Retailer American Apparel has announced a new code of ethics. The move comes, not coincidentally, just a month after the board fired Dov Charney, the company’s controversial CEO and founder. Charney had been at the centre of a string of employee sexual harassment suits.
The move by AA to beef up its Code is an opportunity to emphasize several key points about the role and significance of a Code of Ethics in general.
The first point has to do with the insufficiency of a code, in spite of the admitted necessity of having one. A company the size of AA can’t not have a code. Having one is effectively table stakes at this point—in some jurisdictions it’s legally required. But American Apparel’s board also shouldn’t dream for a second that simply having a new code is going to fix the company’s problems, any more than simply removing Charney from the helm will do so.
What the company surely needs is a change in culture. Charney’s departure will surely help — tone at the top matters — but it likely won’t be enough. Charney has surely left his imprint on the corporate culture, and it will take time for that to change. A new code may serve as a focal point for such change, but only if the code is noticed and taken to heart. And that will only happen if sufficient training takes place. In other words, AA needs to not do what too many organizations do: simply post the new code on the wall. Even sending each employee a copy and “requiring” them to read it won’t be enough.
The final point has to do with the relationship between ethics and the law. As should be obvious, ethics and the law are not identical. What’s legal isn’t always ethical, and vice versa. An ethics code typically tries to bridge the gap: they tell employees what’s ethically required, but they also typically threaten a penalty, most often termination of employment. Further AA’s code effectively advises employees to think of the code as a legal document:
“…we ask that if you have questions, ask them; if you have ethical concerns, raise them; if you believe something to be suspicious or inconsistent with the Company’s best interests, report it to the General Counsel…” [or to contact the company’s outside ethics hotline provider].
That’s fine, but given the importance of culture, it’s important that the legal implications of a code not dominate. And unfortunately, AA’s code was pretty clearly written by a team of lawyers. The wording is often legalistic. That’s not surprising. Ethics policies often are. The most we can hope is that the ethics training that should accompany the code’s launch focuses on the values that underpin the code, not on the punishment that could result form its violations.
So is American Apparel’s new code good news? Absolutely. Are the company’s worries over? Far from it.