Defining a Corporate Culture of Ethics and Compliance

cultureSome things are easy to define by negative inferences. Corporate ethics or business ethics are not the same as legal ethics. Business ethics are not the same as our philosophy ethics – Aristotle and all of the classic philosophers were not operating in a corporate context.

Some things require a positive definition. To bring about real change in the area of business ethics, a clear and concise definition is needed.

I know this analysis will be viewed as simplistic, but I am committed to practical ideas that can be easily translated to the corporate context.

There are two basic schools of thought when it comes to defining corporate or business ethics. The first is to equate business ethics to shareholder interests, which ultimately boils down to profits. If a company is profitable, shareholders benefit. Shareholders are the owners of the company, and their interests are paramount.

Under this view, the contribution of the company to the community, society, and the public interest are irrelevant. Promoting and maximizing shareholders’ interests should guide a company’s business decisions. Reputation, an important company asset, has to be protected and promoted through an ethical culture.

From a theoretical standpoint, the shareholders may express their interest in values other than profits such as political or social issues, and the company has to take those values into account if they become significant to the shareholders as expressed through communications, proxy interests or other interactions between the company and its shareholders.culture2

The second school of thought for defining a corporate culture of ethics is tied to a broader notion of trust and reliability. In this school, corporations act in response to stakeholder concerns. Corporate stakeholders include shareholders, employees, community, government and public interest. In making business decisions using business ethics, a company takes into account all of the stakeholders’ interests. In the end, trust and integrity are important to shareholders, employees, and the public.

Whether there is a real meaningful difference between the two schools of thought is up for debate. In the end, a company’s profitability depends on trust, integrity, and its overall reputation. Employee interests are important, just like shareholder interests, and there may be little difference between the two schools in application. The difference might only result in emphasis, rather than on any real results.

My goal is only to keep business ethics, as a concept, relatively practical and simple. I am not one for dreaming up complex scenarios for defining these terms.

Once a company defines a framework for its corporate culture, it has to focus on how to implement the culture, communicate the culture, and make it a reality for its business operations. That is why simplicity is critical. A corporate audience is like any other audience in society – the message has the be clear and genuine, and it has to be accessible to the managers and employees who are expected to implement it.

culture4Further, the culture definition has to be measurable. If it is simple, it can be measured. If it is complex, the measurement may not be very accurate and could reflect a poor messaging strategy. It is easy to outline this in theory; it is much more difficult to implement in the real world, as it takes time, attention, and resources to manage what many feel is unmanageable – an intangible asset or strategy that has no concrete results.

In my view, these challenges require companies to recognize several real and inescapable facts – culture is the most important control that a company can implement; culture has a direct and immediate benefit to the company’s bottom line of profitability; and culture is the best way to increase employee satisfaction and productivity. Companies need to pay greater attention to this area, and they need to do it now.

You may also like...

2 Responses

  1. November 4, 2015

    […] Source: […]

  2. November 5, 2015

    […] indicates how to get a deferred prosecution agreement in the UK Mike Volkov defines culture. The FCPAProfessor flags remarks on individual […]