Codes of conduct to the rescue.

• Author: Cochran, Philip L.
• Position: Ethics

You know your company needs one, but you're not sure where to start. Here's some reassurance: Many of your financial counterparts are in the same boat.

Kidder Peabody, Archer Daniels Midland, Dow Corning, Exxon. Do the bring to mind trustworthy stalwarts of Corporate America - or headline-makers for less-than-admirable acts? Accurate or not, the perception of ethical failure in large organizations today places a burden of proof on all businesses. Every firm needs to demonstrate it's ethical, and company codes, company ethics programs and other activities are visible ways to do just that.

Why the recent interest in corporate codes of conduct? For starters, the federal corporate sentencing guidelines, enacted in 1991, apply legal pressure on all organizations to implement formal mechanisms for implementing business ethics. So your good-faith efforts to foster ethical behavior can reduce your exposure to the established reprimands under the sentencing guidelines.

On the less-tangible side, it's no longer enough for a business to provide employment, return on investment, and goods or services. Rather, society expects you to remedy societal ills, provide individual fulfillment and assist individuals in managing their personal lives. If you choose to ignore these social demands, you'll be subject to more laws, regulations, bad publicity and lawsuits.

The mix of cultures in today's business environment also requires trust and a clear set of behavioral expectations for employees. And new organizational forms are structured much more loosely than traditional, hierarchically controlled businesses. Joint ventures, network organizations and virtual corporations offer participants high degrees of autonomy. To manage these entities, you have to trust the other players.

Based on a telephone survey of 407 financial executives from a variety of company sizes and industries, we obtained an inside look at how today's business leaders view conduct codes. The charts accompanying this article reveal some of the statistics gathered from the survey. Here's a glimpse at other findings:

* Surprisingly, 74 percent of the companies surveyed have already formally adopted some type of code of conduct.

* Not so surprisingly, larger firms have more formalized ethics programs than do smaller firms.

* The principal reasons a company has a code of conduct are to demonstrate the firm's basic philosophy and to protect various stakeholder groups.

* The principal force that...