In the past, I have looked at how most codes of ethics aren't worth the paper they're written on.

Still, codes of ethics are important because they outline the values and principles management wishes to promote to safeguard the company's business operations.

So what steps should companies take to develop codes that are real and credible and powerful enough to provide everyone with guidance? Here are a set of guidelines I have developed based on my observations of how good companies go about developing these codes. It's best practice for codes of ethics.

First, the company has to make up its mind whether it wants a code of ethics or a code of conduct. Or both. The two are very different, and will produce different results.

A code of ethics attempts to capture the organization's culture. It sets out the ethical framework by which management should run the business and it has to go beyond legal compliance.

Codes of conduct tend to be more detailed and prescriptive. They also encapsulate the company's legal obligations and set out employee accountabilities to the organization and to the law. Typically, codes of conduct cover areas like occupational health and safety, harassment, bullying, discrimination, conflicts of interest, gifts and benefits, confidentiality, and rules about email and Internet usage as well as private phone calls.

Codes of conduct have a place but they can be rigid and, as a result, fall short when the situation turns complex and unpredictable. Codes of ethics, if done properly, can work well when it comes to managing unpredictable situations.

So what should a code of ethics look like? Ideally, it should be less than 1000 words so that people can remember its core content. Anything more than that can overwhelm people.

In framing the code of ethics, management would need to consult with as many stakeholders as possible. Furthermore management would need to do the stakeholder consultation annually to ensure the code can remain relevant to emerging issues. The code would also have to examine the organization's existing way of doing things and it needs to be thoroughly workshopped with management, directors and employees. A good code would have (a) the CEO's message (b) a definition of business ethics (c) the company's core values (d) specific behaviors to be promoted demonstrating those values (e) identification of key stakeholder groups and reciprocal obligations.

So how to make sure the Code works and is part of the organization? First, the board and chief executive need to endorse it. Secondly, there needs to be a strategy that would ensure the code was reflected in the organizations systems such as recruitment, reward, recognition and review. There would also have to be appropriate training. Also, the code would need to be made part of the company's induction program, and would need to be translated into multiple languages, something that is particularly important if the company has overseas operations. Copies of the code should go to all employees, sub-contractors and joint venture partners. These groups should also be invited to the launch of the code. The code of ethics should also be included in the organization's annual report.

The code of ethics needs to be subjected to constant maintenance and monitoring. That means the appointment of a very senior manager to be responsible for the administration and oversight of support training, monitoring and reporting. Also, there would have to annual training, grievance procedures, awards for outstanding ethical achievement and regular reviews to ensure the code remains relevant and workable.