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What Codes of Conduct Should Really Achieve

Matt Kelly | June 13, 2011

I've refrained from writing until now about Dominique Strauss-Kahn, the sexual assault allegations against him, and the sorry state of ethical culture at the International Monetary Fund because, frankly, so much of this tale tells itself. You get tired telling the same story of failure so often.

Let's dispense with the worst part of the story immediately. First is the misconduct of Strauss-Kahn himself, and that chapter—if the allegations against him are true— is straightforward: A man forced himself on a woman. That he was rich and powerful and she poor and vulnerable makes the story more sad, but not more reprehensible. We should all be equally outraged at his boorish behavior even if he assaulted the Queen of Sheba, not some immigrant chambermaid at a New York hotel.

Yet separate from that personal failure is the IMF's corporate failure—and that is the part of the story that compliance officers should contemplate at length. If you've read any news coverage of Straus-Kahn and the IMF, you've already seen the startling fact that the IMF actually had two codes of conduct: one for senior executives, another for everyone else. The sheer stupidity of that should be self-evident to anyone who cares about corporate governance and conduct. It strikes anyone, even the rest of the world that doesn't care about corporate compliance on a daily basis, as a double-standard that encourages all employees to ignore both codes.

But there is a subtler question worth pondering for we compliance professionals: why. Why would a separate code of conduct for senior executives be so reviled by everyone else? I've thought about that a lot, since the answer illuminates what should be in your single, enterprise-wide code of conduct quite a bit.

I believe that most rank-and-file employees don't dislike wealthy and powerful senior executives simply because they are wealthy and powerful, while the employee is not. Rather, they accept that this is how our economic system functions: a person works hard and smart, and advances. Sure, luck has plenty to do with any single individual's success, as do resources like money to buy a quality education. But generally speaking, we have a system where people who play fairly have a respectable chance to climb up the social and economic ladder to power. Employees don't begrudge people who do that well, since they hope that will have a fair shot to climb that ladder as well.

The problem emerges when someone climbs that ladder to the top, screws up, and then doesn't fall back down.

That's what the dual codes of conduct at the IMF achieve, after all. The exclusive code for the top 24 executives doesn't so much spell out what senior leaders can do, as much as it implies what they can do and not be punished for it. After all, anyone can do anything at a company, really—but a code of conduct dictates the consequences for doing something you shouldn't, like kick a contract to your brother-in-law. Dual codes mean that one set of people has a different, smaller set of consequences. And that lack of consequence, that failure to apply justice equally, violates employees' sensibility that the social ladder goes both up and down.

Perceive the problem that way, and suddenly a dual code of conduct is only one example of the issue. It's the same reason people complain constantly about fired CEOs walking away with huge severance packages, or about the dearth of Wall Street executives sitting in jail because of the financial crisis. People want a code of conduct to deliver justice, and that means imposing consequences equally on all employees.

That transcends all the details of certifications, liability waivers, employment contracts, and HR policy manuals. It's about results. You can impose all manner of those documents, and they won't account for squat unless employees believe senior executives will suffer consequences for misconduct just like they would.

I'm glad to see that the IMF did finally abolish its dual code in favor of one, enterprise-wide code of conduct for all—a long overdue step in the right direction. Can you say for sure that your company, and your code of conduct, is ahead of that problem?