Code of ethics

What it means

A code of ethics is an internal regulation that names the rules of conduct: conflicts of interest, gifts and hospitality, corruption, confidentiality and how a breach is reported. It covers not only employees but directors and suppliers as well.

It differs from the works rules in reach: the works rules set out employment matters at one employer, while the code also covers dealings outside the company. It becomes binding only once issued as an internal regulation and demonstrably communicated to people.

A code is not a list of general values but of rules that can be applied to a specific situation. A sentence about honesty decides nothing; a rule that a supplier’s gift above a set value is reported to a manager and recorded can be both followed and checked. That concreteness is what makes the code part of internal control.

How it works in practice

Tenders, the supplier conditions of large customers and ESG assessment all ask for a code. It sits next to the internal whistleblowing system that an employer above the size set by the Act has to run, together with a designated responsible person.

For the code to hold up, the briefing has to be evidenced in the personnel file, the training repeated and the handling of reports documented. Without that the code stays a marketing document on the website.

In a smaller s. r. o. a short code aimed at what really happens there is often enough: dealings with related parties, gifts from suppliers, private use of company assets. We draft it from the books, because entertainment expenses and transactions with related parties show where the real risks lie.

What to watch out for

An employer punishes a breach of the code but cannot show that the employee was ever briefed on it. In a dispute the termination fails and the company pays wage compensation for the time the employee was kept out of work, to the extent the Labour Code allows; with a protected whistleblower it also had to obtain the consent of the Whistleblower Protection Office beforehand.

A code that does not apply to management in practice loses its force for everyone. If the director accepts gifts that staff are forbidden to take, an employee in a dispute easily shows that the rule is applied unequally, and the measure against them fails. Rules for the director and other managers must therefore be written into the code expressly.