Articles | Ethics & Compliance | LRN

Two in Five Codes of Conduct for the World’s Top Companies Fall Short

Written by LRN Corporation | Jul 25, 2023 11:00:00 AM

2023 Report includes analysis of companies in Japan and Singapore for the first time 

NEW YORK (July 25, 2023) — The 2023 Code of Conduct Reportreleased today by LRN Corporation, the leader in ethics and compliance solutions that enable organizations to inspire principled performance, reveals that a significant proportion (two in five) of the world’s top publicly-traded companies have work to do to meet basic expectations for more effective codes of conduct.  

Further, "speak up" culture appears deficient in most organizations, as less than two-thirds of all codes include a section on reporting misconduct and fewer than three in five have strong non-retaliation policies stated for those who do so. 

The report reviewed the codes of conduct of nearly 200 of the top publicly traded companies in Asia, Europe, and North America—focusing on those listed on the major indices in Germany, France, the United Kingdom, the United States and, for the first time, Japan, and Singapore.  

Among the other key findings of the report include: 

  • Only 43% of their codes of conduct for some the world’s largest publicly traded companies were scored "effective", meaning they meet the minimum expectations, and 40% were rated as less effective, meaning they fell below the expectations of an effective code. Only 17% were found to be more effective, meaning that their codes exceeded the minimum expectations 

  • The codes of companies on the U.S. S&P 100 outperform those in other indexes overall, while companies listed on Singapore’s STI 30 generally have the lowest code effectiveness scores 
  • 64% of codes analyzed have a section on speaking up, but only 57% of codes have a strong non-retaliation policy for employees who speak up about misconduct and just 17% explain the procedure for investigation of misconduct  

  • Companies with more effective codes are 10x more likely to include hotline/helpline details

  • Only 48% of codes extend applicability to contractors, agents, and other third parties working on behalf of the company
     

"A code of conduct should be a declaration of an organization’s culture and values: providing insight into who they are, what they believe, and how they make decisions, pursue their goals and operate with integrity," says Ty Francis MBE, chief advisory officer at LRN. “The most effective codes today give an organization’s stakeholders a framework for how to act in line with the company’s philosophy and values, helping guide people in ethical decision making.” 

“Many companies understand the need for a code of conduct and the basic standards and expectations around codes, says LRN CEO Kevin Michielsen. “However, there is still significant room for the top publicly traded companies in the world to strengthen their codes of conduct and make them a more valuable tool to promote ethical corporate culture, which evidence has shown is a key driver of stronger business performance.” 

LRN used its proprietary Code of Conduct Assessment Tool to assess the codes featured in the report and evaluate eight different dimensions of effective codes of conduct, including: Tone from the Top; Purpose and Values Orientation; Applicability and Administration; Speaking Up; Risk Topics; Knowledge Reinforcement; Usability; and Look and Feel. The tool reflects the latest regulatory and best practice guidance along with 28 years of experience and research into ethical culture and compliance program effectiveness.  

LRN's Smart Code solution is based in part on the findings of the company's analysis of codes of conduct. 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. The next release of Smart Code, slated for September, will add new insights directly into LRN Catalyst, the company’s popular SaaS platform for ethics and compliance program management. 

Get the 2023 LRN Code of Conduct Report here.