Keywords

Synonyms

Accountability; Corporate social responsibility; Professional guides; Quality entrepreneurship; Related issues are business ethics; Sustainable development, and code of best practices (Schwartz 2004)

Definition

A code of conduct is both a sum of the ideal values or principals and a guide for good practice for individuals and organizations; it targets the reduction of negative externalities, the internalization of some social costs, and, at the same time, increasing benefits to society.

Theoretical Framework

Why do more and more organizations today try to follow, provide, and measure their social contribution based on a code of conduct? First, a code of conduct is a precaution mechanism. Following appropriate social behavior is less costly and risky than the costs of penalties, law suits, punishments, harm done to a brand name, customer boycotts, negative word of mouth, (Schwartz 2004).

Second, the strict enforcement of codes of conduct is a voluntary and self-regulated mechanism for companies that is not imposed by legislation and regulations. They are a signal and means to inform people that a company wishes to stay in the market for a long time and create a respected brand name; therefore, it is very important for companies to build a good image (Carroll and Buchholtz 2006).

Third, codes of conduct are an ex-ante strategy and not ex-post, which means that elements of positive ecological and social behavior could form part of a business strategy, giving companies the opportunity to think about how to operate in a way that offers something to society or without doing harm. This strategy could make companies very innovative and creative (Porter and Kramer 2006).

Fourth, companies that enforce codes of conduct in their policies and strategy significantly reduce their operational and transactional costs. This is because green companies save energy not only for society but themselves. Moreover, all types of stakeholders are happier to cooperate or work with socially responsible organizations, e.g., suppliers, distributers, shareholders, and bankers are more positive towards dealing with social responsible companies, reducing the cost of searching for, bargaining for, and enforcing contracts. Hence, employees who work in socially responsible organizations are more motivated and committed to the organizational dream and are professional in their work. Furthermore, codes of conduct can help organizations to achieve a balance between different stakeholder’s interests (Thomsen 2001).

Fifth, companies that follow codes of conduct gain a positive reputation, and this is a guarantee to customers and citizens that they will not undertake opportunistic behavior such as higher prices, low quality, misleading practices, or intrusive behavior, but that they will respect them and show good will and trust. Thus, codes of conduct are a trust mechanism. Consequently, they make a positive contribution to the community, society, culture, and ecology development through payments, donations, and philanthropy for a better future. Therefore, socially responsible firms pursue a win–win strategy (Kotler and Lee 2005).

Empirical Evidence

Relevant cases that provide empirical evidence of this benefit are most national and international codes of conduct for hospitals and communication organizations or for individual doctors and journalists. According to their associations, there are behaviors that should be avoided, such as harassment and discrimination, advertising, disclosure of private information, vulgar language, being influenced by power, bribery, and corruption. At the same time, there are good practices that will benefit citizens and society, such as respecting people’s dignity, explaining medical procedures, asking for permission for research, offering services voluntarily in emergency situations, and improving national culture and language.

Conclusion

All types of organizations could adopt altruistic corporate codes of conduct which complement legal requirements with a positive internal and external micro and macro environment.

Companies could care for all stakeholders, for instance employees, by providing training and healthy and safe conditions, and by discussing problems and respecting privacy, and at the same time offering sports, cultural, social, and ecological activities for their members. The same could be done for the micro external environment for customers, suppliers, distributors, and competitors. For instance, for customers, companies could offer safe products without their being produced by child labor or using animal testing, with logical prices, and with the products being eco-friendly and recyclable. Finally, with regards to the community, social, cultural, and physical macro environment, companies could incorporate into their professional codes proposals to solve social problems. For instance, communication organizations could support educational improvements and knowledge regarding educational problems that will change citizen’s living conditions and lead to a better society.