How Have Corporate Codes of Ethics Responded to an Era of Increased Scrutiny?

Abstract

Over the past decade, corporate scandals have proliferated. These scandals along with the emergence of the #MeToo movement and Environmental, Social, and Corporate Governance (ESG) mandates, have increased the scrutiny of corporations’ ethics culture. How have companies responded in terms of the language appearing in their public ethics documents? We compare the Code of Ethics in 2008 versus 2019 for a sample of S&P 500 firms. The general trend is for firms to lengthen their Code of Ethics. On average, the 2019 codes are 28 percent longer (more than 1,690 words) than in 2008. The language of the codes has also changed. Words like bribery, corruption, sustainability, speak up, intimidation, slavery, and human rights all saw significantly higher usage in the later period. We review possible reasons for the dramatic changes, and suggest what questions remain about the motivations behind them. Whether the changes we observe are primarily intrinsically motivated or simply market responses to public pressures is yet to be determined.