Promoting an Ethical Culture — Actions Not Just Words
With an increasing focus on the value of an ethical culture, I have been reading more about chief ethics officers, the separation of ethics and compliance, and the traveling ethics officer who meets with employees to discuss ethics. Forgive me for being a contrarian but everyone is missing the point about an ethical culture.
A company does not instill and promote an ethical culture by spreading “happy talk” about ethical values, principles and the importance of an ethical culture. To the contrary, the words and communications efforts are a small part of what is really much more important – ensuring ethical conduct, measuring ethical values and promoting ethical business decision-making.
What do I mean by all of this?
First, an ethical culture depends on conduct, actions, and controls. A CEO has to act in accordance with the company’s ethical values, and has to demonstrate this commitment in his/her actions. The senior executive team has to make a similar commitment. In this respect, their conduct makes it clear whether the company has a real commitment to ethical business actions. To the extent their decisions or actions have to be communicated to ensure that everyone is aware of these steps or actions, a communications strategy should be adopted to spread the word on their ethical actions.
Take for example, a decision by the business to decline to move forward with an acquisition or a joint venture arrangement based on among other things, compliance and culture concerns – in other words, the potential acquisition or joint venture was not a good fit financially and culture wise. The company’s decision not to move forward should be explained to reinforce the importance of culture as an important factor.
Second, the company has to take affirmative steps to train and require business decisions to include consideration of ethical factors. Does a supply contract with a company that has been prosecuted for environmental, health and safety or labor violations make sense? A company may choose not to do business with a particular supplier or vendor because of reputational concerns created by such a relationship. The company may very well ask as part of its vendor/supplier consideration whether such an alliance is consistent with its ethical culture. Again, this is an issue that should be examined and publicized internally if the reputational concerns are significant enough to cause the company to decline to do business with the offensive vendor/supplier.
Third, a company’ culture has to be measured in order to determine whether the message and requirements are getting through. It is not hard to measure a company’s culture. It can be done across the company, although I favor more targeted surveys along with focus groups, which I recognize are less scientific but still valuable for insights. A survey can quickly uncover the strength of a company’s ethical culture by asking employees questions on a variety of topics, including: (1) board’s commitment to ethics; (2) top management’s commitment to ethics; (3) company’s overall values and principles; (4) employee instances of misconduct; and (5) willingness to report employee misconduct.
I do not mean to belittle communications efforts by chief ethics officers promoting internally the value of ethics. Nor do I oppose separating ethics and compliance functions. My concern is that ethical values and principles have to be instilled in a company in real and tangible ways. Words are all well and good – but ethics demands actions and commitment, not just feel good affirmations that have neither any bearing nor relationship to the company’s actual business operations.