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ACCA Applied Knowledge · Business and Technology · Corporate codes of ethics

A listed company's board wishes to introduce a code of ethics. It wants consistent behaviour across many countries and also wants staff to act responsibly in situations the code cannot foresee. Which approach is most appropriate?

The most appropriate approach is a principles-based code supported by specific rules for high-risk areas such as bribery and gifts. Principles let staff use judgement in unforeseen situations, while specific rules give consistency and clarity where the risk is greatest. Purely one approach would leave gaps or rigidity.

  1. AA purely rules-based code covering every possible situation
  2. BA code with no written content, relying on informal culture alone
  3. CA principles-based code supported by specific rules for high-risk areas such as bribery and giftsCorrect
  4. DA principles-based code with no guidance, training or monitoring

Explanation

Combining core principles with specific rules for high-risk areas gives consistency where needed and flexibility for unforeseen cases. A purely rules-based code cannot cover every situation, and a code without guidance or monitoring is unlikely to influence behaviour.

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