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Business Code of Conduct


Code of conduct is set of conventional principles and expectations that are considered binding on any person who is y member of a particular group.

 Code of conduct States what should not be done by businessmen.

The alternative term are code of ethics  or code of practice.


As demand for ethical business is increasing most of the business organizations have opted to implement the code of ethics:

1. To define the framework of the acceptable behaviour.

2. The follow high standards of practice.

3. To enhance sense of communication. 

4. To create transparency in business activities.
5. To foster higher standards of business ethics.

6. To comply with government laws and norms.


Following factors should always be kept in mind while framing code of conduct:

➤ 1. Involvement of the senior management:

Every company needs a champion or roll model or mentor to guide the corporate ethics programme. A senior person mostly the CEO or Chairman should take the responsibility to lead the ethics program me. The board and senior management should show the enthusiasm and always provide guidance to the employees.

➤ 2. Involvement of the employee:

No programmer can be successful without involvement of the grass root employees. It is important to know what bothers people while making the code of ethics. Each and every person should know the code of ethics and should be made to follow it.

➤ 3. Picking the well tested model:

A framework which addresses issues as they affect different constituents should be used. Sometimes, the competitors should be considered. It the company is global then laws and people of the other nations must be included in the model.


Code of conduct can be evolved only through constant brainstorming in workshops, seminars, conferences, formal and informal discussions.

They must be evolved through mutual consent and consensus.

Everyone must be convinced about the desirability  applicability and practical ability of the code of conduct.


Do not resort to hoarding, black marketing, profiteering and sale of harmful goods.

 2. Do not destroy healthy competition, which offers certain beneficial to consumers. Do not tarnish the image of competitors by unethical means.

3. Ensure accuracy in weighing, packing and quality while supplying goods to consumers.

4. Pay taxes and other charges to the concerned authorities honestly and regularly. Avoid bribing officials and lobbying for favours.

5. Maintain accurate accounts and make them available to all authorized persons and authorities.

6. Pay fair wages, provide facilities and incentives and also give human treatment to employees.

7. Supply reliable information to shareholders regarding financial position and other policy decisions of the company.

8. Avoid injustice and partiality to employees in transfers and promotions. Avoid discrimination among them on the basis of sex, religion and language.

9. Do not make secret agreement with fellow businessmen for controlling production, pricing or for any other activity harmful to consumers.

10. Accept the principle of "service first and profit next".

11. Make your business efficient and dynamic. Give the benefit of these features to consumers.

12. Avoid formation of private monopolies and concentration of economic power.

13. Adjust your business activities as per the needs and expectations of customers.

14. Give due respect and honour to the basic rights of consumers.

15. Honour responsibilities towards different social groups on voluntary basis and not by force.

16. Change fair and reasonable price.

17.  Ensure that intermediaries do not manipulate the prices.

18. Provide product warranty in clear terms.

19. Do not to trade in smuggled products.

20. Do not to public misleading and deceptive advertisements.


Corporations have to operate within the ethics and moral principles of the society to which they belongs. Those principles or actions should be selected which are considered as just, normal or fair. In such a situation they are unlikely to be rejected by the employees, the customers, the suppliers, the government and the society at large. Moreover an ethical organization also draws power from the society to initiate an innovative idea or offer a totally new product to the prospects. There are three types of corporate code of ethics that are identified:

 1. Code of Ethics:

They are statements of the Value and principles that define the purpose of an organization.

2. An applied code of decision-making 

These are practices which guide decision-making.

3. Code of conduct or Behaviour:

It prescribes certain behaviour under a particular situation.

It should be remembered that corporate code of ethics is not incidental to a corporation,s functioning nor is it ornamental or an expression of good intent. Instead it is the practical instrument of management designed to capture the power of social ethics is expected to be followed in the day-to-day functioning of the business by the employers and the employees.


     1. Drafting and preparation

Besides senior management it is equally important that juniors should contribute to drafting the context and setting the code of ethics. Because the actual process of drafting can foster an environment of mutually shared values which can lead people.

     2. Communication

Any code should be widely and effectively communicated. Everyone must understand importance and consequences of not complying. Putting code on website of company would be a good way to communication to all directors, senior management, employees, suppliers and vendors.

     3. Enforcement/Disciplinary action

Deliberate failure to comply with the standards required must be met by appropriate disciplinary action so that all concerned are aware that deviation from established procedure will be dealt with fair, transparent and effective manner.

    4. Periodic review

 It important to keep the cod of conduct up to date. It should be reviewed at regular intervals to ensure that it reflects change in law regulatory environment and gives appropriate emphasis on current issue and concerns.


In order to improve ethical conduct of a business unit, various measure are being taken and should be taken at various levels. Measures are as under:

  1. At the Institutional Level

  2. At the Government level

  3. At the society Level

 At the Institutional Level

           1. Code of ethics

 The organization should lay down the code of ethics for its employees. The code should lay down, what is ethical and  what is unethical, what is right and what is wrong?

           2.  Increase in transparency

The records and operation of the organization have to be made more transparent. The shareholders, the employees and the creditors should be aware of the reasons which compel the organization to take a particular course of action.

          3.  Rewards

The business unit should reward those employees who adhere to the code of ethics. This will motivate people to follow the code of ethics. This not only benefits the individuals but also the organization as it improvers the image of the organization.

         4.  Punishment

If rewards fail to give necessary result, only then the management should resort to punishment.

        5.  Lectures / Seminars

The organization should invite experts in various areas to deliver lectures to its stuff, in order to orient them for ethical behaviour.

    At the Government Level
         1. Enactment of laws

The government has enacted various legislations like the payment of Minimum Wages Act,1948; Prevention of food Adulteration Act, 1954; Essential Commodities Act, 1955, etc., for the protection of various segments it interacts with. However, implementation of those laws is also crucial.

      2. Institution of awards

Government has also place various awards such as the Indira Gandhi puraskar, the Indira Gandhi  priyadarshani award, etc. These types of awards are given for those individuals and organizations which carry on ethical business in India.

   3. Awareness through mass media

Mass Media like television, radio, hoarding, press can be effectively used to make the people aware of the various laws relating to the consumers that are prevalent. It the consumers are deceived, then the remedies in the form of the organization and the avenues that are available to then and the maximum amount of compensation which they can get, should be communicated to them through the media.

     4. Taking quick action

Framing laws would be of no use if the government does not take any action on the errant business organization. Government has incorporate Securities Exchange Board of India to look whether ethical practices have been followed in financial management of the organization.

   At the Society Level

        1. Consumers associations

Various organizations like Mumbai Graham panchayat, consumers society of India, etc; have been started by consumers groups to protect the interest of consumers vis-a-vis manufacturers.
The society can publish magazines or journals where various social issues can be highlighted. Some articles can be devoted to consumer complaints and unethical practices followed by business organisations.

      2. Liaison with government agencies

Consumers associations can act as liaison between the community on the one hand and the government on the other. These associations can influence the government not only to formulate the laws, but also to take necessary action against errant business houses.

     3. Boycotting products

If all measures fail to bring  an erring manufacture to improve his product and policies, then social pressure can brought by boycotting those goods by the society.


          1. Ethical audit

Ethical audit conducted to assess whether a business structure procedures, systems and its policies confirm to the publicity defined criteria through a combination of inspection and interviews.

          2. Ethical training

Through a combination of classroom, instructions and on the job training, ethical training can equip or help employees to cope with ethical principles to deal with them effectively

         3. Business ethics consultants

Business ethics consultants can provide valuable problem-solving advice and help in crisis management by tackling the problem of low productivity, high staff turnover and profitability.

         4. Ethical code of conduct

It's a handbook containing the rules, regulations and procedures to be followed by employees of the organization. The code should set out the implications of the business purpose and make it clear that deviation from the code will not be acceptable.

          5. Ethics committee

It consists of top executives, the BOD and may be chaired by the CEO of the company. The committee helps the firm establish policies in new or uncertain areas and advises the BOD on ethical issues.

         6. Ethics hotlines

In some firms, employees can place a call on the company's ethics issues of concern, which are further investigated for corrective action. Such a system protects the identity of the caller and encourages more employees to report deviant behaviour.

       7. Rewarding exemplary conduct

It is vital that businesses use their incentive systems and performance related pay by making the rewards contingent on the right outcome. Employees behaviour like willingness to assume responsibility, admitting mistakes and seeking to set things right must be appreciated.

      8. Disciplinary action

There must be provision of punishment in  case of violation of ethical principles and codes, showcase notices, monetary fines or even termination of employment must be used ad penalties in organizations for dealing with unethical behaviour.

    9. Efficient systems

The ethical business must actively seek out information by providing mechanism  for registering suggestions, complaints and criticisms to all its stakeholders. Customer valuable inputs can be derived from customers feedback and employees satisfaction survey. It can help the organizations take corrective actions.

      10. Government laws

The government makes effort through various enactments to improve the moral and ethical values of business.
In addition, strict penalty should be imposed by the government.



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