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In 1929, a Catholic layman, Martin Quigley (editor of the prominent trade paper Motion Picture Herald) and the Jesuit priest Father Daniel A. Lord created a code of standards and submitted it to the studios. Lord was particularly concerned with the effects of sound film on children, whom he considered especially susceptible to their allure.

In February 1930, several studio heads — including Irving Thalberg of Metro-Goldwyn-Mayer (MGM) — met with Lord and Quigley. After some revisions, they agreed to the stipulations of the Code. One of the main motivating factors in adopting the Code was to avoid direct government intervention. It was the responsibility of the SRC (headed by Colonel Jason S. Joy, a former American Red Cross Executive Secretary) to supervise film production and advise the studios when changes or cuts were required. On March 31, the MPPDA agreed it would abide by the Code. The production code was intended to put a limitation on films which were distributed to a large audience, making it more difficult to appeal to all individuals in the audiences.

The code was divided into two parts. The first was a set of "general principles" which prohibited a picture from "lowering the moral standards of those who see it", so as not to wrongly influence a specific audience of views including, women, children, lower-class, and those of “susceptible” minds, called for depictions of the "correct standards of life", and lastly forbade a picture to show any sort of ridicule towards a law or "creating sympathy for its violation". The second part was a set of "particular applications", which was an exacting list of items that could not be depicted. Some restrictions, such as the ban on homosexuality or on the use of specific curse words, were never directly mentioned, but were assumed to be understood without clear demarcation. Homosexuals being included under the forbiddance of sex perversion. Depiction of miscegenation (i. e., marital or sexual relations between different races) was forbidden. It also stated that the notion of an "adults-only policy" would be a dubious, ineffective strategy that would be difficult to enforce; however, it did allow that "maturer minds may easily understand and accept without harm subject matter in plots which does younger people positive harm". If children were supervised and the events implied elliptically, the code allowed "the possibility of a cinematically inspired thought crime".

The code sought not only to determine what could be portrayed on screen, but also to promote traditional values. Sexual relations outside marriage—which were forbidden to be portrayed as attractive or beautiful—were to be presented in a way that would not arouse passion or make them seem permissible. Any act considered sex perversion, including any suggestion of same sex relationships, sex, or romance. All criminal action had to be punished, and neither the crime nor the criminal could elicit sympathy from the audience, or the audience must at least be aware that such behavior is wrong, usually through "compensating moral value". Authority figures had to be treated with respect, and the clergy could not be portrayed as comic characters or villains. Under some circumstances, politicians, police officers, and judges could be villains, as long as it was clear that those individuals portrayed as villains were the exceptions to the rule.

The entire document was written with Catholic undertones, and stated that art must be handled carefully because it could be "morally evil in its effects", and because its "deep moral significance" was unquestionable. It was initially decided to keep the Catholic influence on the Code secret. A recurring theme was "that throughout, the audience feels sure that evil is wrong, and good is right". The Code also contained an addendum commonly referred to as the Advertising Code, which regulated advertising copy and imagery.