Code of Conduct vs. Reality: What’s Really Happening Inside Your Company?

A Code of Conduct (CoC) is the ethical backbone of any organization, setting behavioral standards, reinforcing values, and ensuring compliance. It should guide workplace interactions, decisions, and integrity.

Yet, perception differs. Management sees it as a moral compass; employees often view it as bureaucratic formality that they skim during onboarding and forget. This disconnect, if ignored, can lead to ethical blinkers, policy breaches and even corporate scandals. 

Key Elements of a Strong Code of Conduct

A well-structured CoC is a manifesto of corporate integrity. The Companies Act, 2013 (Schedule IV, Clause III(11)) mandates that independent directors report concerns about unethical behavior, fraud, or CoC violations. 

But beyond legal obligations, what makes a CoC truly effective?

Here are some essential elements:

The Illusion of Adoption

A 2024 LRN Report on Codes of Conduct highlighted a telling trend: 63% of Gen Z workers reported referring to their employer’s CoC, compared to just 49% of Baby Boomers. This disparity underscores the challenge that employee engagement with ethical policies is neither uniform nor automatic.

Real-world scenarios paint an even clearer picture.

Take the case of Wells Fargo, where employees, under pressure to meet aggressive sales targets, created millions of unauthorized customer accounts. The company had strict policies on ethical sales practices, but poor enforcement and conflicting incentives led employees to ignore them. The result? A $3 billion fine and irreparable reputational damage.

Where the Misalignment Happens

Misconduct rarely begins with malice. It begins with rationalization. A missed deadline. A little white lie. The belief that no one is watching.

When ambition outpaces integrity, boundaries blur.

The consequences? Trust erodes. Systems weaken. And legal exposure follows.

Here are some common acts of misconduct: 

Why Does It Happen?

Employees often ignore or aren’t fully aware of strict company policies, and even when there are detailed codes of conduct, they may not realize how minor violations can lead to serious trouble. The pressure to perform makes it tempting to cut corners, and when a company culture puts results above ethics, it opens the door to misconduct. 

Add to that poor oversight, and issues go unchecked. Sometimes, the rules don’t match practical situations, enforcement is inconsistent, and cost cutting leaves no room for proper checks. Collectively, it’s a recipe for disaster.  

How Can It Be Prevented?

Preventing such issues starts with regular audits and surprise compliance checks that keep everyone on their toes. Anonymous whistleblower channels give people a way to speak up without fear, making the system more accountable. Building ethical training into everyday company culture helps employees understand not just the rules, but the reasons behind them. 

Case Studies: Meta, EY, and Tata

1. Meta: Meal Voucher Misuse and Strict Corporate Policies

Meta’s decision to fire employees for meal vouchers worth $25, demonstrates how seemingly minor infractions can have major consequences. Employees who purchased non-food items or pooled their vouchers faced termination, highlighting the company’s strict adherence to policy. The fact that an employee earning a substantial $400,000 annually expressed disbelief at being terminated for a seemingly minor meal credit violation shows why companies must clearly communicate their CoC guidelines and stress its importance.

2. EY: The Ethics of Multitasking in a Learning Program

EY’s dismissal of employees following its “EY Ignite Learning Week” has brought attention to the gap between corporate expectations and actual work culture. The firm let go of several staff members in the US after discovering they had logged into multiple virtual training sessions at the same time. EY claimed this was a violation of its ethical standards, framing it as cheating. But many of those affected said the practice was nothing new. In fact, it was seen by many as a routine workaround during intensive training weeks. For them, being logged into two or more sessions at once was simply a way to manage time, not an attempt to cheat. 

3. Tata Steel: Enforcing Ethical Accountability

In July 2023, Tata Steel took disciplinary action against 38 employees following whistleblower complaints exposing serious ethical breaches. Thirty-five were suspended for misconduct related to abuse of authority, conflicts of interest, and contract irregularities, while three faced action for sexual harassment. The company received 158 whistleblower complaints out of 875 total grievances in 2022–23.

Training and Awareness: The Key to an Effective Code of Conduct

Regular training is essential in turning written policies into a company’s ethical foundation. Well-structured sessions clarify what’s acceptable, ensuring that employees not only know the rules but also know how to apply them. 

When the code is presented as a guide instead of a threat, interactive training shifts mindsets and builds a better approach to compliance. 

The Role of Leadership in Policy Enforcement

It’s on directors and managers to clearly communicate policies and their consequences, leaving no space for confusion. Rules must apply equally to everyone to avoid any perception of bias. Leaders have to lead by example, showing through their own actions what ethical conduct looks like and building a culture of accountability. Every violation needs to be addressed, big or small, to protect the system’s integrity, and any disciplinary action must be fair and proportionate.

Drawing the Line

The strength of a code of conduct lies in its adoption, not its rigidity. Ethical awareness, transparency, and consistent enforcement build trust and prevent violations. With training, committed leadership, and clear policies, integrity becomes part of the culture. Employees should see ethics as guiding principles, not restrictions, making compliance a shared responsibility.