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      Establishing governance guides – crafting the code

      It is of the utmost importance for organisations to formulate guiding documents that serve as the foundation of their governance frameworks.

      mm by Dumisani Ntini
      February 21, 2022
      in #CorporateGovernanceCorner
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      Establishing governance guides – crafting the code

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      In many instances documents such as board charters, terms of reference, and codes of ethics are established to guide the conduct and behaviour of organisational actors. Such documents ensure that there is always a blueprint or reference point that ensures reversion to the organisation’s ‘true north’, i.e, realignment to fundamental principles that would ensure successful accomplishment of the establishment’s mandate as well as sustained growth.

      Appreciating always that these documents tend to be clouded in ambiguity, with considerable doubt as to their purpose and effectiveness, we will attempt to alleviate this by zoning in on Codes of Ethics. We will consider the purpose of this document as well as the underlying decisions to be made during its formulation to ensure that it is not ineffectual.

      In order to demystify the concept of codes, it is crucial that governance designates have a rudimentary understanding, at the very least, of codes and what they are. Codes may be referred to in varied establishments as declarations of organisational principles, value statements, conduct standards (or codes of conduct) as well as organisational credos. An overarching definition of codes of ethics must entail its purpose of stipulating the behaviour deemed morally acceptable in an organisation. Codes of ethics outline and explain the moral standards and guidelines that must be upheld by members of the organisation in their interactions with stakeholders (both internal and external).

      Having defined the code of ethics, organisational actors who have been given the responsibility of its formulation should then consider the key decisions to be made for its development. It must be remembered that ample thought must be put into this as it is the quality of the said decisions that determines the eventual efficacy of the crafted code. A few aspects that parties to this undertaking should ask themselves questions about purpose, process, form and content. What purpose would the board and executives wish for the code to serve, perhaps internally and externally. Internally the code may be established to set out morally acceptable behaviour standards, to provide decision-making guidance as well as for the establishment of organisational integration and cohesion. Externally, the purpose of the document may be to outline conduct standards during interaction with stakeholders such as consumers, government and other societal actors.

      Process decisions regarding formulation of the code can be determined by its intended purpose. For example, if the code is largely an internal guide on morally acceptable behaviour, thought may be put into the organisation’s initial mandate and expectations which may be outlined in the organisational strategy document and strategic pillars such as the mission and vision or, in cases of statutory bodies, in the Acts of Parliament that establish these organisations.

      Process decisions may also include determination of the stakeholders to consult in the code’s formulation. Governance designates must also decide on the extent of commitment that will be required from those who will be governed by the code and any consensus that must be built in that regard.

      Decisions surrounding the form of the code would generally be made in response to two questions. Firstly, does the board wish to have a basic document that outlines ethical value expectations and behavioural guides? If this is the case, then the code is ‘aspirational’ and will take the form of a brief, concise and straightforward document. The code will be of a general nature without specific guidance on expectations. Conversely, does the board expect the crafted code to clearly spell out how organisational actors must behave, and should it have specific instructions about ethical expectations in different circumstances? If so, then the code is ‘directional’ and will be a clear (and somewhat lengthy) document that will not be easily misinterpreted because it gives clear and specific guidance on decisions and actions. A directional code would also usually entail consequences tied to the code’s contravention.

      A final consideration for the board and executives is that of content. Here decisions can be made pertaining to the overall rationale of the code, outlining the purpose and ‘why’ of the document. In essence, rationale related content speaks to the code’s importance in and for the organisation. Standards and ethical value information must also be included as part of the code’s content to outline crucial norms as well as targets. Prescriptive and prohibitive content decisions must be made to promote or deter specific ethical and behavioural actions and lastly content relating to any sanctions or consequences resulting from the codes contravention must be decided on.

      In a nutshell the above considerations can aid greatly in the formulation as well as maintenance of effective codes of ethics in varied organisations.


      The views and opinions expressed in this article are those of the author, Dumisani F. Ntini – Governance and Strategy Practitioner. Contact info@governancegroup.org.

       

       

       

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