Journal of Business Ethics (2008) 78:601–609
DOI 10.1007/s10551-007-9370-z
Corporate Ethical Codes: Effective
Instruments For Influencing Behavior
ABSTRACT. This paper reviews studies of corporate
ethical codes published since 2000 and concludes that codes
be can effective instruments for shaping ethical behavior
and guiding employee decision-making. Culture and
effective communication are key components to a codeÕs
success. If codes are embedded in the culture and embraced
by the leaders, they are likely to be successful. Communi-
cating the codeÕs precepts in an effective way is crucial to its
success. Discussion between employees and management is
a key component of successful ethical codes.
KEY WORDS: communication, corporate ethics,
culture, ethical codes, honesty and ethics standards
Introduction
Following Watergate and President Richard NixonÕs
resignation in 1974, corporate scandals and acts of
egregious behavior proliferated in the United States
and continued for several decades. The ethical
standards of corporations were not held in high re-
Betsy Stevens as associate professor of Business Administration
at Elon University. Her academic interests are business and
management communication, business ethics, international
communication, and hospitality management. An active re-
searcher, she has published more than 20 articles in refereed
journals such as The Journal of Business Communica-
tion, Business Communication Quarterly, The Journal
of Business and Technical Communication, Journal of
Business Ethics, Bquest and the Journal of Employ-
ment Counseling. She has an M.A. from the University of
Cincinnati and a Ph.D. from Wayne State University. As a
Fulbright Scholar, she taught university classes in Tomsk,
Russia and has also been on the faculty of the Australian
International Hotel School in Canberra, Australia
Ó Springer 2007
Betsy Stevens
gard by the American public (Gallup, 1977; Gallup,
1986). Feeling a need to improve their images and
facing increasing accusations of corruption, busi-
nesses turned to ethical codes to publicize their
virtues and create a more positive impression with
stakeholders (Berenbeim, 1987; Brooks, 1989;
Cressey and Moore, 1983). Some critics argued the
codes were simply public relations tools; others be-
lieved they could be effective in encouraging more
ethical behavior in organizations. The debate over
ethical code effectiveness continues today.
American ethical codes were first called ‘‘creedsÕ
or ‘‘credos’’ and those in the 1980Õs were considered
‘‘legalistic’’ and ‘‘more likely to talk about ethics or
the reputation of the company’’ (p. 308); they
showed concern over issues like affirmative action
(Benson, 1989). More recently they were defined as
written documents which attempt to state the major
philosophical principles and articulate the values
embraced by the organization (Stevens, 1996).
Codes articulate ethical parameters of the organiza-
tion – what is acceptable and what is not. They have
been defined multiple times in JBE journal articles,
sometimes redundantly without building on earlier
works and other times adding new dimensions to the
understanding of a code. Kaptein and Wempe
describe them as policy documents defining
responsibilities of the organization to stakeholders
and articulating the conduct expected of employees
(2002). Nijhof et al. note codes contain open
guidelines describing desirable behaviors and closed
guidelines prohibiting certain behaviors (2003). As
instruments to enhance social responsibility, codes
clarify the norms and values the organization seeks to
uphold (Kaptein, 2004). In contrast, mission state-
ments articulate the objectives of a company and
declare what goals the organization intends to
accomplish (Stevens, 1994). Ethical codes differ from
602 Betsy Stevens
mission statements by articulating the value system
and answering the question – within what ethical
standards and values should the mission be pursued?
This paper argues the premise that sufficient new
evidence exists to show that corporate codes can
successfully moderate ethical behavior. Although
research on ethical code effectiveness has surren-
dered mixed results, this study examines the situa-
tions where ethical codes have influenced the
behavior of employees in organizations and those
situations where they have not. A body of research
certainly exists pointing to code ineffectiveness and
failure to effect behavior; however, a number of
recent studies show codes can be effective when
certain parameters are in place. This paper examines
two recent sets of studies and analyzes why some
codes have failed when others succeeded.
Ethical code prevalence and content
Corporations increasingly adopted codes throughout
the 1980Õs and 1990Õs and most American companies
now have an ethical code (Chonko et al., 2003;
Trevino et al., 1999). Worldwide, fifty eight percent
of the 100 largest companies use ethical codes
(Kaptein, 2004). Also, European companies have
increasingly adopted codes of conduct to regulate
labor relations (Sobczak, 2003). Studies of ethical
code content conducted in the 1980Õs concluded
that codes reflected concern over unethical behavior
that might decrease profits and showed a weak
commitment to social responsibility (Cressey and
Moore, 1983). Conflict of interest was an important
theme (White and Montgomery, 1980) along with
compliance with federal laws (Sanderson and Varner,
1984). Mathews (1987) performed an extensive
content analysis, which showed that firms primarily
emphasized illegal activities and employee miscon-
duct in codes and placed little emphasis on the
environment, quality, or product safety. Pitt and
Groskaufmanis found conflict of interest, gifts, and
misuse of confidential information were frequently
mentioned topics (1990). StevensÕ study indicated
that the content in ethical codes was primarily
designed to defend organizations against illegal
behavior and was found lacking in visionary per-
spectives and in providing ethical guidance (1996).
Snell and Herndon agreed, concluding codes were
oriented toward corporate self-defense (2000).
In a study of codes from the US, Germany,
France and England, Langlois and Schelgelmilch
concluded that American codes discussed govern-
ment and customer relations more than European
and British codes (1990). Kaptein found that most
codes described company responsibilities for product
quality and services, obeying laws and protecting the
environment (2004). He also found content differ-
ences in European, American, and Asian codes.
European codes focused almost 50% more on the
environment than American codes. Honesty was a
major theme in American codes (64%), but it was
mentioned less frequently in European codes (45%)
and in Asian codes (38%). Fairness was a less pre-
valent topic in American codes than in European
and Asian codes (Kaptein, 2004). Gaumnitz and Lere
proposed a classification scheme for ethical code
content, but their scheme appears to be basic content
analysis that does not incorporate much of existing
ethical code research (2004).
Evidence of code ineffectiveness
Code scholars have reported a number of unsuc-
cessful outcomes in both positively impacting
employee behavior and deterring unscrupulous
actions. MathewsÕ classic study of 202 Fortune 500
codes yielded little evidence linking codes with
behavior and concluded that codes did not provide
self-regulation or a culture of ethical behavior
(1987). Cleek and Leonard later concurred that
codes of ethics did not determine or influence an
employeeÕs ethical behavior (1998). Additional
empirical evidence has shown either mixed results
(Loe et al., 2000; Marshall et al., 1998) or a lack of
effectiveness. Weeks and Nantel (1992) found
codes were ineffective except when well commu-
nicated in organizations. Loe et al. examined 17
empirical codes studies attempting to relate ethical
codes to ethical behavior. The results were mixed,
but some showed positive relationships. Schwartz
argued that codes are ineffective systems of control
(2000), then examined the results from 19 studies
concluding they worked in some situations and
failed in others (2002).
 Corporate Ethical Codes
TABLE 1
Evidence of code ineffectiveness
Study Year N Country
Marnburg 2000 449 Norway
McKendall et al. 2002 108 U.S.A.
Healey and Iles 2002 125 U.K.
Snell and Herndon 2004 171 Hong Kong
Three studies of code use outside the U.S. also
concluded codes were ineffective. MarnburgÕs study
of Norwegian business professionals indicated that
ethical codes had no effect on attitudes toward ethics
(2000). Snell and Herndon (2000) observed that
Hong Kong employees did not perceive ethical
codes impacted their organizations and Healy and
Iles reported that codes did not promote greater
ethical considerations in London-based companies
(2002).
Table 1 shows a summary of recent code studies
which yielded negative results. N indicates the
number of respondents in each country and country
refers to the country where the study was performed
and hence the respondentsÕ home country.
Why were these codes ineffective? Several factors
may have been at work in these situations where
codes did not influence employee behavior. Marn-
burg measured ethical attitudes of engineers and
economists in a group of Norwegian businesses and
found the existence of ethical codes did not affect
their attitudes. He postulated that the mere existence
of a code was not influential, but processes and
systems that the code symbolized needed to be in
place for the codes to be effective. The respondents
in all these studies saw the code as external and were
not influenced by it.
McKendall, DeMarr, and Jones-Rikkers exam-
ined data from 108 large US corporations to deter-
mine whether an ethical compliance program
comprising training, communication and ethical
codes would result in fewer OSHA violations. They
found no positive effects, concluding that ethics
programs might simply be decorative artifacts to
deflect criticism of corporate ethics. But the opera-
tive words here are regulation and control. It is not
surprising that codes in these compliance programs
failed to achieve their goals. Forced code compliance
in organizations is ineffective. Codes imposed by
603
senior management typically do not work because
employees have not accepted them as part of their
culture.
Similarly Snell and Herndon observed this same
phenomena (2004). They saw that willingness to
employ best practices for implementing ethical codes
was weak in Chinese organizations because of col-
lectivist features in the culture. Pseudo-support was
given, but companies did not embrace the ethical
code even when it was in their best interest to do so.
The authors hypothesized that culture and power
distance play significant roles since subordinates are
expected to publicly support their superiors even if
they disagree. Codes imposed by senior management
on Chinese workers were not accepted by the
workers. Their study illustrates the interplay
between culture and ethical codes, whether in an
Asian or U.S.A. company. Codes imposed by
external agents are typically ineffective. In sum, good
ethics cannot be ordered by management. Codes
attempting to create legal controls are generally
ineffective.
Further, Healy and Iles study of 125 London-
based firms found codes issued by IT firms designed
to govern information and technology were not
effective. The codes did not influence the behavior
of IT end users in organizations. Again, governance
and compliance seem to be the operative failure
points. Top down attempts at ethical control typi-
cally fail. Healy and Iles stated ‘‘Codes of ethics are a
means by which organizations seek to exercise
power, control and ownership’’(p.123). But this is
exactly the wrong motive. Codes are not meant to
be instruments of control. When used as such, they
will fail, which explains why the group of studies
shown in Table 1 reported unsuccessful results. In all
of these cases, codes failed to regulate ethical
behavior showing that the mere existence of a cor-
porate code of ethics does not prevent acts of
egregious behavior.
Schwartz argued against using codes as compli-
ance control systems (2000) and Trevino and Wea-
ver also observed that codes do not work when used
as control systems or for legal compliance because
this places them outside the climate and culture
boundaries where employees feel ownership (2003,
p. 194). Culture and cooperation – not legalistic
compliance – create conditions where ethical codes
are effective.
604 Betsy Stevens
More evidence of code ineffectivess
The Enron and WorldCom scandals shook the US
market resulting in the Sarbanes-Oxley Act to reg-
ulate accounting practices and force executive
responsibility. Enron had an extensive ethical code
(Megan, 2002,), yet it also had a pervasive ‘‘cow-
boy’’ culture where rules were routinely broken and
aggressive, individualistic behavior was rewarded.
EnronÕs board of directors actually suspended their
ethical code twice (Sims and Brinkman, 2003). The
off-balance sheet partnerships created by Enron
executives to hide debt eventually imploded, causing
the organizationÕs demise.
Clearly the code did not work for Enron; it was
an artifact that was separate from their culture.
Enron executives Jeffrey Skilling and Kenneth Lay
were convicted in June, 2006 and both faced prison
sentences of up to 25 years. However, Lay died in
October, 2006 before serving his sentence for fraud
and conspiracy. His conviction was voided because
he had appealed the conviction and died while the
appeal was pending. Worldcom corporation,
involved in an $11 billion accounting fraud,
emerged from bankruptcy in 2004 as MCI, which
was bought by Verizon. Worldcom also had an
ethical code, but it was not adopted until 2002.
Given the timing of the executivesÕ egregious
behavior, the code came too late to influence the
behavior of Worldcom executives, if it had any
influence over them at all.
When are codes effective?
Several studies conducted prior to 2000 showed
codes were effective when the right conditions were
in place. Ford and Richardson correlated codes of
ethics with observed unethical behaviors and found
fewer incidences of unethical behaviors in code
companies (1994). Casel, Johnson and Smith (1997)
observed that the right context and design, formal
controls, individual influences such as self-control
affected the workability of codes. Similarly, Laufer
and Robinson showed that when employeesÕ and
managersÕ behavior is consistent with codes, their
behavior can effectively influence others in the
organization (1997). These studies indicated that
when codes are partnered with managers who value
ethics and act accordingly, they can function as
essential management tools.
Trevino et al. (1999) also found that ethical
leadership and open discussions of ethics in the
organization contributed to increased ethical
behavior. Strong leaders who share their values with
others positively affect the organization and its code.
Then, Trevino and Weaver discovered a correlation
between alumni who attended honor code colleges,
then worked for organizations with strong ethical
codes (2003, p.8). Those employees self-reported
fewer unethical behaviors, suggesting that businesses
desiring ethical employees can benefit by hiring
graduates of honor code colleges. Adam and Rach-
man-Moore noted that the influence of managers
setting examples was more effective than formal
ethics training (2004). Somers (2001) discovered that
management accountants perceived less wrongdoing
in organizations with corporate codes and respon-
dents in organizations without formal codes were
more aware of wrongdoing. Awareness and under-
standing the codes is similarly important. Both
Wotubra (1995) and Chonko et al., (2003) showed
the usefulness of codes as decision-making guides
increased with the familiarity of the content. Table 2
shows recent studies which support the effectiveness
of ethical codes. N indicates the number of
respondents in the study and country indicates their
home country.
The studies shown in Table 2 all reported that
codes played a role in impacting employee behavior
and perceiving right ethical actions. In these studies
the codes functioned not as a set of stand-alone rules,
but as an integrated, embedded part of a larger part
of organizational culture. How can an ethics code
become organizationally embedded? Managers who
lead by setting clear standards and expecting the best
from everyone including themselves are able to
create ethical cultures. Ones who consider the eth-
ical codes superfluous fail to establish an ethically
meaningful culture. Most employees are motivated
to commit to higher principles and unite in a
common cause. As Kouzes and Posner noted,
‘‘Great leaders like great companies create meaning –
not just money’’ (2003, p. 59). They also observed
that employees work harder and more effectively for
leaders who inspire them to rise beyond self-
expectations. This is not a new paradigm, but with
the exception of Trevino, Weaver, and Schwartz,
 Corporate Ethical Codes
TABLE 2
Evidence of code effectiveness
Study Year
Fisher 2001
Somers 2001
Trevino and Weaver 2003
Chonko et al. 2003
Schwartz 2001
Adam and Rachman-Moore 2004
OÕDwyer and Madden 2006
Vitell 2006
the relationship to ethics has been tenuously ad-
dressed in the code literature to this point.
How can companies achieve a strong, ethical,
values-driven organization where employees live by
the code of ethics? Research shows that the two
primary drivers of codes effectiveness are cultural
values and communication. Culturally embedded
codes can be powerful strategic management tools.
Similarly, when the values articulated in the codes
are clearly communicated and are part of the orga-
nization, the code affects employeesÕ behavior in a
positive way.
The effect of cultural values
Enron, Tyco, and Worldcom had miasmatic cultures
and lacked ethical values. At Enron the company
culture rewarded strong financial performance at any
cost, even when fake numbers were entered into
books. Former WorldCom chief executive Bernie
Ebbers believed he was beyond the code and acted
dismissively toward it. Ebbers began serving a
twenty-five year prison sentence in October, 2006.
Tyco’s culture allowed for runaway expenditures by
its top executives. Tyco’s CEO and CFO Mark
Schwartz were also sentenced to twenty-five years.
They will serve between eight and nine years in
prison before they are eligible for parole. To avoid
the egregious behavior demonstrated by executives
in Enron and Tyco, organizations should develop
strong cultures where employees embrace the code,
are supported and rewarded for following the code,
and observe managers and executives in the orga-
nization behaving consistently with the code.
605
N Country
45 U.K.
613 U.S.A.
multiple studies U.S.A.
286 U.S.A.
57 Canada
812 Israel & U.S.A.
142 Ireland
152/235 Spain & U.S.A.
Embedding the code in an organization means
defining and prioritizing responsibilities with strate-
gies and policies in the organization such that the
code is not a separate entity. Successful companies
have strong core values, in addition to financial
goals. Porras and Collins found that successful
companies have values allowing them to adjust to
changes in the environment and react in positive
ways (1994). They are flexible and adaptable without
compromising their primary values. Long term
performance depends upon employees engaged in a
purposeful mission with a clear vision of ethical
values.
Codes are often communicated through orienta-
tion literature or posted on a company website.
Employees are told to read the materials, but many
do not until there is a need to know or a trigger
event occurs. Many employees are overwhelmed by
a plethora of messages (e-mails, instant messages,
memos, faxes, and voice mail) to which they must
respond. Keith Davis (1972) called this phenomena
‘‘overpublication’’ years before the exponential
growth of multiple electronic messages. McKibben
recently observed that, faced with too many mes-
sages, most employees absorb and respond to bursts
of information automatically, rather than thinking
carefully about them (2004). Reflection time is
absent from many organizational cultures; codes can
become simply compliance documents that are easy
to ignore. Ethical codes require thoughtful absorp-
tion and discussion in order to become culturally
embedded. The very process of creating a code
shapes organizational culture as members search for
words to express organizational values and ideals.
Words affect the perception of ideas and the process
606 Betsy Stevens
of enacting a code captures and communicates the
recondite ideals in the organization. Organizations
should discuss the code and the meaning behind the
words. It is important not to view culture as a sep-
arate entity from communication; they are inter-
twined and woven as one in the organizational
fabric.
The effect of communication
Effective communication is pivotal to ethical code
effectiveness. Both Adams and Rachman-Moore
(2004) and Weeks and Nantel (1992) recognized
the interrelationship between codes and commu-
nication. They saw that codes could be effective if
communication channels were effective. Ethical
concepts in codes cannot be enacted by organiza-
tional members if they are unaware of or unfa-
miliar with the code. So communication is key,
but channels are also important. The way an eth-
ical code is communicated contributes directly to
its success or failure. Schwartz (2004) found that
codes are effective when they have features of
readability, relevance and are written with a posi-
tive tone. Formal communication (ethics code
training sessions, classes and directives) is less
effective than informal ways such as social norms.
Most important are examples set by managers.
When codes are embedded in an organizational
climate and leaders communicate the value of
ethics by modeling appropriate behaviors, they
make a appreciable difference (Trevino et al.,
1999; Trevino and Weaver, 2003).
When managers set examples and live according
to the code, other members can visualize the action.
However, it is also important that managers openly
discuss the principles with organizational members,
engaging in both upward and downward commu-
nication about ethics. Discussion about values, and
debates over difficult dilemmas help organizational
members realize that taking the right action often
requires a long and thoughtful process (Adams and
Rachman-Moore, 2004).
Change in organizations occurs when people
themselves change and alter the way they react to
events. When members enter what Quinn calls
‘‘the fundamental state of leadership’’ they become
internally driven, other-focused and externally
open (2004, p.64). The result is a heightened
awareness, expanded thinking, increased vision and
understanding (Cameron et al., 2003). This state of
increased integrity, courage, and energy attracts
others to become leaders. To help others with this
process, managers must discuss the tribulations of
ethical decision-making, the indecisions, and both
right and wrong paths openly and honestly with
everyone. They must analyze wrong decisions,
admit to errors, and rectify problems whenever
possible. Employees drawn to this fundamental
state of leadership will become leaders themselves;
in this way organizations change and mature into
thoughtful, ethical companies, financially and eth-
ically strong.
Codes should act as powerful beacons to organi-
zational members and sanctions must be applied
when codes are violated. The role communication
plays in code effectiveness is indisputable. Employees
see and hear organizational action and they respond
to internal messages. Nitsch et al. described the
frustration, anger and cynicism that develops in
organizations where code violations are unreported
(2005). Codes are effective only to the degree that
code violations are appropriately sanctioned. Orga-
nizational leaders, who build trust by ensuring justice
prevails and the code is followed, strengthen mem-
bersÕ commitment to the code. Scalet noted that the
real code involves patterns of trust among employees
(2006).
Employees respond to visible justice, so violations
must be addressed and repercussions communicated
to all. Kickup noted that low trust causes employees
to be more sensitive to fairness issues (2005).
Implementation is the key to code effectiveness and
it belongs at the top. In a recent article Schwartz,
Dunfee, and Kline note that that corporate boards
need to set the tone in organizations (2005). The
message of valuing ethics should come from the top
as a key part of corporate strategy.
Improving the impact of corporate codes
The corpus of ethical code research has yielded
sufficient data that shows codes are effective.
Researchers should no longer debate the general
question of code effectiveness; Trevino, Weaver,
Schwartz, and others scholars reviewed in this
 Corporate Ethical Codes
article have answered that question. The focus
should now be on creating and implementing
codes that militate the values of the corporation
and establishing connections with strong commu-
nication channels.
Synthesizing the existing research from code
scholars has surrendered some salient information for
implementing codes. The following five-step plan
will help managers use ethical codes as a strategic
organizational document:
1. Engage in a collaborative process to create
the code and incorporate revisions.
2. Discuss the topics in the code frequently
with everyone and debate the organization’s
trouble spots.
3. Use the code to resolve ethical issues. It
belongs in the board room and should be
part of corporate strategy meetings.
4. Communicate ethical decisions to all mem-
bers of the organization by explaining the
rationale and how the code was used to
arrive at the decision.
5. Reward people who behave consistently
with the code.
Conclusion
Corporate ethical codes have earned a secure place as
strategic management tools in organizations. A body
of research is now in place demonstrating that if
codes are embedded in the organizational culture and
communicated effectively, they can shape ethical
behavior and guide employees in ethical decision-
making. Managers must model the desired behavior
and employees need to see that sanctions occur if
codes are violated. Communication is a requirement
for codes to be successful. Employees must be aware
of the content in their ethical codes and participate in
discussions about the codes so they have full under-
standing of the meaning. Codes do not work when
they are written by management and passed down to
employees as a mandate. Employees must perceive
the ethical code as a personal document in which
they have ownership, as a key component of the
organizational fabric, and as one that is central to the
organizationÕs strategic functions.
607
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Betsy Stevens
Elon University,
316 KOBC, Elon, NC, 27249, U.S.A.
E-mail: bstevens@elon.edu