No Good Deed Goes Unpunished: Is There a Need for a Safe Harbor for Aspirational Codes of Conduct?

Elizabeth F. Brown, University of St. Thomas

Abstract

Over the years, Congress and some state legislatures have enacted laws to encourage corporations to engage in self-policing by providing them with incentives to adopt codes of conduct and compliance programs. In the case of the Federal Organizational Sentencing Guidelines, Congress offered corporations lower penalties if they were found in violation of a federal law but had adopted codes of conduct and compliance programs to try to comply with the law. In the case of the Sarbanes-Oxley Act, Congress require public corporations to disclose if they had a code of ethic and if not, why not. Congress assumed that the market would punish corporations that failed to adopt codes of ethics with lower prices for their stock. Many U.S. corporations have adopted corporate codes of ethics or conduct because of the incentives built into the Organizational Sentencing Guidelines, the Sarbanes-Oxley Act and other laws.

Most of the existing codes of conduct, however, merely require businesses to comply with their present legal obligations. These codes of conduct do not embrace the higher corporate social responsibility standards promoted in the voluntary codes developed by multinational organizations or non-government organizations. U.S. corporations are reluctant to adopt such codes of conduct because of concerns that the failure to achieve the aspirational goals set forth in these codes would make them targets for litigation and because the added costs might make them less competitive than businesses that do not adopt such policies and procedures. Thus, the laws as they are currently written and applied actually deter businesses from adopting aspirational codes of conduct that embody corporate social responsibility principles.

This article examines the ways in which the law shapes what rules and procedures go into codes of conduct. It then examines whether it is beneficial to create a safe harbor for codes of conduct that espouse aspirational goals that would overcome or minimize the legal disincentives to adopting aspirational goals in existing business codes.