- Only 50% meet minimum expectations while just one in three publicly traded companies rise above the minimum with more effective codes of conduct
- Many codes lack guidance around speaking up and specifics to protect those who do in an organization
NEW YORK (June 7, 2022)—LRN's 2022 Code of Conduct Report released today, a review of codes of conduct of the top publicly-traded companies in the world, revealed disparities in the codes of conduct for the largest companies and that majority have a long way to meet basic expectations for more effective codes of conduct.
Among other key findings is "speak up" culture: While 96% of the most effective codes describe the process for speaking up to report misconduct, only 8% of the least effective codes do, and only 60% of all codes have strong non-retaliation policies stated for those who do speak up.
The report reviewed codes of conduct of nearly 150 of the top publicly traded companies in Germany, France, United Kingdom, and the United States. Other major findings include:
Overall Performance
- There is significant room for improvement when it comes to the codes of conduct across the largest companies in the world. 50% scored "effective", meaning they meet the minimum expectations. 17% were less effective, meaning they fall below the expectations of an effective code.
- Publicly-traded companies with fewer employees and less revenue have less effective codes of conduct. Companies with 5,000 to 25,000 employees scored lower in code of conduct effectiveness across regions.
- Codes of companies on the S&P outperform those in other indexes across nearly all dimensions of code effectiveness. Companies listed on the CAC 40 have the lowest code effectiveness scores.
Reporting & Investigating Unethical Behavior
- 73% of all codes have a section on speaking up, including 100% of the more effective codes.
- Only 60% of codes have a strong non-retaliation policy for employees who speak up about misconduct; more than one in four codes of conduct don't have a section on speaking up.
- Companies with more effective codes are 10x more likely to include hotline/helpline details: 96% compared to only 8% of less effective codes.
- Only 17% of all codes explain the procedure for investigation of misconduct.
Liability & Risk
- Only 53% of all codes extend applicability to contractors, agents, and others working on behalf of the company. This is significant as companies can be held accountable for the actions of third parties.
- 64% of all codes provide the business rationale related to specific risks, allowing employees to understand how a specific behavior connects to their own work.
LRN used its proprietary Code of Conduct Assessment Tool to assess the codes featured in the report. It evaluates eight dimensions of effective codes of conduct. The tool reflects the latest regulatory and best practice guidance along with 27 years of experience and research into ethical culture and compliance program effectiveness. With the report, companies can benchmark their code against the latest best practices and create actionable plans for improvement.
LRN's Smart Code solution, which launches today, is based in part on the findings of the company's analysis of codes of conduct in the report. Smart Code is a turnkey microsite designed with analytics in mind. With it, teams can transform their codes of conduct into an interactive and easily searchable microsite to increase employee visibility, generate buy-in, increase retention, and guide employees to crucial information when they need it. This new product launch is timely; according to LRN's 2021 E&C Program Effectiveness report, 77% of high impact ethics and compliance programs plan on prioritizing web-based codes of conduct this year. Smart Code enables these programs to move quickly to meet this goal.
"Codes of conduct are the cornerstone of an E&C program and provide guidance for all employees—including top executives," said Jim Walton, senior E&C advisor. "LRN's research and experience has shown that in organizations with highly effective E&C programs, the C-suite understands the compliance risks facing the organization and supports mitigation measures. Our report reveals that even the top publicly-traded companies in the world, while they may identify risks, don't have a strong or engaging code of conduct that leads with values."
The code of conduct is a natural vehicle for "operationalizing" an organization's purpose and values. Purpose is why people come to work every day and stay with the company long-term. Values are how the organization goes about fulfilling its purpose. The code takes those values and breaks them down into specific behavioral expectations for how employees treat one another, customers, and the communities they serve.
LRN, a leader in the ethics and compliance space, helps more than 30 million learners each year across 1,000+ companies worldwide.
For more information, access the LRN Code of Conduct Report (free with registration).
About LRN
LRN's mission and purpose is to inspire principled performance and help people around the world do the right thing. Since 1994, LRN has worked to propel organizations forward with the partnership, knowledge, and tools to build ethical culture. More than 1,000 companies and 30 million learners worldwide utilize LRN services and take LRN e-learning courses to help navigate complex regulatory environments and foster ethical, responsible, and inclusive cultures. In partnership with LRN, companies translate their values into concrete corporate practices and leadership behaviors that create sustainable competitive advantage. By acting upon shared values, companies and their people find the means to outbehave and outperform. Learn more at https://lrn.com and follow on Twitter, LinkedIn, and Facebook.
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