CEO Ethics

Top ten ethical blunders

Rather than address the causes for ethical problems, companies too often simply create a filter for trying to catch infractions. This reactive approach failed in addressing total quality, and will fail in addressing quality in ethical orientation.

We now have over twenty years of experience with formal ethics structures in business. By and large these have become one-dimensional programs for delivering compliance, with very little impact on actual business strategy or corporate culture. Enron was touted as a paragon of ethical practices even while its executives plundered shareholder value, and its employees adopted ever more ruthless personnel policies. It is important to realize that such failures are not simply from rejecting ethics, but rather from misapplying them.

The Wrong Way to Strive For The Right Thing

In many ways the whole business ethics culture is at fault. Voluntary codes are not rigorous enough. Structures like ethics or integrity offices have become largely legal services grappling with compliance. Rarely do Boards or strategic planners accord ethics the serious consideration given to finance or marketing. And whistle-blowing systems have been adopted without protecting those who take the risk to do the blowing. Business ethics too often pivot on a business case: tolerated for contributing to reputation or protecting against fines, but considered optional if there is a cost to ethical adherence.  

The most common mistakes are in the most common practices:

1. Adopting formal codes as a tactic rather than as a strategy, assuming rules will catch mistakes rather than addressing the underlying beliefs, motivations and culture.
2. Managing ethics as a legal or PR variable rather than creating an operational culture that invites the hard questions and uncertainties of moral dialogue.
3. Instituting systems of accountability to more clearly assign blame rather than to give more depth to the fiduciary duties for care, answerability and due-diligence.
4. Defining ethics principles as a top-down or internal exercise rather than by means of a dialogue with stakeholders, critics and those impacted by corporate activities.
5. Assuming that generic terms are enough to inspire employee adherence rather than interacting with them to discover the precise implications for values, attitudes and behaviours.
6. Downloading ethical responsibility on employees as a parallel deliverable to business results without providing the tools, skills or leadership for effectively managing the conflicting objectives or ambiguities.
7. Introducing whistle-blowing structures without creating the culture that supports dissent and rewards those who take stands based on ethical principles.
8. Making ethical commitments without introducing the hard measures for evaluating and tracking the specific dimensions of trust and integrity.
9. Embracing ethics programs during crisis or scrutiny without unlearning the habits and values that contributed to impropriety in the first place.
10. Regarding ethics as a binary option without realizing that it is actually a process of constructive and iterative transformation that actually extends and enhances strategy. 

I teach several ethics classes. I think this is a good article written by the Center for Ethical Orientation. Many of my master and doctoral students are considering starting their own businesses. It is very important to have a strong code of ethics set up from the beginning and to be sure that this message is being delivered.