Doing the Right Thing to Instill Business Ethics

The trial of former Enron CEO Kenneth Lay is expected to begin early this year, and that’s sure to revive memories of the corporate wrongdoing that dominated business news over the past three years.

    Although the cause of bad behavior in some instances can be traced back to a small band of business rogues, companies are asking: Do our ethical practices keep us safe from such potentially fatal incidents?

    Starting that discussion is one goal behind the Integrity Measurement Program, a new 28-question survey designed by the Minneapolis-based Center for Ethical Business Cultures and Gantz Wiley, a research company. By assessing practices in five critical areas, including company alignment with its suppliers, business partners and community and internal processes from hiring to compensation, the survey informs executives about their current state of affairs.

    Experts say it is such leaders who invariably set the example for a company’s ethical well-being.

    “CEOs have to be clear and say, ‘That’s never what I want,’ and make sure people understand norms,” says Bob Shoemake, director of programs for the Center for Ethical Business Cultures. Trouble is, he says, even blemish-free companies experience communications difficulty among leadership, middle management and frontline workers.

    “That doesn’t mean a company is unethical,” center CEO Ron James says. “It just means information has gotten filtered.” But he says organizations are nonetheless “vulnerable when they say one thing and their activity demonstrates another.” To fix that, James says that a company should address questions about ethics from top to bottom.

    Although the 28-question survey is just reaching the center’s clients, Gantz Wiley has for the past two years included a condensed, five-question “Quick-Check” version as part of its annual WorkTrends study of businesses. Some answers from this year’s results show incongruity. For example, six in 10 respondents agreed with the statement that “My company’s senior management supports and practices high standards of ethical conduct.” But when faced with the statement “Where I work, people do not get ahead unless their behavior clearly demonstrates my company’s values,” only 36 percent agreed. The disconnect points to exceptions that companies sometimes make for the sake of profit.

    “There are always cases of people who are ‘gunners’ and focus on the numbers, and succeed because of it,” Gantz Wiley’s Scott Brooks says.

    A zero-tolerance policy may be the cure for wrongdoing, but a strong company culture is better prevention. Consider the Vanguard Group, the Valley Forge, Pennsylvania-based mutual fund company that is custodian to $800 billion in assets. Known for its low-cost funds, the company wasn’t touched by last year’s scandal involving late trading and market timing, which engulfed close to two dozen firms.

    “Part of it goes to our systems in place: compliance, legal and audit,” says Vanguard managing director Mike Miller. But first, he says company leaders consistently talk about the client-centric practices that precede those controls. “The culture of a company, if it has ingrained the commitment to ethics and excellence, will be fine.”

    Miller says Vanguard’s day-and-a-half orientation for new employees includes a history lesson, examples of its commitment to client service and an explicit warning: “Cross the line, and there’s no second chance,” he says. “It’s clear from Day One.”

Workforce Management, April 2005, p. 26 — Subscribe Now!