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Global HR Hot Topic—March 2012: Global Codes of Conduct

March 2012
Global HR Hot Topic
Donald C. Dowling, Jr.

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Challenge: Multinationals cannot operate their far-flung employment operations as "silos" anymore. Business and legal imperatives in the global environment all but require headquarters to impose certain standards or rules on employees worldwide via an up-to-date global code of conduct.


Most major multinationals, particularly those based in the United States, seem to have issued a global conduct code that spells out certain rules that apply across their worldwide operations. Global codes of conduct vary substantially in purpose, content and focus. According to the International Labour Organisation, "Global codes of conduct do not have any authorized definition…[T]here is a great variance in the way these statements are drafted."

Indeed, "code of conduct" is not a term of art, but is merely a label put on a range of global and nongovernmental organization policies. In fact, many global policies labeled "code of conduct" have little to do with employment relationships. We find professional-association antitrust compliance codes of conduct, environmental-protection codes of conduct and advisory codes of conduct on topics like intellectual property and computer programming. These codes—while vital—are only loosely connected to a multinational's global efforts at legal and ethical human resources compliance.

Anchoring our code of conduct discussion here in the international employment context, we begin by distinguishing two very different types of codes: External supplier codes chiefly protect employees working for a multinational's suppliers from so-called "sweatshop" conditions, while internal ethics codes chiefly impose compliance rules on a multinational's own employees across its worldwide workforces. In a sense, these two global codes of conduct are actual opposites: External supplier codes seek to protect employees not on the code issuer's payroll while internal ethics codes seek to restrict (impose rules on) a code issuer's own employees. Some multinational codes of conduct try to combine these two into a single document—but effectively merging them is difficult because both the goals and the intended audiences differ.


Pointer: Drafting and launching a viable code of conduct raises various issues, from type of code to content of code to implementation of code. Treat a global code of conduct launch (or relaunch) as a project and manage it with a sound strategy.


As such, any multinational launching a global "code of conduct" should: (1) first clarify which type of code it needs, then (2) determine what its code of conduct should say and, finally, (3) implement its code legally across global operations. Tracking these three steps, part 1 of this article distinguishes the two types of codes of conduct, part 2 is a checklist of topics to address in an internal ("ethics") code of conduct and part 3 addresses the issues in properly launching a multinational's internal code of conduct.

Part 1: Distinguishing the Two Types of Codes of Conduct

The two very different types of employment-related global codes of conduct are external supplier ("sweatshop") codes of conduct and internal ("ethics") codes of conduct. Before drafting a code of conduct, a multinational should decide which of these two types of codes it needs.

External supplier ("sweatshop") codes of conduct
In the United States, global employers' supplier ("sweatshop") codes of conduct first got traction in the 1990s when American human rights activists who championed codes to promote worker rights in the developing world teamed up with US labor-union activists promoting job security for American workers. Activists and US organized labor continue to urge that multinationals selling third-world-sourced product to rich first-world consumers impose supplier codes of conduct to police the labor conditions of the overseas workers who make the product. (That said, trade unions in third-world countries tend to oppose overzealous American moves to protect low-wage workers in this way. See, e.g., Thomas L. Friedman, "Don't Punish Africa," N.Y. Times, Mar. 7, 2000.)

Supplier codes of conduct are external in that they are not meant to protect a multinational's own employees—rather, they seek to protect employees of multinationals' unaffiliated suppliers. Some external codes' texts ostensibly reach both supplier employees and the multinational's own employees, but internal compliance is rarely a primary concern: Multinationals that go to the trouble to issue supplier codes of conduct rarely consider their own company facilities to be "sweatshops," and they rarely police these codes internally. Monitoring tends to be externally focused on suppliers.

External codes, by their terms, almost always reach all supplier employees worldwide—in developed and developing countries alike. But external codes implicitly focus on supplier employees in the developing world. Labor law violations of course occur everywhere, but domestic "sweatshops" are not seen as a pressing social issue in, say, Canada, Denmark or Japan. While multinationals usually extend their external codes of conduct worldwide, they rarely police these codes aggressively in rich countries.

External supplier codes tend to require that a multinational's suppliers meet minimum basic labor protections set out in the code. Many of the industries in which supplier codes of conduct are common have issued model or sample supplier codes of conduct. Forms, models and examples have, for years, been readily and widely available online and in books. Some codes offer specific lists of core labor protections while others (increasingly) incorporate by reference model industry code templates, local employee-protection laws or International Labour Organisation [ILO] conventions.

  • Incorporating ILO standards: However, incorporating ILO conventions by reference into a global code of conduct may not be a multinational "best practice," because it can lead to unintended consequences. In particular, incorporating the core ILO right to "freedom of association" can spark an argument that the multinational has estopped itself, and its suppliers, from opposing unionization drives and certain trade union initiatives worldwide. "Freedom of association" has very divergent meanings in different sectors around the world.
       

Multinationals usually impose supplier codes as appendices to their supply contracts or sourcing agreements with factories around the world. Some—almost uniformly unsuccessful—lawsuits filed in US courts have sought to enforce global supplier codes for overseas workers on a third-party-beneficiary theory. (A lead example is Doe v. Wal-Mart, 572 F. 3d 677 (9th Cir. 2009).) The lurking, often misunderstood legal issue here is privity-of-employment-contract: Multinationals that buy product from unaffiliated factories are mere customers. In the normal course of business, a customer/buyer has little information about or say over a seller's work conditions. Legally (as opposed to economically), customer buyers tend to be powerless to direct and monitor sellers' day-to-day human resources. Supplier codes of conduct try to change that and give customer buyers some right to monitor supplier work conditions. But making customers responsible for labor conditions at suppliers is an awkward fit, not always workable. Customer/buyers are in a bad position to dictate and monitor labor conditions inside the factories of unaffiliated overseas companies that merely sell them products. Supplier codes rarely (and should never) require customers to monitor. How should a customer get access to a supplier's premises to monitor, let alone dictate, work conditions? Who monitors work conditions upstream, at materials suppliers that supply the factory?

Multinationals that issue robust supplier codes of conduct tend to be those that source low-cost manufactured tangible products from the developing world: Think of athletic shoe companies like Nike and Adidas, retailers like Wal-Mart and Target, clothes makers like Liz Claiborne and Kathy Lee Gifford, and sports equipment and toy makers like Reebok and Mattel. In addition, some oil and mining companies and some global manufacturing conglomerates (General Electric, for example) also impose tough supplier codes. However, supplier codes remain rare in other industries, such as the industrial supply and technology sectors—and these codes are all but unknown at luxury goods companies that source product from developed countries, and at services firms.

Until now, the supplier code of conduct movement has targeted institutional buyers of tangible products, even though most of the social, compliance, public relations and business-case arguments for a supplier code of conduct apply equally to suppliers of services. The next frontier, perhaps, will be imposing supplier codes on outsourced call centers and other low-wage back-office services operations in the developing world, from India to the Philippines and beyond.

Internal ("ethics") codes of conduct
Completely distinct from external supplier codes of conduct but still within the context of international human resources are internal ("ethics") codes of conduct. These are internal human resources policies by which multinationals use human-resources enforcement tools to impose sets of ethical rules and compliance standards on their overseas subsidiaries' and affiliates' workforces, worldwide—reining in employee misbehavior by sanctioning illegal, unethical and inappropriate acts. Again, internal codes of conduct differ from supplier codes not only in their audience, but also because internal codes impose restrictions while external codes grant affirmative rights. The rest of this discussion focuses on these internal ("ethics") codes.

Successfully launching an internal code of conduct requires attention to two disparate issues: code content versus code roll-out:

  • Code content: Distinguish an internal code of conduct from an employee handbook. Employee handbooks tend to address quotidian aspects of human resources that mostly differ from country to country, local topics best relegated to local employee communications—topics like benefits, dress code, smoking policy, office hours, expense reimbursement, holidays/ vacation, overtime and even discounts at local merchants. A well-drafted global internal code of conduct, on the other hand, focuses on minimum baseline compliance standards that reach across borders. A robust internal code also propagates global culture and fosters compliance with the actual ethical standards of the issuing organization. Multinationals based in the United States tend to be particularly concerned that their internal codes address global rules on, for example, antidiscrimination/harassment, Sarbanes-Oxley/Dodd-Frank, insider trading, bribery, US trade sanctions, prevention of financing terrorism and adherence to data privacy, antitrust and intellectual property standards (and that the codes meet US federal sentencing guideline standards). Part 2 offers a checklist of topics that tend to comprise internal codes of conduct.
  • Code roll-out: Completely separate from code of conduct content is the distinct issue of the process for launching an internal code. Because an international internal code of conduct is essentially a set of border-crossing human resources policies subjecting violators to discipline, every internal code needs to get implemented consistent with local-law restrictions against unilaterally imposing new, restrictive terms/conditions of employment. In short, launching or re-launching a global internal code of conduct is a two-stage process. Stage one, the easy stage, is drafting the code. Stage two, the complex stage, is launching the code in a way that guarantees it actually takes effect in all overseas jurisdictions. In rolling out any internal global code, be sure to address six key issues: (1) repeal of, and alignment with, existing policies and work rules, (2) multiple versions, (3) dual employer, (4) consultation, (5) translation and (6) distribution/acknowledgement. Part 3 addresses those six issues.
       

Part 2: Checklist of Topics in an Internal ("Ethics") Code of Conduct

Drafting an internal ("ethics") global code of conduct that imposes ethics rules and compliance standards on employees across a multinational's worldwide subsidiaries raises the question of which topics to cover—and which to omit. A Google search for "code of conduct" yields dozens of sample codes, and the easy temptation is simply to copy some other multinational's code, or at least to use it as a first draft. The problem with that approach is that each multinational's unique business operations spawn special needs. A code of conduct should include only those topics the issuing organization has an actual business case to regulate. Different organizations, of course, have very different needs. Needs of government contractors differ from needs of publicly traded services organizations which differ from needs of nonprofits which differ from needs of organizations operating in the world's trouble spots. Plus, many provisions in a well-drafted internal code of conduct inevitably reflect the issuer's specific business sector—an oil company's code of conduct looks quite different from a bank's. And internal codes vary depending on the issuer's headquarters country.

In short, some company's internal code of conduct might make a useful and interesting example, but a best practice for drafting an internal ethics code is to take an organic approach. Using a topic-by-topic checklist, craft a bespoke code that meets the code issuer's particular business needs without including anything extraneous. In doing that, consider whether there is a business case to include a provision on each of these common internal ethics code topics.

  • Introduction stating core values: Internal codes of conduct usually open with a statement, often from the chief executive officer, explaining the organization's core values and the reasons it imposes the global code.
  • Statement of purpose and compliance philosophy: Any multinational that imposes a global code of conduct does so largely in an effort to comply with applicable laws. The vast majority of "applicable" laws are local laws imposed by the local host countries where the multinational operates. In addition, a multinational's headquarters country may impose a handful of legal mandates that extend internationally. Indeed, overseas compliance with the US set of "extraterritorial" laws (FCPA, SOX, Dodd-Frank, securities laws, international trade sanctions laws, discrimination laws) drives many US-based multinationals to implement codes of conduct in the first place. The codedrafting issue here is that multinationals too often neglect to explain to overseas employees how certain headquarterscountry laws actually do reach abroad. Without a clear explanation, a US multinational's overseas workers will doubt they really have a legal obligation to follow American laws (just as auto workers at Toyota's plant in Georgetown, Kentucky and secretaries at Toyota regional headquarters in California do not likely consider themselves subject to Japanese law). But be careful in wording any compliance mandate regarding extraterritorial US laws to account for doctrines in some Eastern European and other countries that prohibit imposing foreign laws locally.
  • Discrimination/equal employment opportunity: US multinationals sometimes transplant robust American antidiscrimination (often labeled "equal employment opportunity") provisions from US handbooks straight into a global code of conduct. Prohibiting illegal discrimination across worldwide operations is of course a vital and legally mandated goal. But US multinationals need to deconstruct their US-drafted discrimination rules and then rebuild them to account for the global context. A key issue here is the code's listing of protected groups: While US discrimination laws focus on protected groups, some other countries, like Belgium, somehow impose an obligation of total equality, prohibiting employers from singling out any group. Further, certain groups protected in the United States are not protected abroad, while many countries outside the United States impose their own unique protected categories. Age discrimination clauses in codes of conduct raise big problems where multinationals impose mandatory retirement in their overseas operations, from India to Germany and beyond. A catch-all clause in a list of protected groups ("…or any other group protected by applicable law") may be ineffective under the doctrine of interpretation by which included factors take precedence over omitted ones. One viable (but less than ideal) strategy is not to list protected groups at all, but rather to invoke "applicable law." A separate issue is accounting for the narrowness of the "extraterritorial effect" issue: US discrimination laws do reach abroad, but only to protect a tiny sub-set of most US multinationals' overseas workforces—foreign-employed US citizens. Too many global discrimination provisions seem to extend US discrimination laws to everyone abroad, letting the "tail wag the dog." See our December 2010 Global HR Hot Topic.
  • Harassment: Code of conduct harassment provisions lifted from US handbooks fall short in jurisdictions (such as Brazil and some states in Europe) that impose a broad concept of so-called "moral harassment," "bullying," "mobbing," or "psycho-social harassment"—what used to be known stateside as nonactionable "equal-opportunity harassment" and what US states are only now considering subject to regulation as"abusive work environment." Too many US-drafted international harassment provisions persist in defining "harassment" as unwelcome behavior based on a victim's membership in a protected class. That definition is far too narrow in the growing number of jurisdictions that legislatively prohibit abusive workplace behavior unlinked to protected-group status. Global codes of conduct that define harassment in terms of protected groups, therefore, fail to address lots of illegal harassment. It makes no sense to prohibit by policy only a subset of what is prohibited by law. To be effective, a harassment prohibition in a given jurisdiction must be broad enough to include all locally actionable harassment. A separate problem is that US-drafted harassment provisions tend to impose overly aggressive co-worker dating restrictions. In many countries, these provisions, even if they merely require reporting a relationship to management, are offensive and virtually impossible to enforce. See our February 2011 Global HR Hot Topic.
  • Diversity: US-based multinationals sometimes include a diversity provision in their global codes of conduct, often lifted directly from the organization's domestic US handbook or diversity communications. But any robust US-style diversity program will need radical reinvention outside the United States . Avoid a diversity provision in a globally-applicable code of conduct unless the outside-US diversity program, goals, and metrics have been painstakingly tailored for the international environment. See our April 2011 Global HR Hot Topic.
  • Conflicts of interest: Many global codes contain provisions on employee conflicts of interest, such as prohibitions against contracting with relatives and against employing former government officials. Often these provisions also address moonlighting (employee holding a side job or position on a board of directors at competitor or supplier). Make any globally applicable conflicts provision flexible enough for regions such as the Arab world and Latin America, where family relationships play a vital part in everyday business.
  • Bribery: Local laws in probably every country prohibit bribing local government officials. In addition, extraterritorial laws in Organisation for Economic Cooperation and Development (OECD) countries prohibit multinationals from bribing or making improper payments to foreign government officials. Multinationals—particularly those that sell to or need licenses from foreign governments—need to communicate, train on and enforce tough bribery prohibitions. A code of conduct bribery/improper payments provision will in many cases be among the most vital. The US law on this point, the Foreign Corrupt Practices Act, is particularly robust; the FCPA is an aggressively enforced statute that prohibits both bribes and deceptive accounting notations of certain payments. Also the UK Bribery Act is in some respects tougher than the US FCPA and arguably reaches even bribery outside the UK committed by US entities with UK offices.
  • Business gifts to nongovernment contacts: While US FCPA law prohibits overseas bribery of, and improper payments to, government officials, a growing trend is for employers (and even some countries' laws) to prohibit so-called "bribes" to nongovernment actors, such as payments to get business from nongovernmental customers, or accepting gifts from nongovernmental suppliers. Global codes of conduct increasingly address this. Think through any such provision: Payment to procure business from a private company is in some important respects very different from a bribe or improper payment to a government official. Too many codes of conduct improperly conflate these concepts.
  • Money laundering/financing terrorism: Employers in the financial-services sector often impose code provisions that address money laundering and so-called "know your customer/ client" rules. Codes also address compliance with US Executive Orders and regulations meant to control financing of terrorism, such as so-called "list-scrubbing" obligations meant to prohibit payments to and from specific suspected terrorists—an issue particularly acute for nonprofits.
  • Embargo/anti-boycott and foreign trade: US trade laws with extraterritorial effect embargo (prohibit doing business in) certain black-listed countries and prohibit complying with the Arab boycott of Israel. US-based multinationals often impose code of conduct provisions that address compliance with these US trade laws. But some countries (particularly in Eastern Europe) prohibit companies from requiring locals to follow foreign laws. As such, global code of conduct provisions that strictly require following US trade restrictions can raise legal issues in certain foreign jurisdictions. A code of conduct trade provision should account for this.
  • Antitrust/competition and non-collusion with competitors/ trade practices: Antitrust laws differ from country to country. Global codes of conduct often instruct employees not to commit basic violations such as collusion and price fixing. Codes often tell employees whom to ask for guidance on these matters.
  • Insider trading: Publicly traded multinationals need global code of conduct provisions that ban insider trading in the company's own stock. Organizations such as professional services firms whose employees' jobs afford them access to insider information about publicly traded clients need to impose tough client insider trading restrictions.
  • Audit/accounting fraud/substantive SOX and Dodd-Frank compliance: Sarbanes-Oxley-regulated multinationals are subject to audit/accounting rules that reach operations worldwide. Codes of conduct often impose SOX and Dodd-Frank accounting and compliance standards worldwide, with the code's text explaining why compliance is vital. Indeed, as a best practice, even certain non-SOX-regulated multinationals include audit/accounting provisions in their codes. Again, though, some jurisdictions, such as in Eastern Europe, prohibit requiring locals to follow foreign laws; code of conduct phrasing needs to account for this.
  • US federal sentencing guidelines: Violations of some US laws with extraterritorial effect can lead to a US criminal conviction. Multinationals draft global code of conduct provisions cognizant of provisions in US federal sentencing guidelines that offer affirmative credit for certain human resources policies meant to curtail illegal conduct. Of course, codes tend not to discuss sentencing guidelines explicitly; the drafting issue is imposing human resources rules and noncompliance sanctions robust enough to earn sentencing credit.
  • Data privacy/processing: Data "protection" laws in the European Union, Argentina, Australia, Canada, Hong Kong, Israel, Japan, Mexico, Peru, Uruguay and elsewhere impose tough mandates on multinationals that run global human resources information systems. Multinationals' compliance initiatives should impose guidelines or rules on employees who "process" personal data, be it employee, supplier, or customer data. Some codes of conduct set out these rules, while other organizations handle data law compliance outside the code of conduct. See our May 2007 Global HR Hot Topic.
  • Monitoring communications and reserving right to search: A best practice for an employee handbook issued domestically within the US is to clarify that employees should not form expectations of privacy in employer-provided communications systems, and expressly reserving the employer's right to monitor employee emails, telephone calls and the like—and sometimes also reserving a right to search offices, desks, lockers and even lunch boxes. American employers drafting global codes of conduct often try to extend an American-style right-to-monitor/ search provision globally. The problem is that data laws outside the United States differ radically. The American approach of using an employee communication to defeat an "expectation of privacy" is simply not enough, in many countries, to authorize employer searches. But there is no "magic bullet" here. A global employee-monitoring provision in a code of conduct needs careful structuring to account for the employer's specific needs and the restrictions in the specific jurisdictions in play. Regardless of what monitoring rights a global code of conduct purports to reserve, in many jurisdictions employers will need legal advice before invoking any purportedly-reserved monitoring right. That is, overseas, a well-drafted reservation-of-monitoring-rights clause merely begins the legal compliance analysis. Determining when an employer can search or monitor does not turn solely or even chiefly on the wording of the reservation-of-rights clause.
  • Environmental protection: Some global codes of conduct contain provisions that require employees to comply with local environmental laws. Some codes require complying with the more protective of local law, US law or global standards.
  • Intellectual property: Some global codes contain intellectual property provisions that instruct employees to respect others' copyrights, such as in photocopying or emailing copyrighted materials, or copying software.
  • Restrictive covenants and trade secrets: Global codes of conduct often purport to impose on worldwide workforces restrictive covenant-like prohibitions—confidentiality, posttermination noncompete and nonsolicitation of employees/ customers. But a code of conduct is an impotent medium to impose these. Restrictive covenant-type rules often need to appear in an employee's signed contract. Enforceability standards differ widely by country, with some countries requiring extra consideration paid after separation, which makes a one-size-fits-all global approach infeasible. As such, restrictive covenant topics are best left out of a code of conduct entirely, other than perhaps a short statement of the employer's commitment to enforce any employee-signed covenants, and other than perhaps a confidentiality provision that makes a general statement on the importance of complying with applicable trade secrets laws.
  • Safety in the workplace and pandemic response: Most every country has workplace safety laws broadly analogous to US OSHA. While no global code of conduct can replicate all jurisdictions' safety rules, many codes contain provisions requiring compliance with applicable safety rules and imposing accident reporting procedures. Some multinationals impose more complex global safety frameworks that include, for example, pandemic or disaster response protocols or "cardinal safety rules"—but usually multinationals issue these separate from the code of conduct. These require special attention, as global safety protocols raise many issues. See our June 2011 Global HR Hot Topic.
  • Drug-free workplace/substance abuse: US domestic employers seem inclined to take a "zero-tolerance" approach to illegal drugs and alcohol in the workplace, often refusing to hire employees whose positive drug test results offer no evidence of work-time impairment, and even firing good performers whose drug test results demonstrate off-hours use of illegal drugs and those caught drinking on the job, even though not inebriated. Outside the United States, though, on-job alcohol use is less of an evil, and workplace drug testing can, as a practical matter, be virtually impossible. Further, some drugs that are illegal in the United States are legal elsewhere and, as such, are inappropriate for employers to prohibit using off-hours. A zero-tolerance cannabis policy, for example, makes little sense in the Netherlands where marijuana is legal and where "coffeehouses" sell it openly. And zero-tolerance workplace alcohol policies can seem impractical and puritanical in countries like Germany and Mexico where company cafeterias and vending machines serve beer and wine, and where alcohol is ubiquitous at business lunches and company parties. Rethink any US-drafted drug/alcohol policy for the global context. If a global drug/alcohol provision does make sense in a code of conduct, do a "reality check" by running a draft of the proposed provision by local human resources overseas.
  • Media contact: Multinationals are constantly the subject of stories in the business press. Some global codes of conduct contain provisions instructing affiliates' employees worldwide on press relations and fielding media inquiries.
  • Compliance with company rules and cooperation in investigation: Some codes of conduct have provisions requiring employees to follow company rules set out elsewhere, such as in local human resources polices and handbooks, and such as reimbursement procedures, clocking-in rules, safety protocols and the like. Some codes also affirmatively require employees to cooperate in employer internal investigations. While mere cooperation clauses seem unobjectionable to an American reader, in many countries they may be unenforceable—local laws may not support discipline imposed for non-cooperation even where the code of conduct expressly requires "cooperating." See our October, November, and December 2009 Global HR Hot Topics.
  • Sanctions clauses: US-drafted codes of conduct often contain clauses exposing employees who violate any provision in the code to discipline up to discharge. Outside the US, however, simply declaring that certain conduct is subject to a sanction or discharge does not automatically make it so. Local laws on good-cause discipline may prohibit employer sanctions even for blatant violations of rules clearly set out in a code. For example, a mandatory reporting clause in a code of conduct may purport to force employee witnesses to denounce co-worker scofflaws— but local law in many jurisdictions will not support discipline for failing to blow the whistle even when failure to whistleblow violates an express written rule. Also, in jurisdictions from the UK to France and beyond, mandated disciplinary procedures often apply; these may trump a discipline clause in a code of conduct. In drafting a global code of conduct sanctions clause, factor in limits on disciplinary restrictions outside the US employment-at-will environment.
  • Complaint system/whistleblowing hotlines: .Sarbanes- Oxley requires imposing "anonymous" whistleblower hotline "procedures" and the Dodd-Frank law implicitly encourages company hotlines to the extent that it lures whistleblowers over to the US SEC by offering a bounty. These days even many non-SOX-regulated multinationals impose global reporting procedures, and many multinationals outsource hotlines to outside providers. But employee hotlines are heavily regulated in the European Union and, increasingly, elsewhere. Any global code of conduct provision that outlines global reporting procedures needs careful strategy. Treat the launch of an international whistleblower hotline as a project separate from the launch of a global code of conduct. See our January 2011 Global HR Hot Topic.
  • Acknowledgment: Many global codes of conduct end with an acknowledgement page for employees to sign, acknowledging their commitment to follow the code. But signed employee acknowledgements outside the US raise a number of logistical problems—and can actually backfire, offering ammunition to non-signers who violate the code. Consider any acknowledgement procedure carefully. See our February 2012 Global HR Hot Topic.
       

A well-drafted internal ("ethics") code of conduct contains a tailored provision on each topic the company has a good business case to align across borders and omits topics the company need not address. That is why copying another company's code is never a good idea—because the other company will have had its own business drivers, its code may omit provisions necessary this time and may contain provisions that, this time, are unnecessary. Good global codes steer clear of provisions on everyday human resources topics that are more appropriately relegated to the local level, such as provisions more appropriate for a local HR policy or handbook—inherently local provisions on topics such as testing/monitoring, breaks, vacation, holidays, overtime, payroll, expense reimbursement, work hours, smoke-free workplace, performance evaluations, employee benefits, severance pay/procedure and many others.

Part 3: How to Implement a Global Internal Code of Conduct

When a multinational's headquarters launches a global internal ("ethics") code of conduct, often the only question that gets asked is: "What is our code going to say?" But that question—addressed above in part 2—merely gets the code-implementation process started. Once a code of conduct gets drafted, a multinational's follow-up question immediately needs to become: "How are we going to impose this global code on our employees overseas?" That is, in any global code of conduct project, "phase one" should be drafting the code and "phase two" should be implementing the code properly. Too many of these projects gloss over "phase two," which is actually the more complex of the two phases.

  • "Backstopping": For that matter, many global codes of conduct purportedly in place today were implemented without complying with the vital logistical issues for implementing new human resources policies outside the US. As such, many existing codes are subject to attack, and could cause liabilities. A best practice for a company that failed properly to implement its current code of conduct correctly is to go back now and correct oversights in implementation.
       

There are six key logistical steps to take into account when implementing an internal code of conduct abroad. These six steps are discussed in detail in our Global HR Hot Topic for February 2012:

  1. Repeal or align existing policies and work rules
  2. Multiple versions
  3. Dual employer
  4. Consultation
  5. Translation
  6. Distribution/acknowledgement
       

Conclusion

Codes of conduct have become virtually ubiquitous among multinational employers. Any multinational launching or revamping a global employment-context code of conduct should first distinguish whether it needs an external supplier ("sweatshop") code of conduct or a very different internal ("ethics") code. When drafting an internal ("ethics") code, avoid copying a form from some other employer. Instead, tailor the code to the issuer's own cross-border business needs, using a checklist of possible topics and omitting inherently local matters better relegated to local employee communications. Drafting the code is merely "phase one" of a global code of conduct launch project. "Phase two," the more complex phase, is implementing the code legally in each jurisdiction. As soon as a code is drafted, therefore, the focus needs to turn to a legally compliant global launch. Consider six issues to ensure the code becomes enforceable in all applicable countries.


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