting societal change and shaping business practice on a global scale. Although the reasons given for creating codes of conduct vary, they generally revolve around creating a company-wide ethos of excellence, regardless of jurisdiction, including core tenets such as prevention of harassment and respect for human rights. Such soft law is a powerful option in a toolbox of solutions when issues may arise in different jurisdictions.’
Summary findings
The 32-page Code of Conduct Report on the surveyed companies include:
- 92% of codes are applicable in all the countries of operation.
- 71% require employees to consent individually to the code of conduct, with the majority requiring written consent. In some cases, annual re-certification of employees’ understanding and adherence to the code is a requirement.
- 55% intend the code to be legally binding on employees.
- 38% have relied on their code of conduct in litigation. Examples given include behavioral breaches and disputes relating to intellectual property.
- 68% of the codes include social responsibility items – demonstrating an awareness of the paradigm shift towards organisations contributing back to the community and being responsible corporate citizens.
- 52% of the codes include social media issues – suggesting the potentially significant impact of these activities on companies’ corporate image in the digital age.
Graeme Kirk, Co-Chair of the IBA GEI, commented: ‘Undoubtedly, codes of conduct are increasing in both relevance and importance. Where they were once narrow in scope, having developed through classical topics such as how to deal with safeguarding confidential company information, the proper use of company assets and avoiding conflicts of interest, they are now broadening. New areas include human trafficking, poverty, climate change and social media. This demonstrates that codes are not being created in isolation, but rather in alignment with a society’s evolving demands and an increased sense of responsibility – ultimately, this is a good thing.’
Asked about support for the provision of an IBA GEI model code of conduct template incorporating best practices, 85% of the multinationals surveyed welcomed the initiative.
Mr. Rutgers concludes: ‘Codes of conduct are a necessity for businesses today because a company’s reputation can be put at risk or destroyed swiftly with the rise of social media. Corporations need to maintain high ethical standards, and ensure that employees understand their ambassadorial standing and respect the codes. Also, to be relevant, codes require mindful tweaking. For example, climate change featured in only 32 per cent of respondents’ codes but, as the issue of climate change justice moves up the global geopolitical agenda, I suspect that this will alter. Our intention in drafting a template for codes of conduct will be to pool our global expertise to provide businesses with an effective tool in a constantly shifting landscape.’