Business Ethics as an Effective Control
Integrity has no need of rules. – Albert Camus
Corporate decision-making ignores important principles and sometimes, common sense. With the increase in corporate compliance programs, corporate boards and senior executives need to take a moment to address one important issue – the importance of creating an ethical culture.
For some reason, corporate boards and leaders like to focus on the tangible aspects of ethics and compliance – how many compliance officers, the number of reporting systems, the internal training program, and resources needed to manage compliance in a global organization. Do not misunderstand my point – these are all important.
But everyone appears to be missing the most important point – the most effective compliance control is a culture of ethics. Or to put it in a more tangible way, you can build the most elaborate and comprehensive set of internal controls designed to promote compliance with a company’s code of conduct and every applicable law, but, in the end, those controls, individually or together, will never ever eclipse the importance of a company’s commitment to creating a culture of ethics and compliance.
As Albert Camus noted – integrity does not require rules. This common sense statement applies with powerful force to corporate compliance.
In the end, a compliance program cannot prevent every instance of employee misconduct. Everyone knows this truth.
On the other hand, a corporate culture of ethics has the greatest impact on individuals or small groups of individuals who may be considering or tempted to engage in misconduct by influencing them to refrain from misconduct. A culture of ethics may cause an individual to second-guess or stop for a moment of contemplation before engaging in misconduct.
Additionally, a corporate culture of ethics will increase the likelihood of another employee who learns of corporate misconduct committed or contemplated by others to report such misconduct internally. In the absence of such a culture, the willingness of employees to report misconduct by other employees is reduced significantly.
Companies do not have time to engage in psychoanalysis of each of its employees. However, companies can appeal to the conscience of its employees by committing the company to a culture of ethics and compliance. Those without a conscience will continue to engage in misconduct. Those with a conscience may refrain from engaging in misconduct or may report others who they suspect have engaged in misconduct.
Companies that do not invest in their corporate culture are making a serious mistake. The cost of promoting a culture of compliance usually boils down to time and attention. It is more an economic opportunity cost than a monetary cost.
The investment in a culture of ethics and compliance has benefits that extend outside of the issue of code of conduct and legal violations. A culture of ethics and compliance directly promotes financial profitability by improving employee morale and productivity and reducing employee turnover.
Employees want to believe in the company they work for because they want their efforts to contribute to society. A company with positive ethics and compliance often is viewed positively in the community and in the marketplace. Employees want to be a part of organizations with a positive reputation and with strong moral character.
Every company needs to examine its commitment to ethics and compliance. Before investing significant time and attention to compliance programs that depend on a culture of compliance, a company has to invest first in its culture of ethics and compliance. Such an investment requires the specific support and authorization from the board, the CEO, and senior leadership.