January 31, 2025

Reputation is Everything: Drafting A Code of Conduct For Your Cannabis Company

Learn how to draft a comprehensive Code of Conduct for your cannabis company to protect your reputation, ensure compliance, and foster trust. Discover key components, including workplace conduct, compliance policies, social media guidelines, and more to navigate the unique challenges of the cannabis industry effectively.
Reputation is Everything: Drafting A Code of Conduct For Your Cannabis Company
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The cannabis industry is quickly growing, but with exponential growth comes increased scrutiny from stakeholders, including both the government and the court of public opinion. It is therefore not only advisable, but essential, to take all appropriate measures to protect your company’s reputation. 

Why a Code of Conduct is Needed 

Company executives, employees, and even service providers represent you as they go about the world, even when they’re off the clock. Inappropriate behavior by an employee or executive can cause irreparable harm to a company’s reputation. One way to better protect your company’s reputation is to create and enforce a Code of Conduct - an ethical backbone for your organization or company that outlines the core principles and expected decorum of your employees, management, and partners in and out of the workplace.

In an industry as complex, volatile, regulated, and stigmatized as cannabis, a robust code of conduct can build trust, ensure compliance, and set you apart as a responsible business leader. 

Maintaining a code of conduct is, unquestionably, a best practice for all businesses, and public companies are legally mandated to do so under §406 of the Sarbanes-Oxley Act of 2002. Not only can it assist businesses to quickly address and mitigate ethics-related public relations disasters, but it also helps organizations clarify their mission, values, and principles and establish standards for behavior by employees, vendors, suppliers, and affiliates. 

Internally, a code of conduct provides a road map that supports decision-making and empowers employees to handle ethical dilemmas. Externally, it serves as a public reminder of a company’s commitment to civil conduct. In some situations, it mitigates governmental fines that may be imposed upon a company for unethical behavior.

Examples of Personal Misconduct Affecting the Workplace in the Cannabis Industry  

TreatWell Health

TreatWell Health, a prominent Bay Area cannabis business lauded by medical patients (and pet owners) for its high-CBD products, made national headlines in June 2018 when a video of its CEO, Alison Ettel, went viral.

The video captured Ettel — a white woman — allegedly calling the police on an 8-year-old Black child for selling water without a permit outside of Ettel’s apartment complex. Dubbed #permitpatty, the video garnered more than 6 million views on social media within days and was covered by national news outlets. The incident was seen by many as a sad reminder of racial animus and distrust, and yet another all-too-common incident involving a white person calling the police on a person of color for innocuous behavior. And the irony of a cannabis business CEO, operating in open violation of federal law, “outing” a young entrepreneur for allegedly impermissible activities, was not lost on the press.

Within 48 hours, several prominent Bay Area cannabis retailers that carried TreatWell’s best-selling products denounced Ettel’s conduct and liquidated their inventory. While Ettel did not commit a crime, her behavior likely violated the code of conduct for these organizations, prompting and guiding their immediate action.

Marijuana Policy Project

Rob Kampia, co-founder of the Marijuana Policy Project, faced allegations of sexual misconduct in 2009. Following an incident involving a female subordinate, several staff members resigned, and Kampia took a leave of absence. The situation highlighted issues of personal misconduct affecting organizational reputation within the cannabis advocacy community.

How to Write a Code of Conduct: The Basics

So you know that you need a code of conduct to avoid the dilemmas some other companies in the industry have been plagued with, but how do you actually write one? 

Here are some general tips to get you started:

Keep the Language Simple

Generally, the language selected for any code of conduct should avoid legalese. It should be uncomplicated and easy for individuals at all professional levels to understand. If it is not user-friendly, the code will not be effective, internally or externally.

Tailor it to Your Company

A well-crafted code of conduct must be customized to the organization implementing it. Organizations must dig into their formation and operating history and reveal to themselves what has gone wrong previously. Ask questions like:

  • Where may we be vulnerable in the future?
  • Are there any gray areas that require clarification? 
  • For a cannabis business, in particular, what laws and regulations apply to our organization? 

Principals charged with preparing a code of conduct should seek input from all levels within the organization. And of course, confirm with counsel to assure that vulnerabilities are adequately addressed.

Involve Key Stakeholders

Engage and include employees, management, and legal experts in the drafting process to ensure it reflects the practical realities of your operations on a day-to-day basis.

Provide Training

A code of conduct is only effective if employees understand it. Offer regular training sessions to ensure everyone is aware of their rights and obligations.

Enforce Policies Fairly

Establish a system for reporting and addressing violations. Consistent and transparent enforcement shows that you take your code seriously, while giving your team members an opportunity to defend themselves when needed.

Review and Update Regularly


The cannabis industry landscape is changing every single day, from one state to the next. Revisit your code of conduct periodically to ensure it stays relevant, accurate, and effective.

What should be included in a clear and effective Code of Conduct?

Now that we know why a Code of Conduct is important and how to start drafting and implementing one, we need to consider the content.

Appropriate Workplace Conduct

  • Prohibiting discriminatory, threatening, or “bullying” conduct
  • Addressing misuse of company resources and equipment
  • Addressing the proper exercise of authority
  • Outlining the use of illegal drugs and/or alcohol, noting the contradiction between federal policy and the state-legal cannabis industry
  • Romantic relationships among co-workers

Compliance and Anti-Corruption

This section might cover:

  • Compliance with all applicable state and local laws and regulations, including those related to cultivation, sales, marketing, and employee safety
  • Assuring accurate accounting and reporting
  • Proper maintenance of financial statements and employee records
  • Prohibiting bribery and questionable political contributions

E-commerce and Social Media

This section might cover:

  • Addressing internet use at the workplace or during work hours
  • Prohibited websites and the content of posts regarding the company, its products or services, or co-workers, vendors, suppliers, and other affiliates and partners.

Product Quality and Safety

Emphasize the importance of delivering high-quality, safe products. Include policies on testing, labeling, and recalls to demonstrate your commitment to consumer well-being.

Environmental Responsibility

Sustainability is a growing concern in cannabis. Include guidelines for reducing your environmental impact, such as energy-efficient cultivation practices and waste reduction.

Community Engagement

Highlight your commitment to giving back to the community, whether through charitable initiatives, public education, or economic development.

Handling Cash and Security

Provide clear protocols for handling cash transactions and maintaining security. This protects your employees, customers, and reputation.

Conflicts of Interest

The conflicts of interest section might cover:

  • Prohibiting employees and others from engaging in activities that enrich themselves at the expense of the organization and its shareholders
  • addressing political activities, outside and/or competing employment opportunities
  • The disclosure of personal and confidential information

Relationships with Third Parties

This section might cover:

  • Addressing proper recruitment and procurement
  • Scope of due diligence
  • Conduct in the negotiation of agreements
  • Accountability standards, as behavior-guiding provisions are meaningless without them

Repercussions for Violations

The severity of the sanction should turn on the materiality and severity of the violation and may include, among other things: 

  • A requirement that the individual who violated the code undergo sensitivity or other training
  • Written censures that may be considered in employment decisions such as promotions or bonuses
  • Suspension
  • Termination

What To Do With The Code Of Conduct Once Written

Organizations should ensure the code of conduct is readily accessible and should, where appropriate, obtain signatures — on an annual basis — that each person responsible has read, understood, and accepted the code of conduct. Related policies should encourage employees (and others) to come forward to the company’s chief compliance officer (or other responsible party), the failure of which should also be a code violation, and prohibit retaliation against those who seek to invoke the code’s provisions.

Running your company with diligence and care with Rudick Law Group

Federal illegality already places cannabis businesses in an ethical conundrum. It is best to prepare for ethical dilemmas and to avoid creating standards mid-crisis. With the right legal and business counsel from Rudick Law Group, you’ll be well prepared to face whatever challenges may come your way. Contact Rudick Law Group today!

Details
Date
January 31, 2025
Category
Insights
Reading Time
7 - 9 minutes
Author
RElated News
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