A Firm's Code Lifts Ethics

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Conduct codes might seem basic when it comes to encouraging ethics. But a new study says they're more than basic -- they have a big impact. Here's how to make them work:

Write the code. Lisa Shu, a graduate student at Harvard University, and two professors found in the study that simply putting a code of conduct in place cut cheating in half. But Shu and co-authors Francesca Gino, an assistant professor at the University of North Carolina, and Max Bazerman, a professor at Harvard Business School, discovered that there's an even stronger impact when people sign the code. Taking that step virtually eliminated unethical behavior.

"People underestimate the impact of these codes," Shu said. "But it's a nudge in the right direction."

Customize it. A lot of firms use boilerplate codes of ethics. Paul Fiorelli, co-director of the Cintas Institute for Business Ethics at Xavier University, says he doesn't put much faith in those. "Don't just use a consultant," he said. "Get the (company's) key players involved."

Johnson & Johnson's (NYSE:JNJ - News) credo lists shareholders last. It believes if it does all else right, shareholders will gain, too. The code matches the beliefs of the firm's people.

Set the tone. Shu's study found that more people cheated when no one kept tabs on them. That might seem obvious. But people often define ethics and integrity as doing the right thing even if no one is watching. "Environmental cues matter a lot," Shu said. "It's shocking how much of our morality does depend on our environment."

Reinforce it. Those who cheated remembered only one part of the code of conduct, Shu's study found. The honest ones remembered five. She and her co-authors are studying the cause for that. It could be a memory issue, or the cheaters might just be trying to justify their actions.

Live by the code. It's worse for companies to put a code in place and ignore it than to not have one at all, Fiorelli says. With no code, employees might think the ethical dilemma wasn't thought through. Ignoring the code shows it just didn't matter to those at the top.

"That breeds more cynicism among employees," Fiorelli said.

Train your people. It makes a big difference, Fiorelli says. He handles training for some corporations. You can do it online, but training works best in person. Reach all levels, too, from employees to the board.

"You want to expose people to different issues," Fiorelli said.

Follow up. Once the code is in place, the work has just begun. Firms need to put in place methods, such as whistle-blower hotlines, to find wrongdoing.

The companies should have enforcement plans and take preventative measures, Fiorelli says.

See it through. If you suddenly stop reminding people of the importance of acting with integrity, they might quickly resort to cheating, Shu says. Staffers might see a lack of a reminder as a green light to cheat.

Assume the best. Write the code of conduct with the expectation that people are honest, Shu says. Avoid a list of don'ts.

"People are more receptive when they're being treated as ethical and moral," Shu said.