Challenge: When launching a global code of conduct, multinationals too often focus only on what the code says, neglecting five key logistical steps.
When a multinational's headquarters launches a global code of conduct, often the first question is: "What's our code going to say?" But that question skips over key threshold logistical issues. Instead, before rolling out a global code of conduct, ask first: "How are we going to impose this on our employees overseas?"
- Indeed, too many global codes of conduct in place today were implemented without accounting for the logistical issues. As such, many codes are subject to attack, and could give rise to liabilities. A best practice is to go back, check and correct any oversights.
- This discussion of "global codes of conduct" applies equally to global policies on ethics, business conduct, discrimination/harassment/diversity, Sarbanes-Oxley/Foreign Corrupt Practices Act and whistleblower hotlines.
Pointer: Develop a strategy for logistical issues in a global code of conduct roll-out. Go back and verify that all these issues were addressed at the outset for any existing code of conduct, ethics policy,global discrimination policy, global Sarbanes-Oxley/Foreign Corrupt Practices Act policy or whistleblower hotline.
The five key logistical steps to take before launching a global code of conduct are:
- Multiple versions: US-based multinationals rolling out global codes of conduct should decide whether: (a) to use one global code worldwide; (b) to create a "rest-of-the-world" version separate from the "US" version; or (c) to spin off distinct local codes for each affected country. There are pros and cons to each approach:
- One global version: A single global code of conduct creates a uniform policy and is of course simplest. However, code provisions appropriate for US employees may need to be modified or reworded for use elsewhere.
- Two versions: Many US-based multi-nationals roll out a US code of conduct plus a separate "rest-of-the-world" version; this strategy accounts for issues from a non-US perspective, but neglects specific local-country issues.
- Local versions: Every country's laws are unique. Tailoring an aligned local code of conduct for each country that accounts for local law and HR policy as well as headquarters issues should be the most effective strategy. But many versions of one code of conduct can get unwieldy and expensive.
- Dual employer: Most US-based multi-nationals' overseas employees work for locally-incorporated subsidiaries or affiliates. To extend a headquarters code of conduct directly to employees of foreign affiliates raises the "dual employer" problem. By imposing rules directly on local foreign workers, the US headquarters may become a co-employer with the local subsidiary, jointly liable for employment claims. In Latin America, US multinationals regularly face these claims. A best practice is for headquarters to impose the conduct code on foreign affiliate entities only; each affiliate, in turn, imposes it on its own employees. This approach also cuts off the technical argument where an overseas employee disciplined for violating a headquarters conduct code claims the code is inapplicable because his local employer entity failed to implement it in the first place or else failed to take account of what is or is not a valid way to introduce a policy.
- Consultation: Outside the US, employee representative groups such as "works councils" and trade union committees are common. Laws can impose a requirement like the US labor-law concept of "mandatory subject of bargaining": an employer cannot change workplace rules until after it sits down and discusses the proposal with employee representatives. This doctrine implicates codes of conduct, which by definition impose mandates on employee "conduct." Unfortunately, outside the US, employee representatives can be skeptical of American codes of conduct. Therefore, from the inception headquarters needs to involve its overseas management. For example, give them a "heads-up" that a code of conduct will be coming, and discuss consultation strategy and timing.
- Translation: In Belgium, Chile, France, Poland, Portugal, Quebec and elsewhere, local law requires that work rules (such as in a code of conduct) be communicated in the local language. In these places, an English-language code will not only be unenforceable, it can cost money: last year a US multinational that distributed English-language papers to French workers paid a $689,920 penalty. Further, even in those countries without local-language laws, local courts are reluctant to enforce English-language policies; translations buttress enforceability.
- Distribution/acknowledgement: Multi-nationals need strategies for: (a) how to distribute the code of conduct to overseas employees; (b) how to train on the code overseas; and (c) how to adapt the code to local offerings (in Japan, for example, it will be necessary to amend the local work rules to reflect new code prohibitions). Also, multinationals need to develop some way to prove each employee actually received the code so as to aid enforcement against those claiming never to have seen it, so as to establish a defense against US Foreign Corrupt Practices Act and Sarbanes-Oxley enforcement actions. The common US approach is to have employees sign acknowledgements, but that raises problems abroad:
- In Continental Europe and elsewhere, employee acknowledgments often are not binding; signed consents are often presumed coerced due to inequality of bargaining power.
- A 100 percent return rate on acknowledgements may be impossible outside the US where codes of conduct often meet with skepticism. But away from the US employment-at-will environment there is no "good cause" to discipline an employee who openly refuses, or quietly neglects, to sign. How, then, to handle non-signers?
- Non-signers raise an "Achilles' heel" problem: If they later violate the code, they will argue they were exempt because they never signed.
As an alternative to acknowledgements, local HR representatives might distribute the conduct code personally (or in training sessions). Then HR representatives themselves could sign forms stating the date and circumstances of transmission to each employee.