Business is more concerned than ever about ethics. Since Enron and other business scandals, companies have been strengthening their ethics codes and programs. Ironically, Enron had a strong ethics code that named the values thought to be most esteemed by its executives. Prior to Enron’s scandal, its ethics code was highly regarded as a positive model. What went wrong?
The clear lesson is that just having an ethics code does not guarantee that a company will stay out of trouble. In fact, an ethics code can make a bad situation worse if, as with Enron, it makes people even more cynical about the company’s apparent hypocrisy.
That said, it would be a mistake for a company today not to have a robust ethics code. The reasons for this go beyond the requirements of Sarbanes-Oxley. Done correctly, ethics codes not only forestall misconduct, they point the way to exemplary judgment and behavior. An emphasis on ethics promotes effective as well as responsible business judgment and conduct.
How can executives ensure they’re getting the most value from their company’s ethics code? It is important to remember that many of these codes were first written when most companies were more hierarchical and bureaucratic. Their codes reflected the view that managerial duties could be spelled out in detail and codified in a policies and procedures manual. There was advanced division of labor and clear spans of control. In that environment, the task of ethics was to chart a clear, stable path.
Over time, many companies removed layers of middle management, pushing decision making downward and organizing people in more flexible, self-managed teams. Emphasis was placed on individual initiative and lightning-quick responsiveness to a dynamic business environment. As organizational processes became more complex, even chaotic, ethics emerged as an integral dimension of corporate culture. Ethics came to be viewed as a something that permeates the organization, holding things together while supporting individual thinking. Codes today need to be rewritten to reflect evolving organizational structures and practices.
Amidst all the change, one practice has stood the test of time: Corporate ethics must be embodied in the words and deeds of the company’s leaders. Even the perception that the people at the top don’t walk the talk can breed cynicism and doubt throughout the company. The requirement of ethical leadership is even more urgent today because many companies report greater diversity of values held by their employees. In particular, the newest generation of workers brings a mindset to work that seems to contrast starkly with the preceding generation or two. Thus leaders must embody traditional core values while also comprehending how new values and attitudes are shifting the corporate landscape. As business goes global and the rate of technological change accelerates, this challenge becomes even more acute. Communication from top to bottom and back to the top again, has never been more important.
While a written code is fundamental, it has teeth only when it is implemented in practice. We now have a robust array of methods and tools to actualize ethics in organizations: Ethics officers and ombudsmen, hotlines and blogs, benchmarks and best practices models, training and development. Cutting edge developments with these kinds of methods and tools provide new levels of sophistication in implementing corporate ethics. One exciting development now is the area of assessment, measuring the actual impacts of these initiatives on the bottom line. As executives embrace the lifelong learning required by our flatter, faster world, they need to use these assessment breakthroughs to measure the effectiveness of their training. This is as true for ethics as it is for any business function.
Charles Dickens’ A Tale of Two Cities reminds us that it is possible to live simultaneously in the best and the worst of times. The recent wave of corporate scandals has shown how bad it can get. But there are executives who are responding to the challenge with a renewed commitment to advancing ethics in business. For them, these times may prove to be also the best.
David P. Schmidt is the chief ethicist for iDNA (www.iDNAUSA.com), a strategic communications and technology company that specializes in producing corporate meetings and trainings. He can be reached at (212) 644-1400.
