In recent years, there have been scores of publicized incidents of corporate wrongdoing such as overstating profits, fraudulent accounting, spying, overcharging government contracts, knowing manufacture of dangerous products and bribery. Corporate and personal reputations have been destroyed.  Stock values have plummeted.  Corporate officers have been convicted and have served prison terms. Corporations have paid huge fines. With this publicity, corporate ethics has received much attention, especially in the media.  Congress has responded,  in a very limited way, by enacting the Sarbanes-Oxley Act.  Many of our nation's business schools have just begun offering courses in ethics and corporate social responsibility.  And, having been swept by this tide, many businesses are now taking ethics seriously as it does marketing, sales, production and other bottom line components. Companies are now creating ethics departments, drafting ethics policies and requiring ethics training for employees. While these are steps in the right direction, to be meaningful, they must be part of a comprehensive effort designed to create a culture of ethics, which is the best safeguard against ethics breaches.

WHAT IS A CULTURE OF ETHICS?

As the phrase suggests, a culture of ethics is a type of culture. Every business, regardless of type and size, has its own particular culture.  Loosely defined, the company's culture is the way it behaves, as a whole, that sets it apart from others.  Like the culture of any given country,  an organization's culture makes it unique.  For example, these differences can be seen in its structure. Some companies have clearly defined positions, each having its place in the chain of command while others have very loose structures with no clearly defined hierarchy.  Or, one can get a feel for a company's culture by observing its employees' attire, whether it is casual, business or where uniforms are required.  The above are examples of just few aspects of an organization's culture.

Where does ethics fit into this notion of culture?  Before going any further, we need a working definition of ethics.  It is about having a sense of values, consciously exercising judgment pursuant to the values and acting according to that judgment. Ethics only matters in the context of behavior. For example, if the officers at Enron had corrupt thoughts, but acted in the best interests of the corporation and its shareholders, no investor would have suffered any loss. To be clear, ethics is not necessarily about acting right or wrong, or according to the law or in violation of it, although some professions such as law do have codified ethics rules. A culture of ethics refers to an organization, as a whole, knowing and appreciating its values and consciously acting consistently with them.

Our sense of culture drives so many of our behaviors. Every culture has a value system and corresponding rules, formal and informal, that govern behavior.  Beginning in early childhood, we learn the rules, the purposes behind the rules and the consequences of running afoul of the rules. Our values are ingrained in us by authority figures such as parents, teachers and government leaders.  Their messages are repeated; appropriate behaviors are rewarded and inappropriate behaviors are punished. Learning the values and appropriate behavior is a process, not an isolated lesson.  Having been steeped in the culture, the values become second nature.  We know them down to the marrow.  Because we know the values so well and how to behave according to the values, socially correct behavior is no accident. Of course, some may know how to behave appropriately, but choose not to for whatever reason.

A CULTURE OF ETHICS PROMOTES ETHICAL BEHAVIOR

 When a business has a culture of ethics it acts consistently with its values.  Ethical behavior is the norm and contrary behavior is an aberration. Acting according to the organization's highest values is a matter of second nature; it is simply the way things are done.  New employees readily learn the ropes of the establishment, including its values and acceptable behaviors. People want to feel like they fit in.  Accordingly, employee conduct will be consistent with the culture.  Even if employees do not share the values of the company, their behavior will fall in line. Or, as is often the case, some may find that the organization's culture of ethics matches their own values.  For them, there is no culture shock. Conforming behavior is easy.   

THE ORGANIZATION'S LEADERS MUST CHART THE COURSE

When ethics matters to an organization's leaders, it becomes part of the business model.  Successful businesses devote time and energy to those elements of the business plan that matter.  The research and development department creates new products because it is important to stay current with or, better yet, ahead of the competition.  The sales department is dedicated to getting the products out the door.  Other departments, such as marketing, advertising and customer service have their respective dedicated functions. If ethics matters to an organization, its leadership must embrace ethics as part of the business plan.  When ethics is incorporated into the business model, it  becomes substantial and real; ethics is seen as important to the success of the company. Creating or revising the business model is the function of an organization's leadership.  However, some organizations have ethically neutral leaders who do nothing to create a culture of ethics. The business ignores ethics completely.  There is no system, formal or otherwise, to guide value based behavior thereby sending the message that ethics is not an issue worth addressing.  This kind of leadership sends the message that ethics does not matter at all and that the employees are on their own to figure it out.  The ship is without a rudder.  Effective leaders establish an ethics system and set the right examples.

START WITH A CODE OF ETHICS

A code of ethics is a statement of the values the company embraces. Management must know and be able to articulate the values which are important to the company.  Some values may have almost universal acceptance and application.  For example, most businesses would probably subscribe to the value of honesty in customer relations such that it would be wrong to deliberately mislead a customer into purchasing a  good or service.  Other values have more narrow applications.  For instance, some businesses, especially professional firms, have fiduciary relationships with their clients, affirmatively requiring disclosure of material information, whether requested or not.

ADOPT STANDARDS OF CONDUCT

Since ethics is about behavior, the organization must adopt standards of conduct. The standards of conduct dictate what behaviors are appropriate or recommended and those that are prohibited.  And, there must be consequences for violations. For example, an investment brokerage values client confidentiality; it is sacred and is to be protected at all costs.  All employees are instructed that they are not to remove any software containing confidential data from the brokerage=s office.  Suppose an employee takes a disk home and his manager learns of it.  There must be consequences for the employee. For, without any, the policy and standards of conduct are meaningless.  On the other hand, behavior that exceeds expectations should be rewarded.  Without standards of conduct, personnel are told what principles the company deems important, but they are not offered any guidance on how to act according to those principles.

GENERAL ETHICS GUIDELINES TO FILL THE GAPS

There will be situations where neither the ethics policy nor the standards of conduct apply.  This is similar to our justice system where there are instances in which there is offensive or even harmful behavior for which the law is silent, providing no remedy or relief.  This does not mean that management should simply hope for the best and surrender to whatever outcomes these situations produce.  In the absence of a specifically germane ethics policy, personnel can nevertheless be trained to be generally aware of ethical issues and how to appropriately respond to them.  For centuries, philosophers and academics have been developing theories of ethics for every context, including the business realm.  Much of this scholarship is highly abstract having no direct application in the corporate environment. However, modern business and ethics scholars have transformed these abstract ideas into practical tools for everyday use.  Personnel in all types of companies can be trained to use these tools to effectively handle ethics issues in a myriad of situations.  This task is ideally suited for professional ethics trainers.

ETHICS IS FOR EVERYONE IN THE ORGANIZATION

Once the ethics policy and standards of conduct are completed, they must be accessible to every employee regardless of position. Ideally they should be in writing and/or posted on the company's website.  Everyone in the establishment must be able to understand them.  They should be manageable in their size so to be easily digested.  A 1000 page manifesto on the corporate values will not be read or understood.  On the other hand, the organization ought not sacrifice completeness for brevity.  Obviously, balance is key here.

LEARNING THE ROPES

The messages of the policy and the standards must be made clear through training.  Many businesses have ethics and compliance departments dedicated to training.  Others hire qualified ethics trainers.  After the initial training, the messages must be repeated.  This can be done in a number of ways.  For example, some companies require refresher courses provided by the ethics and compliance department.  While others bring in outside professional ethics trainers who give periodic seminars. Other organizations include salient points of their policies on posters, newsletters to employees and on employees' identification badges.  Managers are charged with the responsibility of punishing violations of the standards of conduct. On the flip side, ethical behavior is to be encouraged and rewarded.   Some forward thinking organizations have ethics hotlines, allowing employees to anonymously report ethics breaches or to seek advice.  Ultimately over time, having seen and heard the messages so regularly and frequently, employees will inevitably learn them.

INTEGRITY FLOWS FROM THE TOP DOWN

Implementing a system of ethics is not enough.  Because integrity, or the lack thereof, flows from the top down, officers, managers and supervisors must lead by example.  When the leaders conduct themselves in accordance with the code,  the values are reinforced.  Employees see that integrity matters and that the rules apply to everyone in the organization. However, when the leaders speak of the importance of values, yet exhibit contrary behavior, employees will follow the example and not the message. Whatever training that is offered, while well intended, is often met with cynicism.  The leaders are unaware that their behavior is watched and that it sets the model for others to follow.   Where the corporation has a strong culture of ethics, it has strong leadership and the opposite is also true.

EVALUATE AND TWEAK THE CULTURE OF ETHICS