Author's Name: Mark Schultz
Date: Tue 26 Apr 2016

The code of conduct – a foundation of good governance

Organisations striving for best practice in board leadership, effectiveness and governance will have in place a Code of Conduct that all board members and staff understand and formally commit to through the selection, induction and annual review processes. This month’s article will provide a summary of the key components of a Code of Conduct and the key benefits derived from having such a document in the governance system of your organisation.

Background

There is an expectation that board members will act in good faith, fair and impartially, with honesty and integrity and always in the best interests of their organisation and stakeholders.

However what is expected and then delivered is not always in alignment and whilst the existence of a Code of Conduct will not necessarily deliver good governance, it is a powerful tool for setting expectations and then providing a mechanism to manage any digression from the benchmark. Such a document and the process by which it is developed and maintained is also a core component of the organisation’s culture.

Development of the Code

The best outcome will be achieved if the Code of Conduct is developed collectively by the board and senior management team. This process should achieve buy-in, commitment and a referral base if future actions do not meet expectations established in the Code. When new board members and management are recruited, the prospective should receive a copy of the Code during the selection process and its content and role discussed at this time. This process is about re-enforcing the desired culture and aligning personal behaviour with organisation expectations.

Contents of the Code

Whilst the contents of a Code of Conduct are generally unique to each organisation, there are some universal behaviours that should be included in each Code and these include:

Act with honesty and integrity: be open and transparent in dealings with all stakeholders, use power responsibly and avoid any conflict of interest;

Act in good faith and always in the best interests of the organisation: be accountable individually and collectively, accept responsibility for your decisions, always be mindful of the reputation of the organisation and act accordingly;

Act fairly and impartially: avoid bias, discrimination, self interest; act in a respectful, professional and courteous manner; disagree but do not be disagreeable;

Use information appropriately: apply the information received as a director only in the manner for which it was intended;

Use your position appropriately: do not seek to gain from your position nor gain benefits for your family, friends or colleagues; apply independence in judgement and decision making;

Be prepared: to contribute, to analyse and make decisions; allocate appropriate time and resources to do the job;

Comply with established legislation, regulations and the constitution: act within both the letter and spirit of the compliance requirements;

Demonstrate both stewardship and leadership: apply the principles of good governance at all times.

This list is not intended to be exhaustive and it should be developed in words and statements that are reflective of your organisation’s culture.

Benefits of a Code of Conduct

The benefits of a code of conduct include:

  • Creating an agreed way of behaving and operating for the entire organisation;
  • Improving organisational performance by aligning expected behaviours with business and strategic objectives;
  • Enhancing the organisations culture – the board, management and staff know what is expected of them in terms of behaviour;
  • Appropriate communication across the organisation will provide a framework and benchmark to refer to when confronted with difficult discussions and decisions around inappropriate behaviour; and
  • Establishing and promoting organisational values – fundamental to good leadership and management.

In summary, good governance is as more about the behaviour of individuals than the establishment of systems and processes. Whilst the latter is important and should not be devalued or avoided, the former and how this is managed and delivered, will ultimately determine the governance standard that is achieved by your organisation. A Code of Conduct developed and delivered by the Board will make a valuable contribution to your ongoing quest for governance excellence.


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