The problem with codes of ethics is that the people who need them most don't use them. But that hasn't stopped two prominent organizations for finance and investor-relations professionals from recently reworking their codes of ethics.
In the wake of major ethical lapses at Enron and Andersen, the National Investor Relations Institute (NIRI) and Financial Executives International (FEI) have created new codes that spell out the ethical responsibilities of members and instruct them to be more proactive in addressing ethics issues in their organizations.
The NIRI code is now written in the first person, says NIRI head Louis Thompson, so that it's a "personal commitment rather than just an agreement to a statement of principles." The new code states that members will create equal access for analysts, investors, and the media. "We go beyond Reg FD," says Thompson.
At the FEI, the changes have been modest, but no less important, says Richard Schrader, CFO of Parsons Brinckerhoff and an author of the new FEI code. "What this revised code really says is that if you feel something is unethical, step forward and do the right thing," he says. "The code won't stop the unethical person, but it's important for an organization to have a statement of values." Members have been asked to sign the code and deliver it to their audit committees.
FEI is also looking at ways to beef up its enforcement authority. "As a voluntary organization, you can't force someone to come to a hearing," he adds.
Codes of ethics are useful as guideposts for members, says Lynn Paine, a professor of management at Harvard Business School. But, she adds, "a written code is not sufficient to be a responsible company or organization. The mistake comes when people think a code will stop someone from doing something wrong that they were going to do anyway."