Corporate Culture: Tone at the Top and Ethical Leadership
Companies can argue all they want that they are unique in their business. But the truth is, everyone has a competitor. However, there is one important differentiator in the workforce that could make or break your business: Culture.
Corporate culture is the shared beliefs of top managers in a company about how they should manage themselves and other employees, and how they should conduct their business. Southwest Airlines promotes a culture of a: (1) warrior spirit; (2) servant’s heart; and (3) fun loving attitude. Most people who fly on Southwest see it as caring about the customer.
An important element of ethical culture is the tone at the top. Tone at the top refers to the ethical environment that is created in the workplace by the organization’s leadership. An ethical tone creates the basis for standards of behavior that become part of the code of ethics.
The tone set by managers influences how employees respond to ethical challenges and is enhanced by ethical leadership. When leaders are perceived as trustworthy, employee trust increases; leaders are seen as ethical and as honoring a higher level of duties. Employees identify with the organization’s values and the likely outcome is high individual ethics; high organization ethics; and a lack of dissonance.
If the tone set by management upholds ethics and integrity, employees will be more inclined to uphold those same values. However, if top management appears unconcerned about ethics and focuses solely on the bottom line, employees will be more prone to commit fraud, whether occupational (i.e., job-related), or participation in fraudulent financial reporting.
When we think about workplace ethics, the first thing that comes to mind is a code of conduct that influences the development of an ethical culture in the workplace. A code goes beyond what is legal for an organization and provides normative guidelines for ethical conduct. Support for ethical behavior from top management is a critical component of fostering an ethical climate. Employees who sense that top managers act unethically quickly lose trust in those managers. The result can be to become disillusioned with the goals of the organization and question whether the corporate culture is one that is consistent with individual, personal values and beliefs.
Here is a list of measures that should be taken to establish an ethical culture.
- Establish clear policies on ethical conduct including a code of ethics
- Develop an ethics training program that instills a commitment to act ethically and explains code provisions
- Assign a top level officer (i.e., Chief Ethics and Compliance Officer) to oversee compliance with ethics policies
- Use the internal auditors to investigate whether ethics policies have been followed in practice
- Establish strong internal controls to prevent and detect unethical behaviors, such as fraud
- Establish whistleblowing policies including reporting outlets
- Establish an ethics hot line where employees can discuss questionable behavior on an anonymous basis
- Have employees sign a statement that they have complied with ethics policies
- Enforce ethics policies fairly and take immediate action against those who violate the policies
- Reward ethical behavior by including it in the performance evaluation system
The hardest step to take in the workplace is to blow the whistle on wrongdoing by a fellow employee or supervisor. Yet, that is precisely what we are required to do as moral agents. You do not want to get caught up in compromising your values for expediency or the (real) fear that you might lose your job if you aren’t a team player. Often, the would-be whistleblower is pressured ‘to go along to get along.’ The problem is once you stay silent about wrongdoing, it becomes more difficult to blow the whistle at a later date on similar instances because your failure to act initially creates an opportunity for the company to say “gotcha” when you grow a conscience at a later date. You don’t want it to be known you were part of the cover-up of an unethical, even illegal, act at an earlier date.
In ethics, it’s important not to take the first step down the proverbial ethical slippery slope because if you do, and sanction wrongful behavior by your silence, it becomes more difficult later on to reverse course and take the ethical high road.
Blog posted by Dr. Steven Mintz, aka Ethics Sage, on July 16, 2015. Professor Mintz teaches in the Orfalea College of Business at Cal Poly San Luis Obispo. He also blogs at: www.ethicssage.com.