A matter of ethics: in organizations where honesty and integrity rule, it is easy for employees to resist the many temptations today's business world offers

Internal Auditor, Feb, 2003 by Dennis Blank

Corporate ethics always exist at some level: functionally effective ethics create and build a morally safe environment based on care, trust, responsibility, and other core values unique to the corporation; functionally ineffective ethics create an environment of fear and chaos, or malaise and distrust. The answer to whether corporate ethics can be mandated depends to a large extent on the management skills and the ethical integrity and role modeling of the leadership team -- the CEO, other top-level executives, and the board of directors.

The conditions for effectively mandating corporate ethics include:

* Awareness of core values of the corporation and CEO.

* Establishing ownership of the core values by all employees, executives, and other constituencies.

* Democratic implementation of core values and ethical processes.

* Clear lines of moral authority -- the defined responsibility of each constituent.

* Enhancement of moral intelligence -- the active application of responsible decision-making skills.

* Metacognitive -- self-interrogation -- skill development.

* Commitment to corporate ethics culture.

* Vigilance and constant reminders of core ethical values.

If one views mandating ethics as a top-down process, challenged occasionally by the whistleblower or nervy subordinate, then the skills and sensitivities of the leadership team are crucial to the development of moral corporate ethics. Autocratic leaders tend to be insensitive; laissez faire leaders create a "don't care" attitude; and democratic leaders are more likely to create a culture of loyalty and support for the corporate core values. These three types of leaders differ significantly at the implementation level.

The first, an autocratic imperialistic tyrant -- or tyrannical leadership team -- might create the appearance of efficiency while destroying all the intangibles of trust, honesty, and responsibility. Such fear may develop reflexive obedience but not ethical decision-making.

The second type of leader, the democratic CEO, will include much "bubble up" communication -- input from all levels of individuals -- to develop and clarify the ethical standards of the corporation, and so establish a mandatory set of ethical expectations for both employees and the leadership team. Such a leader -- and leadership team -- can create a mandatory ethical corporate culture in which all employees and leadership members participate with moral intelligence.

The third leadership style -- laissez-faire -- reflects apathy. The CEO abandons his or her moral authority or unwisely delegates responsibility to unethical and unsupervised leaders. The laissez-faire approach is unlikely to mandate an ethical corporate culture at the praxis or action level. Enron appears to fall under this category.

In the corporate structure of firms led by a democratic CEO, a set of corporate ethics is usually found in the company's professional codes and the policy and procedures manual and reflects its core values. Input from all employees and leaders is mandatory for ownership of the core values and procedures, and responsibility is at the level of each employee.