Why Businesses Should Incorporate a Recommended Code of Conduct

Corey —  June 27, 2013 — 6 Comments

Back in the 1980s, one of the things that became quite popular in a number of corporations was to have a neatly typed and laminated Recommended Code of Conduct. According to the American Bar Association, this developed out of a slew of ethical issues that began cropping up throughout corporate America about this time. The Recommended Code of Conduct has not quite passed out of popularity, but businesses and employees no longer take it as seriously.

One of the main reasons that the Recommended Code of Conduct began to fall out of favor was because people did not take it seriously. It seemed like nothing more than a bunch of standards and rules that no one really would follow. But, according to the Journal of Trial Advocacy, this supposedly laughable document could actually be admissible in court as a defense or even as evidence.

The Business Record Exception

One of the ways that it can be worked into evidence is through the business record exception under the Federal Rules of Evidence. Generally, as can be seen on Legal Zoom and other similar legal sites, this rule is used to introduce into evidence documents and records that are kept within the course and process of business. Yet, in a growing number of cases, the Recommended Code of Conduct falls into that exception so long as it meets certain criteria, because the Recommended Code of Conduct itself is prepared in the ordinary course of business.

The Requirements

The precise requirements vary based on individual state law, but the general basis of introducing the Recommended Code of Conduct is to ensure that it is something that has been distributed throughout the business and that has been upheld as much as possible. Upholding it means enforcing the rules and the codes listed within the book. Instead of just having a general recommendation, it must be followed unless good cause can be demonstrated otherwise.

Even if the practice has not always been followed, the Recommended Code of Conduct can be introduced. It is up to the opposition to contest its introduction into evidence.

Why This Matters

Most of the time, introducing a Recommended Code of Conduct is necessary when a key employee or member of the board has done something that violates the law while in the employ of the business. For the liability to fall on the business or the corporation, that individual must generally have been shown to be acting either with actual or implied authority from the business. Unless it is specifically stated otherwise, the general stance is that so long as it has not been prohibited or standards made clear, then even acts such as embezzlement or fraud could come back onto the business or corporation through vicarious liability.

Obviously, businesses do not need to have that added burden of liability. A Recommended Code of Conduct is a concrete statement that such activities are prohibited, and it demonstrates in one tangible way how the business views that scenario.

Corey

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Corey is currently pursuing a Master of Arts degree in religion. While he enjoys learning and writing about Christianity, another one of his new passions is writing about personal finances in order to help others make wise decisions with their money.

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