Choose Your SOX Wisely

Any code of ethics should outline a set of fundamental principles, although a company should avoid drafting overly aspirational policies that set practically unworkable standards. Code drafters are encouraged to think in terms of values, beliefs, and expectations; draft simply and concisely so as not to obscure fundamental points; use the active voice so as to convey ideas more clearly and with fewer words; and generally make the code easy to read.

Multiple approaches can be taken in drafting codes of ethics and business conduct to comply with the applicable SEC and stock exchange/market requirements. A typical issuer may adopt up to three separate codes solely to satisfy the SEC and stock exchange/market requirements:

• A code of ethics for the chief executive officer and principal financial officers only, designed specifically to satisfy the SEC requirements regarding a code of ethics for the designated officers.
• A code of ethics and business conduct applicable to all officers and employees, meeting the applicable stock exchange/market requirements (as well as SEC requirements).
• A code of ethics for nonemployee directors only, considering the very different role outside directors serve compared to employees (i.e., supervisory rather than active involvement on a day-to-day basis in the company’s operations) and the resulting fact that much of what is in a comprehensive code of conduct for employees may not be applicable to the outside directors.

 “Code of Ethics” by Herbert S. Wander and Mark D. Wood
From The Practitioner’s Guide to the Sarbanes-Oxley Act, volumes 1-3
ABA Section of Business Law

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