Practicing ethics as legal compliance may bring a company to neutral – “doing no harm” – but it will do little to motivate or inspire exemplary behavior on the part of employees.  As discussed in the last blog of this series, the traditional approach of ethics-as-compliance is insufficient to cultivating an ethical culture. Here are the reasons why.

The Code of Conduct Won’t Cut It

An ethics policy will not – on its own – ensure that individuals within an organization will act ethically. The recent fraud at Wells Fargo and the Volkswagen emissions scandal clearly demonstrate this point. In both cases, the companies had policies in place to prevent and punish legal violations. 

Despite these punitive measures, many employees were complicit in these scandals, which spanned the course of several years. Those who refused to break the law were punished. A lawsuit against Wells Fargo alleges, “Employees who failed to resort to illegal tactics were either demoted or fired as a result.”

One major problem with the compliance approach is that it often overlooks or fails to account for the various organizational pressures and incentives that can lead to wrongdoing in the first place. Things like sales quotas, diminishing market share, and declining company revenue all put a tremendous amount of pressure on employees, many of whom are already stretched too thin.

These pressures can gradually chip away at the moral foundation of even the most virtuous individuals. If there is the sense that unethical behavior is business as usual, the misconduct quickly becomes standard operating procedure. Individuals can then rationalize their bad behavior, while the implications quickly fade from our minds – a phenomenon known as ethical fading.

Another problem with an over-reliance on compliance programs and mandatory ethics trainings is that they are often siloed, rather than fully integrated throughout the company. They are peripheral, not core, to the organization. They are add-on, incremental, minor tweaks, rather than systemic changes. 

And now that I have taken you through the litany of ways that compliance programs fail, let me say this: having robust policies and programs in place to monitor and prevent unethical behavior is important! The problem is that these structures and systems will only take a company so far. 

From Punitive to Positive

Enabling ethical, pro social behavior is more demanding and takes a stronger commitment than maintaining legal compliance by avoiding unlawful conduct. 

This is especially true for larger, decentralized organizations that may not have ethical values built into the fabric of the organization from the start. Designing ethical systems involves a holistic approach that considers the shared set of values and guiding principles that define a company’s culture. 
 
We’ve written before about how sustainability boils down to aligning values, beliefs, and behaviors with environmental stewardship and social responsibility. As such, ethics is at the heart of sustainability. At the most fundamental level, sustainability is about cultivating an ethic of care for oneself, each other, and the planet. 

A values-based approach to ethics recognizes the role and responsibility on the part of the company itself to shape and influence ethical practices throughout the organization. Ethics is not just a personal matter, it’s a management issue. Empowering senior leaders and supporting mid-managers to promote and embody ethical behavior is key for success. When everything is aligned and everyone is thinking about the long-term mission of the organization, employees will see themselves as partners in ethical leadership, rather than mere compliance subjects.   

Another critical ingredient in designing ethical systems is courage. Yes, courage - the ability to act from our hearts in the face of fear. The path of least resistance is to go along with the crowd and be swayed by situational influence. Phil Zimbardo, the social psychologist who conducted the famous Stanford Prison Experiment, had this to say about why good people do bad things: “Decades of evidence shows us that situations can persuade even the most ethical and compassionate people to betray their own values.” It takes courage and vulnerability to act on our values in the face of fear. 

Integrating a positive organizational ethos and making it “just the way we do things” takes practice and ongoing efforts to bring about positive changes to peoples’ patterns of thought and actions. 

While there is no one-size-fits-all approach to cultivating ethical organizations, there are a number of tools and best practices to help companies tackle this challenging (yet rewarding!) endeavor. And there are now data-driven, research-based solutions that help companies evaluate whether they have an ethical culture. We’ll delve further into these practical tips in the last blog of this three part series. 

Categorized as: Governance