What is a Code of Business Ethics and Conduct, you might ask (you may also have heard it referred to as a Code of Conduct, Code of Ethics, Code of Business Ethics, or some other variation). Well, a Code of Business Ethics and Conduct is essentially a document memorializing an organization's mission, values and principles. As many of us are aware, it has become quite common to hear about corporate scandals related to ethics violations, corporate conduct or the like. With that being said, we shouldn't have to list the reasons why a company should have a Code, but we will anyway.
A company (both small and large alike) should have a Code of Business Ethics and Conduct for many reasons, some of which include:
If you are a federal government contractor then not only should you have one, but you are required to have a written Code in place. In December 2007, FAR 52.203-13 [Contractor Code of Business Ethics and Conduct] became effective, requiring contractors with contracts of $5 million or more and a period of performance of at least 120 days to: (1) have a written Code of Business Ethics and Conduct; (2) make the Code available to each employee engaged in performance of the contract; (3) promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law; and (4) establish an ongoing ethics awareness and compliance program, including regular training (small businesses are exempt from this specific requirement).
Although the ethics awareness and compliance program/training requirement does not apply to small businesses, we recommend that all businesses (including small business), at the minimum, conduct annual ethics training for their employees. Doing so goes a long way in demonstrating that the organization takes this subject seriously. In addition, FAR 52.203-13 is a required flow down clause in covered subcontracts (including purchase orders) so we recommend that small business Prime Contractors include this as an item in their Reps & Certs that they obtain from subcontractors.
Significantly, FAR 52.203-13 does not provide any guidance or limits on what should be in the Contractor Code of Business Ethics and Conduct. However, the absence of any such guidance is not necessarily a bad thing - in fact, we would suggest that such absence provides companies with wide latitude to draft a code, promote compliance, establish an ethics awareness program and provide training in any manner the company deems appropriate under the circumstances and with respect to its corporate culture. There are some elements that are common to most Codes, but for the most part the Code, while general in nature (as opposed to containing detailed policies and procedures), should be a reflection of the company's culture, values and morals. It should also be a document the company is proud of and has no problem making public.
Notwithstanding the existence of FAR 52.203-13, we have been shocked to learn there are many contractors that are either are not aware of this requirement and/or do not have a written Code in place. Not having a Code exposes government contractors to liability and puts them at risk of either losing current contracts and/or not being awarded future contracts. For more information about Code of Business Ethics and Conduct and how we can help your business to put one in place, please contact us today at (808) 369.9710 or through our Contact link.
- It helps companies to define their mission, values and priorities
- It serves as a reference and a guide in support of day-to-day decision making
- It encourages discussions related to ethics and how to resolve ethical dilemmas
- It offers an organization an opportunity to create a positive public identity which can and often will lead to an increased level of public confidence and trust
If you are a federal government contractor then not only should you have one, but you are required to have a written Code in place. In December 2007, FAR 52.203-13 [Contractor Code of Business Ethics and Conduct] became effective, requiring contractors with contracts of $5 million or more and a period of performance of at least 120 days to: (1) have a written Code of Business Ethics and Conduct; (2) make the Code available to each employee engaged in performance of the contract; (3) promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law; and (4) establish an ongoing ethics awareness and compliance program, including regular training (small businesses are exempt from this specific requirement).
Although the ethics awareness and compliance program/training requirement does not apply to small businesses, we recommend that all businesses (including small business), at the minimum, conduct annual ethics training for their employees. Doing so goes a long way in demonstrating that the organization takes this subject seriously. In addition, FAR 52.203-13 is a required flow down clause in covered subcontracts (including purchase orders) so we recommend that small business Prime Contractors include this as an item in their Reps & Certs that they obtain from subcontractors.
Significantly, FAR 52.203-13 does not provide any guidance or limits on what should be in the Contractor Code of Business Ethics and Conduct. However, the absence of any such guidance is not necessarily a bad thing - in fact, we would suggest that such absence provides companies with wide latitude to draft a code, promote compliance, establish an ethics awareness program and provide training in any manner the company deems appropriate under the circumstances and with respect to its corporate culture. There are some elements that are common to most Codes, but for the most part the Code, while general in nature (as opposed to containing detailed policies and procedures), should be a reflection of the company's culture, values and morals. It should also be a document the company is proud of and has no problem making public.
Notwithstanding the existence of FAR 52.203-13, we have been shocked to learn there are many contractors that are either are not aware of this requirement and/or do not have a written Code in place. Not having a Code exposes government contractors to liability and puts them at risk of either losing current contracts and/or not being awarded future contracts. For more information about Code of Business Ethics and Conduct and how we can help your business to put one in place, please contact us today at (808) 369.9710 or through our Contact link.
