The Promise of Ethical Business: On the Legal Status of Corporate Codes of Conduct

Abstract: The legal status of corporate codes of conduct, whereby a corporation promises to behave in an ethical manner, is uncertain. Such codes are often claimed to be legally unenforceable. But even if codes per se are not regulated by a legal system, there are still numerous rules governing the making and keeping of promises. Contracts, constitutions and advertising are examples of promises recognized in many legal systems. This thesis will show, using general principles found in several legal systems, that codes of conduct can indeed be enforceable. Firstly, a contract is an agreement between two or more parties. According to different theories, it derives its legal validity from either the ethics of promise-keeping or the reliance of one party. Codes of conduct may, in some cases be considered enforceable contracts. Secondly, corporations, like states have constitutions, which outline the basic principles of the organization in a way recognized by the law. A code of conduct can be made enforceable by incorporation into this constitution. Finally, promises made in advertising can also be binding for the corporation. If the code is regarded as advertising, it can become enforceable.