Creating a Code of Ethics for a Luxury Brand Organization

Introduction: What Makes an Effective Code of Ethics

There are many factors that go into creating a code of ethics for an organization. At its simplest, a code of ethics should be a "collection of principles and practices that a business believes in and aims to live by" (Spiro, 2010). The code should have a certain degree of clarity, because it will ideally serve as a reference point for employees and for other stakeholders. Yet there are many challenges when it comes to creating a code, because both the field of ethics and today's organizations have a high degree of complexity.

Challenges in Developing Organizational Ethics Codes

Kaptein and Wempe (1998) provide a helpful guide to understanding many of the issues that organizations face when creating codes of ethics. First, the code needs to have an underlying consistency that can be understood by its audience. Second, the code cannot be so vague that it means nothing. Many codes of ethics are too vague to have any genuine use in resolving ethical dilemmas.

The most important element of a code of ethics — one that many companies overlook — is that the code must genuinely address the issue of ethical dilemma. Obeying the law, something discussed in many codes, is not an ethical dilemma. That is a baseline behavior and is self-evident. An ethical dilemma is a situation where there is conflict between moral requirements: a situation where one must choose between two options and some form of harm will result regardless of which choice is made. Sartre described it in terms of a scenario involving conflicting obligations (McConnell, 2014). If the situation can be resolved — such as when a supervisor asks an employee to break the law, a case where the law is clearly overriding — then it is not a true dilemma. But there are many instances where managers must genuinely choose between two competing, mutually exclusive obligations. If the code of ethics does not help resolve such situations, the code is inadequate.

Basic Premises of a Corporate Code of Ethics

The first basic premise of a code of ethics is that the organizational code will, to a large extent, supersede any local or individual interpretations of ethics. This is a necessary component, because employees are effectively agents of the shareholders and should therefore behave in the manner the shareholders prefer. Codes of ethics, values, mission statements, and vision statements are all part of organizational culture and should apply to all employees.

The second basic premise is that diversity should not dilute the code, but neither should the code disregard diversity. There is considerable room for common ground in a code of ethics — basic shared values such as trustworthiness, respect, and responsibility (Schwartz, 2002). However, some values are not as universal. When writing a code of ethics, understanding which values are universal and which are not is essential to clarity. Consider, for example, that another value Schwartz (2002) discusses is fairness. There are many interpretations of fairness — fairness of outcome, fairness of opportunity, and so on. Everyone values fairness, but the word means different things to different people. The code of ethics should therefore reflect that reality and offer clarity with respect to key terminology.

The final basic premise is that there must be managerial buy-in (MindTools, 2014). A code of ethics that exists only on paper is worthless. Senior management must conduct itself, visibly, in accordance with the code. Moreover, the code of ethics should be embedded into the organization's culture and structure. Without this, the code will not guide anyone's behavior in practice.