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5 Benefits of a Code of Ethics [2024]

Last updated on
May 17, 2024



5 Benefits of a Code of Ethics [2024]


All healthy relationships are built on trust, including a relationship a company has with its clients, or employees, or partnering web development agency. A code of ethics ensures ethical conduct, which is essential for building trust with clients, employees, and partners. If there’s something all the recent high-profile corporate scandals have shown us, it’s how fragile trust really is and how its absence can be detrimental to overall company value creation.

When implemented correctly, a code of ethics can be an important source of competitive advantage and have a huge positive effect on the company’s financial performance and all other performance criteria. Let’s take a closer look at what a code of ethics is, what it isn’t, and what its most important benefits are.

What are ethical principles in a code of ethics?

Investopedia defines a code of ethics as “a guide of principles designed to help professionals conduct business honestly and with integrity.” Typically, a code of ethics outlines the mission and values of the business or organization, the approach professionals are supposed to take when they encounter a problem, the organization’s core values, and the ethical principles they’re based on, as well as the standards to which all professionals are held.

In the past, codes of ethics were commonly found only in non-profit organizations and other similar entities, but they have since spread into the corporate world. It also provides guidance on how to handle ethical dilemmas, ensuring that professionals' actions align with the organization's values and expectations. A code of ethics is typically employed in conjunction with a company’s specific politics and its code of conduct.

Code of ethics versus code of conduct

Because the terms “code of ethics” and “code of conduct” are often used interchangeably, there’s a lot of confusion surrounding their exact meaning. What they both have in common is that they attempt to encourage specific behavior. While both aim to encourage specific behavior, an ethics code focuses on guiding values and choices, whereas a code of conduct specifies acceptable actions. A code of ethics accomplishes this by providing guidance about values and choices, while a code of conducts clearly states which actions are appropriate and which are not.

Most codes of ethics have a wide scope, covering a broad range of specific and non-specific topics. Codes of conducts tend to be much narrower in their scope, dealing with a small number of particularly relevant areas, such as sexual harassment, racial discrimination, offensive language, and others.

Both codes are sometimes combined into a single document, as illustrated by the Code of Ethics and Professional Conduct created by the Linux Professional Institute.

“The LPI community is an open, safe and inclusive space fostering sharing and collaboration regardless of age, disability, ethnicity, gender identity and expression, level of experience, nationality, personal appearance, race, religion, or sexual orientation,” the document lays down some basic ethical principles before continuing with more specific examples of dishonorable and questionable conduct.

Why is code of ethics important?

A code of ethics provides a consistent framework for making decisions, ensuring that all team members have a clear understanding of acceptable behavior and practices. - Institute of Data

Ensures trust and credibility

Adhering to a code of ethics builds trust with clients, users, and stakeholders. When organizations consistently act ethically, they are perceived as reliable and trustworthy. Ethical behavior also enhances the credibility of the business. Clients and partners are more likely to engage with companies they believe operate with integrity.

Promotes fair practices

A code of ethics ensures that all employees are treated fairly and that decisions are made without bias, promoting diversity and inclusion. Ethical guidelines promote transparency in business practices, reducing the likelihood of corrupt or unfair activities.

Guides decision-making

A code of ethics provides a consistent framework for making decisions. This ensures that all team members have a clear understanding of acceptable behavior and practices. It offers a reference point for resolving conflicts and dilemmas, helping to make decisions that are not only legal but also morally sound.

Software engineers must ensure their software is reliable, safe, and meets users’ needs, and they must be accountable for the consequences of their actions and decisions. - Institute of Data

Protects stakeholders

In software development, ethical guidelines ensure that user rights are protected. This includes privacy, data protection, and security. It ensures that employees are treated ethically, promoting a safe and respectful working environment.

Enhances professionalism

A code of ethics sets high standards for professional conduct. This elevates the overall quality of work and fosters a culture of excellence. Adhering to ethical standards helps maintain a positive reputation, which is essential for long-term success.

5 benefits of a code of ethics

#1. Sets the right culture to promote ethical behavior

The most important benefit of a code of ethics is that it can foster an environment of trust, ethical behavior, integrity, and excellence. When everyone, from the c-suite to the people at the very bottom, plays by the same rules and behaves in a certain way toward one another, productivity tends to grow as conflicts and confusions disappear from the workplace.

In this environment, employees who might otherwise be afraid to voice their opinion feel encouraged to contribute, which is how good teams become excellent. Companies that foster an environment of trust, ethical behavior, integrity, and excellence are also better prepared to deal with unforeseen challenges because they have a very strong foundation to stand on.

#2. Builds a good reputation

Today's customers look well beyond the price tag. With so many choices, customers gravitate toward companies they feel they can trust, and they stay far away from those companies that don't promote ethical behavior. But it's not just customers to whom ethics matter. Companies that pay strong attention to ethics also find it easier to establish lasting partnerships both within and outside their industry.

To see why ethical behavior is so important, we don't need to look further than at the recent so-called Weinstein effect, which is a term that's used to describe a worldwide wave of sexual abuse allegations against film producer Harvey Weinstein, which eventually gave rise to the #MeToo campaign. After it spent months looking for a buyer or investor, The Weinstein Company was eventually forced to file for bankruptcy because nobody wanted to touch it.

#3. Helps remain in compliance with laws and regulations

According to the landmark Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act, all individuals serving on boards and organizational leaders of public companies are required to have a code of ethics to make major corporate scandals like Enron and WorldCom less likely to happen.

Any promises a company makes and fails to comply with can make it amenable to sue for breach of contract, so companies that implement a code of conduct have a strong incentive to ensure ethical treatment of its employees, clients, partners, as well as the public.

#4. Attracts outstanding employees

Outstanding employees come from all walks of life, and they all expect to be treated justly and ethically. Companies with a code of ethics reassure potential employees that they won't be discriminated against, sexually harassed, intimidated, bullied, or subjected to any other type of workplace harassment.

Just last month, Linux Torvalds apologized for how he had been running the Linux kernel community and adopted the Contributor Covenant, which is a code of ethics and conduct for open source project, after years of driving away talented developers with his hostile behavior.

“In the interest of fostering an open and welcoming environment, we as contributors and maintainers pledge to making participation in our project and our community a harassment-free experience for everyone, regardless of age, body size, disability, ethnicity, sex characteristics, gender identity and expression, level of experience, education, socio-economic status, nationality, personal appearance, race, religion, or sexual identity and orientation,” states the Contributor Covenant.


In this day and age, companies cannot afford to focus solely on the bottom line anymore; an ethics document is essential for guiding ethical business practices. The ethical aspects of doing business are becoming just as important as the financial ones, and a well-thought-out code of ethics is emerging as a necessary prerequisite for success.

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Marcin Dryka
Software Engineer

Full-stack software developer with 17 years of professional experience.

Bianka Pluszczewska
Tech Editor

Software development enthusiast with 8 years of professional experience in this industry.

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