Cracking the Code – Some Key Considerations for Developing Codes of Conduct

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Codes of good conduct (“Coded”) Are an important tool for companies to mitigate legal and reputational risks by promoting ethical and responsible conduct of their employees. In addition to serving as a marketing tool to demonstrate good governance to external stakeholders, codes also offer the opportunity to define a company’s mission, values ​​and fundamental principles regarding the conduct of its business.

The need for a code and other policies and procedures within a company is becoming increasingly evident as regulatory authorities impose more stringent compliance requirements to promote responsible business conduct by companies operating in the country. and abroad. Companies are also stepping up their environmental, social and governance policies (“ESG”), As this area is becoming increasingly relevant for investors in a post-pandemic world. For example, recent Government of Canada announcements[1] Regarding human rights violations in China’s Xinjiang region are indicative of the growing pressures on companies to operate in a responsible manner that takes into account the supply chain risks resulting from forced labor.

In this newsletter, we discuss some key considerations that should be taken into account when writing codes, and why companies may need to go beyond codes to ensure a strong governance framework.

I. Drafting of recommendations

There is no “one size fits all” approach to codes. All codes should be appropriate for the size, business operations and regulatory risk profile of a company. As such, it is important to ask the following questions before writing Codes:

  • What is the company’s mission and values?
  • What legal and regulatory risks is the company exposed to?
  • What potential legal and regulatory violations could arise in the course of day-to-day business operations?
  • What went wrong in the past?

The topics to be covered in the codes are determined by the answers to those questions. Once the author is ready to put pen to paper, he should consider a fundamental maxim for Code writing, which is to use plain language that explains in a clear and concise manner what is expected of it. an employee. Code authors should avoid legal jargon and confusing wording to avoid unnecessary ambiguity among their readership. In addition to being clear and concise, guidelines for code writing should sometimes be “less is more” to be equally compelling and effective in achieving the ultimate goal of codes.

The writing process should involve a multidisciplinary team who can comment and contribute according to their respective areas of expertise. It has also become common practice for companies to add a foreword from the CEO or other high-ranking executive to set “the tone from above” in terms of ethical conduct. Demonstrating buy-in from senior executives plays an important role in anchoring core values ​​in a company’s culture.

Another important part of writing codes is using examples to illustrate everyday situations that could give rise to unethical conduct. This provides employees with the tools to react in accordance with the Codes if ever they are faced with a similar situation. A compliance resource should be assigned to clarify any ambiguity and provide guidance when an employee is faced with an ethical dilemma.

Finally, codes should also be a living document that is regularly updated to reflect changes in a company’s regulatory environment.

ii. What topics should be covered in the codes?

There is a wide variety of topics that can be covered in a company’s codes. The selection of these topics tends to be dictated by industry and the company’s regulatory environment. However, there are more general themes that should be addressed by any organization regardless of industry. These include, but are not limited to, diversity and inclusion, workplace harassment, conflict of interest, confidentiality, record keeping, outside employment, personal use of computer systems, media management and political activities.

Beyond these general subjects, each company will have to address questions specific to its situation. For example, state-owned companies will need to consider the implications of insider trading, while companies that frequently bid on contracts with government entities will need to focus particularly on fighting corruption. Companies exporting to high-risk jurisdictions will need to ensure that their employees are aware of export control sanctions and restrictions. Laws against money laundering and terrorism are particularly relevant for companies operating in the financial services industry.

As mentioned, there is no “one size fits all” approach to codes. Businesses may consider contacting an outside advisor if they are unsure of the scope and extent of a code or other policy document.

iii. The importance of a whistleblower program

It should be noted that whistleblower programs have become an important tool in corporate governance to uncover wrongdoing and prevent an employee from reporting wrongdoing through other channels. These programs also create a process by which employees can raise any concerns in good faith without the risk of retaliation. This sends a message not only to employees, but also to external stakeholders, that the company takes ethical conduct and compliance issues seriously. In terms of implementation, most companies set up a whistleblower hotline or website where employees can report concerns.

iv. Codes of conduct in public procurement

Codes also play an important role in the public procurement process under the auspices of Public Works and Government Services Canada (“PWGSC“). Procurement Codes is a policy established by the Government of Canada that provides everyone involved in the procurement process with guidelines for ethical conduct. Certain provisions of this Code impose compliance requirements on suppliers, in particular with regard to the fight against corruption and fraud or anti-competitive behavior. If companies have not instituted a code for tendering in public contracts, it would be prudent to put one in place before the contracts are awarded.

v. McMillan’s International Trade group can help you implement codes or improve your existing code

Codes lay the foundation for a company’s mission and core values. In addition to this base, companies should consider putting in place a governance framework made up of policies and procedures more specific to the risks they face. In international operations or international trade, for example, policies and procedures related to export controls, sanctions, customs and other trade-related matters are essential for navigating the regulatory minefield, which is international trade law.

Whether your business needs a Chevrolet or Cadillac as a code, McMillan’s International Trade group has the expertise to help write more specialized codes and policies and procedures tailored to the values ​​and risk profile. organisation. We also review and comment on existing codes to ensure that your organization’s codes mitigate current regulatory risks.


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