Codes of conduct to the rescue.

You know your company needs one, but you're not sure where to start. Here's some reassurance: Many of your financial counterparts are in the same boat.

Kidder Peabody, Archer Daniels Midland, Dow Corning, Exxon. Do the bring to mind trustworthy stalwarts of Corporate America - or headline-makers for less-than-admirable acts? Accurate or not, the perception of ethical failure in large organizations today places a burden of proof on all businesses. Every firm needs to demonstrate it's ethical, and company codes, company ethics programs and other activities are visible ways to do just that.

Why the recent interest in corporate codes of conduct? For starters, the federal corporate sentencing guidelines, enacted in 1991, apply legal pressure on all organizations to implement formal mechanisms for implementing business ethics. So your good-faith efforts to foster ethical behavior can reduce your exposure to the established reprimands under the sentencing guidelines.

On the less-tangible side, it's no longer enough for a business to provide employment, return on investment, and goods or services. Rather, society expects you to remedy societal ills, provide individual fulfillment and assist individuals in managing their personal lives. If you choose to ignore these social demands, you'll be subject to more laws, regulations, bad publicity and lawsuits.

The mix of cultures in today's business environment also requires trust and a clear set of behavioral expectations for employees. And new organizational forms are structured much more loosely than traditional, hierarchically controlled businesses. Joint ventures, network organizations and virtual corporations offer participants high degrees of autonomy. To manage these entities, you have to trust the other players.

Based on a telephone survey of 407 financial executives from a variety of company sizes and industries, we obtained an inside look at how today's business leaders view conduct codes. The charts accompanying this article reveal some of the statistics gathered from the survey. Here's a glimpse at other findings:

* Surprisingly, 74 percent of the companies surveyed have already formally adopted some type of code of conduct.

* Not so surprisingly, larger firms have more formalized ethics programs than do smaller firms.

* The principal reasons a company has a code of conduct are to demonstrate the firm's basic philosophy and to protect various stakeholder groups.

* The principal force that encourages a firm to adopt a code of conduct comes from the outside directors on the firm's board.

Interestingly, according to the survey, one of the top reasons executives find corporate codes useful is to enhance their reputation among their co-workers. Likewise, these same executives never "bend the rules" at least in part out of concern for their reputation.

A CODE OF MANY COLORS

Just as companies differ, company ethics codes vary in their detail level, content and qualitative character.

Some codes are very general, suggesting a few ethical guidelines that employees should keep in mind in all their dealings. Some codes are very specific, suggesting a range of actions that may signal an employee's lack of integrity - such as accepting certain types of gifts from vendors or holding investments in competitors. One such detailed code, from General Electric, runs more than 60 pages.

Of course, each type of code has its pros and cons. Short codes may be easier for employees to remember, but they could leave too much room for interpretation. On the other hand, a lean code supplemented with training sessions may be as adequate as a more comprehensive code.

Whether you include certain business requirements, like your firm's guidelines for accepting gifts, in your code of ethics or in some other company document, such as your procurement policy handbook, depends on your overall organizational context. Before deciding, you have to ask yourself this: If you include a particular requirement in your code, will you send a message that's more likely to enhance or detract from compliance? After all, compliance is your ultimate objective.

One warning: In creating or changing your ethics code, you could create a new set of ethical problems for your firm. For instance, a sudden change in a code may prompt employees to come up with new, inaccurate interpretations of the company's obligations.

You must also be careful about how you present your code. If your company is under pressure from important stakeholders, such as the government, to avoid unethical actions, developing a strict ethics code and establishing an ethics office may not be the answer. You'll inadvertently place the ethics-monitoring function in an adversarial, almost police-like role that employees will easily resent and may even ignore. In short, you'll find that satisfying external demands may count for more in the media than your less sensational, behind-the-scenes work to ensure good behavior.

Finally, remember that a code of conduct is no panacea. Simply writing, printing and distributing a code may have little or no effect on the ethical behavior within your firm. Instead, most of the executives we spoke with see codes of conduct as intertwined with corporate culture - reflecting the firm's culture and helping to define it.

Dr. Cochran is director of the Center for the Study of Business and Public Issues and an associate professor at the Pennsylvania State University in State College, Pa. Dr. Weaver is assistant professor of management at the University of Delaware in Newark, Del.