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The keys to running an ethical organization

Holding everyone in a company accountable for ethical conduct is essential

Bad business behavior made front-page news, from Enron’s financial cover-up, Arthur Andersen’s book-cooking and Hewlett Packard’s spy operations to Wells Fargo’s fake customer accounts, Mylan Pharmaceutical’s price-gouging and Fox News’ sex scandal.

The commonality among these corporate giants was a lapse in business ethics.

The short definition of “business ethics” is a moral code of conduct companies adopt and pledge to follow. Ethical standards forbid tolerance of and participation in activities considered immoral, unlawful, unfair, dangerous, irresponsible and generally harmful. By setting ethical standards, businesses lower the risk of becoming lawsuit targets, while sealing their reputations as law-abiding corporate citizens.

Accountable leadership is key

Ethical businesses have a high moral code and expect honest and trustworthy behavior from everyone in their organizations. Chief executive officers and other high-level company leaders hold themselves accountable for following and enforcing the same ethical standards as their employees.

In “Athletes Off the Field: A Model for Team Building and Leadership Development Through Service Learning,” author Laurie Haughey cites five high-standard goals of ethical leaders, including communication in which ethical behavior is both carried out and instilled in a company’s brand; high-quality products and services that everyone in the organization takes responsibility for producing; and collaboration with diverse groups of advisers. The final two goals are succession planning, in which future company leaders pledge to maintain ethical behavior, and tenure, which requires leaders to work for the company in the most ethical way until they decide to leave.

What acceptable conduct looks like

Businesses maintain ethical workplace behavior through internal rules of conduct. They issue restrictions on email content and set appropriate uses of social media and the Internet in general. Zero-tolerance for bullying, verbal and physical abuse, and other confrontations are common rules.

Ethical companies fully and immediately comply with all government and EEOC mandates on sexual harassment, discrimination, workplace safety and labor practices. Organizations publish rules of conduct in employee handbooks and require employees to sign agreements stating that they read and understand the rules and consequences for violating them.

Nan DeMars, author of You've Got To Be Kidding!: How to Keep Your Job Without Losing Your Integrity (Wiley, 2011), wrote that managers should run what she refers to as an Ethical Office. EOs promote honesty and trust in communicating with employees, directors, stockholders, customers and other stakeholders.

Unethical means of doing business

Companies have been known to bend to the pressures of meeting sales goals. Wells Fargo allegedly created a culture in which employees felt pressured to create fake customer accounts to satisfy the bank’s sales quotas.

A lapse in ethics has led some businesses to exaggerate their earnings, products’ capabilities and stock values. Other businesses overpromise and underdeliver their services. Even badmouthing the competition to gain an edge in customer loyalty and patronage is acceptable practice in some corporate circles.

Businesses have been charged with putting products that they know are unsafe before consumers and deceiving the public, and their own stockholders in particular, about their financial standing.

But thanks to technology and the free-flow of electronically transmitted information, consumers are more aware of and much savvier about corporate misconduct. They’re also more vigilant and less accepting of unethical behavior. Now the pressure is on organizations to conduct themselves based on a higher moral code.

The Ethisphere Institute, which defines and advances ethical business standards, released a list of 124 worldwide companies for their high ethical values. The firms chosen in the 2017 World’s Most Ethical Companies® are entities that invest in their local communities, value diversity and inclusion, and concentrate on the long term as a viable business advantage, according to Ethisphere's CEO, Timothy Erblich.

HR can head up ethics initiatives in their organizations. No one knows better than HR how to help employers behave like good corporate citizens for their employees and the surrounding communities, and operate within the law.  

Filed Under: HR Management Legal
Top image credit: Ambro