I continue to be astounded by one simple fact (candidly there are others) – companies do not understand that creating and maintaining an ethical culture improves bottom-line financial performance.  A commitment to ethics as an enhancement to an existing compliance program not only improves performance of the compliance program, but improves corporate profitability and long-term shareholder value.

From my days as a history major, I am reminded of the Luddites and their rejection of technology.  To me, the issue is remarkably similar – companies ignore ethics as a driver of compliance, but more importantly fail to recognize the importance of ethics a means to ensure business success and long-term viability.

There is an abundance of research proving that an ethical culture improves financial performance.  The link appears very logical and intuitive and research confirms the improvement to the bottom line.

A remnant of the old-way of thinking was that ethics and profits do not mix.  In fact, research shows that ethics has a positive and direct effect on profits.  A culture of ethics creates valuable goodwill for the company in the market, increases its loyalty among customers, aids in employee retention and maximizes utlization of resources.  On a broader front, a commitment to ethics represents a general approach to corporate decision-making, problem-solving and strategic direction — ethics goes hand-in-hand with creative thinking and positive intra-company communications and information sharing.

Ethics and compliance mutually reinforce each other – legal compliance enhances the ethics of a company and an ethical culture enhances legal compliance.   Companies are starting to understand that creating a culture of “doing the right thing” improves the financial bottom line.

One fundamental limitation to establishing such a link is the difficulty in proving a negative, that an ethics and compliance program actually prevented a company from committing a violation and suffering financial and reputational harms.

Corporate leaders have trouble getting their arms around the amorphous concept of an ethical culture and how it benefits the organization.

Business leaders often refer to the importance of an “ethical culture,” but are unable to cite specific actions needed to instill such a culture.  Businesses need to move beyond the negative mindset and recognize that fostering an ethical culture can define a corporation’s identity.  A commitment to ethical conduct defines business intent and creates a springboard for developing business opportunities.

A shared value and vision to ethical behavior can produce a competitive advantage and enhance business performance.  Compliance professionals need to impress senior management with the logical nexus between ethical conduct and superior performance.

More specifically, compliance leaders should push the importance of ethics: to clarify the company’s purpose in the marketplace and using this message to inspire its employees; to confirm the key values of the company to guide the behavioral norms for employees; and to establish behavior expectations which are aligned with the values and business operations.