Establishing a code of conduct not only averts financial risk or ruin, it ensures that shareholders, customers and employees have trust in the company for the long term. Human resource departments typically make ethical decisions related to employee selection and recruitment, training, performance management and compensation. They also deal with incentives compensation, base pay and benefit determination, talent management systems (including succession planning and labor relations). Monitoring these activities involves analyzing employment data for discrimination, running surveys to gauge employee attitudes and assessing workplace safety.

Balance the need to pay employees in a competitive manner with the ethics pertaining to incentive plans. The Bureau of Labor Statistics conducts the National Compensation Survey to measure wages, costs and benefits. An HR department typically uses this data to pay competitive salaries that attract and keep top talent. For example, an HR professional may need to justify providing additional compensation to an executive based on the management team's desire to retain her. The HR department also keeps an eye on who gets promoted, gets raises and receives bonuses. HR practitioners analyze data to check for unintended effects, such as the discriminatory adverse impact on legally protected groups.

Discourage the practice of differentiating employees on the basis of race, gender or disability. Instead, direct the assessment of the key capabilities required by the company. The Lilly Ledbetter Fair Pay Act of 2009 extends the time allotted for employees to file federal claims charging pay discrimination. This creates substantial potential liability. Effective HR departments train managers to avoid discriminatory practices.

Hire family members and friends of executives with caution. While hiring family members may provide your small business with tax credits, especially for those hires under the age of 18, do so cautiously as it may have a destructive effect on the morale of your other employees. Other dilemmas involve hiring employees who ultimately fail background checks or present fraudulent documents. Hiring employees based on merit and strengths tends to work out best in the long run.

Respect privacy. According to the U.S. Small Business Administration, HR departments that collect employee information have a legal responsibility to secure or dispose of it properly. This includes financial data, personal information and credit reports. Compliance ensures prevention of identity theft. According to the U.S. Department of Justice, employers may monitor email, phone and social media usage if the employee uses company-owned equipment. However, it’s considered a crime to violate social media terms of service and enter sites illegally with passwords demanded from employees.