Ethics: Good for Goodness’ Sake

What we mean when we talk about ethics.

Three years ago, when CFO magazine surveyed 500 chief executive officers about what they thought was most important in a chief financial officer, 84 percent of them ranked personal integrity just behind financial expertise. Evidently, CEOs were hungry to hand over the financial reins to a few honest men and women.

The media and Washington have spun the recent high-profile financial misdeeds of a handful of large corporations as an indictment of the ethical behavior of all Corporate America. Part of the fix, if you believe the country’s top policymakers, is…a call for more ethics in business. But isn’t that what CEOs said they were looking for all along?

The trouble with demanding ethical behavior is that unless those doing the demanding heed their own words, the call rings hollow. In fact, it’s likely to do more damage than good if you’re going to proclaim such behavior but practice otherwise.

In its 2000 Organizational Integrity Survey, KPMG found that the ethical behavior of top executives affects employees’ perception of their companies. Overall, 69 percent of the 2,390 employees of the companies surveyed believed that their current customers would recommend their company to others. But when employees believed management would uphold the company’s stated ethical standards, that number shot up to 80 percent. It fell to 40 percent among employees who believed that management would not adhere to written standards.

When it came to recruiting word-of-mouth, the differences were staggering. Overall, 66 percent of employees would recommend their company to prospective employees. Among those who believed management would walk the ethical line it talked, the number of recommenders jumped to 81 percent. But among those who believed their boss’s behavior clashed with stated policies, the number was just 21 percent.

The Business of Ethics

During the 1990s, the ethics business boomed, and not simply because companies were hoping for a little good PR. In 1991, new federal sentencing guidelines stipulated that when a corporation was accused of violating federal laws, its management’s efforts to prevent misconduct would be taken into account in assessing culpability. Minimizing fines and jail time also provided a huge incentive to create ethics policies.

Companies fell into line. Consultants were brought in, manuals were drawn up, and few companies would be caught dead without a well-crafted code of ethics or values statement. RICE — respect, integrity, communications, and excellence — became the most common acronym for values statements. To read one company’s statement after another, you might think the same person wrote every code.

The catch is, in order to work, these values statements must reflect the reality within a company. A few years ago, Jim Collins, the co-author of Built to Last and Good to Great, two management bestsellers that found adherence to core values to be the sign of great, enduring companies, said: “I’m not a big fan of the ‘right statement’ model of the world. I’m more a fan of the ‘get clear, skip the statement’ part.”

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