What is the purpose of a code of conduct in governance?

The purpose of a code of conduct in governance is primarily to set clear expectations for ethical behavior and compliance among board members. This framework is crucial as it establishes the principles and standards that guide the actions of individuals within the organization, fostering an environment of integrity and accountability. By outlining what constitutes acceptable behavior and ethical decision-making, a code of conduct helps to ensure that all board members act in the best interests of the organization while adhering to legal and regulatory requirements.

This emphasis on ethical behavior is fundamental because it supports the organization’s reputation, builds trust among stakeholders, and contributes to effective governance. A well-articulated code of conduct serves as a reference point for board members when faced with ethical dilemmas or challenges, reinforcing a culture of compliance and ethical leadership.

The other options do not encapsulate the primary function of a code of conduct in governance. While financial growth and market competition are important business considerations, they are not the central focus of a governance code. Similarly, limiting stakeholder participation directly contradicts the principles of transparency and accountability that a code of conduct seeks to promote. Thus, the answer highlighting the setting of expectations for ethical behavior and compliance accurately reflects the core role of a code of conduct in governance.