The 2012 Great Place to Work® Institute report claims the stock price growth of the 100 firms with the most ethical cultures outperformed stock market and peer measures by almost 300 percent. Thus, researchers have shown that a firm’s culture is the strongest predictor of how much market value that firm will create for shareholders’ investments. Yet, in at least half of our workplaces, employees report seeing unethical or actual illegal practices (Ethics Resource Center). Lapses in ethics are costly in loss of trust and erosion of confidence on the part of employees and customers. And, there are financial consequences including fines, loss of business, bankruptcies, and more. Yet, unethical practices continue, despite the costs.
If you surveyed most CEO’s, they would cite ethics and integrity as being qualities necessary to an organization’s wellbeing and as critical leadership traits. Kouzes and Posner’s seminal work, The Leadership Challenge (which I’ve mentioned in a previous post), point out that honesty is the #1 trait followers demand in their leaders. In fact, ethical behavior is the foundation upon which a company’s culture must be built.
So what’s the issue? Why is holding people accountable to an ethical path so difficult? In too many organizations, greed is rewarded by punching up the numbers in the short term to make the sales to make the company balance sheet look good. Management is rewarded on short term profit. And, managers themselves are too often involved in shoddy practices and downright unprofessional or illegal or unethical behavior. Managers may look the other way and not call questionable practices to account.
The message is sent, and followers follow the leader. So how do we hold people and organizations accountable? How do we factor in right behavior, not just making the sale, or getting that big account, and making profit at all costs? The good news is that there are numerous resources that provide guidelines.
One is the Society for Human Resource Management (SHRM). In 2013, SHRM put together a foundation report entitled “Shaping an Ethical Workplace Culture.” The report provides specific suggestions for how firms can create a more ethical culture. Each year, Fortune Magazine partners with Great Places To Work® and conducts what is the most extensive employee survey in Corporate America to determine the 100 Best Companies To Work For®. The suggestions from the SHRM foundation report and the outcomes determined by the Fortune Great Places To Work® survey are remarkably similar.
The practices are not costly, nor do they require an MBA in human development. The suggestions are simple common sense. Employees need to feel genuinely cared for and respected, an organization needs to encourage employees to put the work and interests of others first, and to encourage employees to hold themselves accountable to the highest ethical standards. SHRM also provides an Ethical Culture Inventory so that your own organization can assess its current culture and make changes.
The Ethics Resource Center (ERC) has also identified how leaders can model an ethical tone to inspire employees to do the right thing. The ERC says that firms “that want to support strong ethical leadership should make it part of the hiring process, should train managers on ethics and employees’ perceptions of ethics, and annually review business objectives and policies to ensure they promote ethical performance.”
Another source, the Ethisphere Institute, ranks the World’s Most Ethical Companies®. Companies who make the cut must have robust corporate compliance programs, strong corporate social responsibility policies, and must adhere to various trade and other laws. There are also lists of the most unethical companies and practices.
And, there is some good news. The latest report by the Ethics Resource Center, indicated that workplace misconduct is at a historic low, from 2007 which weighed in at 55% of those surveyed to today’s 41%. The report also found that fewer employees felt pressure to compromise their standards than in the past.
We still have a long way to go. As Joyce E.A. Russell, Director of the Executive Coaching and Leadership Development program at Maryland’s Robert H. Smith School of Business, says, “there is still work to be done.” Russell continues, “Since leaders are “watched” 24/7 both on and off the job, it is imperative that they continue to set a good ethical example and reward others who do the same. Only then will we have companies that truly embody an ethical workplace.”
I can’t help adding that unethical business practices are costing society and it’s the taxpayer who is paying. We all lose if we don’t hold businesses accountable.
[tweetthis twitter_handles=”@RichardMBowen”]Unethical business practices are costing society and it’s the taxpayer who is paying.[/tweetthis]
Related Articles, Reports, and Websites
Penn Mutual’s Guiding Principles: a First Step Toward Fraud Prevention
Ethical Leadership- Culture is the Culprit!
The Value of Keeping an Eye on Ethics
Shaping an Ethical Workplace Culture
How do Companies Get on a Best Companies to Work For® List?
Ethisphere Announces the 2015 World’s Most Ethical Comanies®
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
