Character-Based Leadership Underlies Ethical Decision-Making
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. When the values and beliefs of an individual do not match those of the organization, ethical dissonance occurs and these differences need to be resolved to bring an ethical balance back to the organization.
Establishing an Ethical Culture
An ethical organization is one in which top managers establish a tone at the top that promotes ethical behavior including to raise questions when questionable behavior occurs. 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 occupational 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.
Character and Leadership in the Workplace
“Character Counts” is the mantra of the Josephson Institute of Ethics. Characteristics of ethical behavior in leaders include: compassion, courage, diligence, fairness, honesty, inclusiveness, initiative, integrity, optimism, respect, responsibility, and trustworthiness. Good leaders have strong character and have a moral imperative underwrite their actions. Management guru, Warren Bennis, is quoted as saying: “Managers are people who do things right and leaders are people who do the right thing.”
Good character can be developed through experience and learning. Each situation we encounter presents a different experience and opportunity to learn and deepen character. Character becomes critical when managing a crisis, such as an ethical dilemma where stakeholder interests conflict.
Managers can set the right tone at the top and foster ethical leadership, both of which are necessary for ethical decision making, by following four simple rules.
- Consider how your actions affect others. How will the stakeholders be affected by your intended actions? Here, a utilitarian analysis can be used to evaluate costs and benefits of alternative actions.
- Do no harm. Your actions and decisions should not harm others. One exception is whistleblowing because of the need to emphasize “the greater good,” which means the public interest.
- Make decisions that are universal. Consistent with the categorical imperative of Rights Theory, an ethical leader should ask: How would I want others to resolve the conflict that I am dealing with? Universal decisions are those that should be followed across the board.
- Reflect before deciding. As a final step, think about how you would feel if your actions and decisions appear on the front pages of the local newspaper. Would you be proud to defend them and comfortable explaining them?
Integrity: The Basis for Trust in the Workplace
Albert Camus, the French Nobel Prize winning author, journalist, and philosopher, said: “Integrity has no need of rules.” People of integrity are self-driven to do the right thing. Leaders of integrity act on the knowledge that their actions are ethical and provide the basis for others in the workplace to follow their lead.
KPMG's Integrity Survey 2013 provides an inside look at organizational misconduct based upon responses from more than 3,500 U.S. working adults. Key findings from the report include:
- Nearly three out of four employees reported that they had observed misconduct within their organizations in the previous 12 months.
- More than half of employees reported that what they observed could potentially cause a significant loss of public trust if discovered.
- Some of the driving forces behind fraud and misconduct in the corporate environment include pressure to do “whatever it takes” to meet targets, not taking the code of conduct seriously, believing employees will be rewarded based upon results and not the means used to achieve them, and fear of losing one's job for not meeting performance targets.
- Nearly half of employees were uncertain that they would be protected from retaliation if they reported concerns to management. And more than half suggested a lack of confidence that they would be satisfied with the outcome.
- Ethics and compliance programs continue to have a favorable impact on employee perceptions and behaviors.
Employees were asked what they would do if they observed a violation of their organization's standards of conduct. The results were: 78 percent would notify their supervisor or another manager; 54 percent would try resolving the matter directly; 53 percent would call the ethics or compliance hotline; 26 percent would notify someone outside the organization; and 23 percent would look the other way or do nothing.
It's encouraging to learn that over three-fourths would inform their supervisor, in part because it is the generally recognized first step in considering whether to blow the whistle. It is somewhat troubling that almost one quarter of the workers would look the other way or do nothing.
Tone at the Top
The tone at the top set by top management is a determining factor in creating organizational commitment to high ethics and integrity. Employees were asked whether the chief executive officer and other senior executives exhibited characteristics attributable to personal integrity and ethical leadership. Approximately two-thirds of the employees agreed that their leaders set the right tone regarding the importance of ethics and integrity and served as positive role models for their organization, leaving one-third unsure or in disagreement.
Perhaps not surprisingly, a large percentage (64 percent) indicated that the root cause of misconduct was pressure to do “whatever it takes” to meet business objectives while 59 percent said they believed they would be rewarded for results, not the means used to achieve them. In such instances, the corporate culture does not foster integrity or ethical behavior; instead, expedience and self-interest drive workplace behavior.
Character-based leadership needs to be emphasized in business if companies are to meet their ethical obligations to those who rely on organizations for their livelihood and who are benefited or harmed by organizational decision-making. The notion of a corporate social responsibility needs to be linked with character-based leadership informed by a strong set of unyielding ethical values.
Blog posted by Steven Mintz on July 7, 2016. Dr. Mintz is Emeritus Professor from Cal Poly San Luis Obispo. He also blogs at www.ethicssage.com.