2023 Code of Conduct Report Exposes Gaps in Ethical Standards Among Top Publicly Traded Companies

3 mins read

27 July 2023

Discover key findings and insights on codes of conduct effectiveness, ‘speak up’ culture, and ethical corporate practices in this comprehensive analysis.

Today, LRN Corporation, a renowned leader in ethics and compliance solutions, unveiled its highly anticipated 2023 Code of Conduct Report, shedding light on the ethical practices of the world’s leading publicly traded companies. The report, which aims to inspire principled performance, reveals a disconcerting finding: nearly two in five of these esteemed companies have considerable work ahead to meet basic expectations for more effective codes of conduct.

The comprehensive analysis, encompassing close to 200 top publicly traded companies in Asia, Europe, and North America, focused primarily on those listed on major indices in Germany, France, the United Kingdom, the United States, Japan, and Singapore—a noteworthy addition to this year’s study.

Among the key highlights from the report is the discovery that only 43% of the assessed codes of conduct for some of the world’s largest publicly traded companies were rated as “effective,” meaning they met the minimum expectations. In contrast, 40% fell below these expectations, receiving a rating of “less effective.” A mere 17% were deemed “more effective,” indicating that these companies’ codes surpassed the minimum requirements.

One glaring issue unveiled in the report is the lack of a robust “speak up” culture in most organizations. Shockingly, less than two-thirds of the evaluated codes included a section on reporting misconduct, and even fewer, only three in five, had strong non-retaliation policies in place for employees who do report such misconduct. Additionally, a mere 17% of the codes explained the procedure for investigating misconduct, further highlighting the need for improvement in transparency and accountability within these organizations.

The report also revealed that companies listed on the U.S. S&P 100 generally outperformed those on other indexes in terms of overall code effectiveness. However, companies on Singapore’s STI 30 index scored the lowest in code effectiveness, indicating room for progress in this region.

Commenting on the significance of a robust code of conduct, Ty Francis MBE, Chief Advisory Officer at LRN, emphasized that such a code should reflect an organization’s culture and values, providing stakeholders with insights into its identity, beliefs, decision-making process, pursuit of goals, and commitment to integrity. He believes that effective codes offer a framework for ethical decision-making, helping guide employees in their actions.

LRN’s CEO, Kevin Michielsen, highlighted that many companies recognize the importance of a code of conduct and understand the basic standards and expectations surrounding them. However, there remains a considerable opportunity for the world’s leading publicly traded companies to enhance their codes and turn them into valuable tools for promoting ethical corporate culture, ultimately driving stronger business performance.

To assess the codes featured in the report, LRN employed its proprietary Code of Conduct Assessment Tool, which evaluated eight key dimensions of effective codes of conduct. These dimensions include Tone from the Top, Purpose and Values Orientation, Applicability and Administration, Speaking Up, Risk Topics, Knowledge Reinforcement, Usability, and Look and Feel. The tool, based on 28 years of experience and research into ethical culture and compliance program effectiveness, adheres to the latest regulatory and best practice guidance.

LRN’s Smart Code solution, informed in part by the findings of the company’s code of conduct analysis, presents a turnkey microsite designed to enhance employee visibility, foster buy-in, increase retention, and provide crucial information when needed. The forthcoming release of Smart Code in September will introduce new insights directly into LRN Catalyst, the company’s popular SaaS platform for ethics and compliance program management.

As the global business landscape evolves, the need for ethical corporate practices becomes more paramount than ever. LRN Corporation’s 2023 Code of Conduct Report serves as a wake-up call for top publicly traded companies to strengthen their commitment to principled performance, thereby fostering an environment of trust, integrity, and success.

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