Workplace ethics need to make a comeback. Considering such landmark scandals as Enron, the Bernie Madoff Ponzi scheme and the Merrill Lynch bonus bust; coupled with recent allegations against Bank of America’s former CEO and CFO for misleading investors about Merrill Lynch prior to acquiring the Wall Street bank in early 2009; and reports that point to credit card abuse at all levels of our government, ethics in America continue to be called into question. The gap between proclaimed business values and practiced business values is wide, and it’s time to bring the two back together.
One of the challenges to keeping a company on the up and up ethically is that breaches are typically a result of corporate culture. Pressure from management to achieve results and exceed goals too often pushes employees to cross ethical lines. While this isn’t an excuse, it is a reality. Ethics — good or bad — originate from the leaders who build the strategy, drive the pace and set the moral tone of a business or department.
As business executives and managers scour for ways to improve profitability and performance in this tremendously challenging marketplace, ethics policies and commitment should, without a doubt, be one of the places they look. Why? As it turns out, operating a business with principled values based on “doing the right thing” is vital to corporate survival.
It pays to be ethical
While strong business ethics in and of themselves do not contribute directly to a company’s bottom line, it’s a proven fact that bottom-line results for businesses where employees and executives partner in ethical behavior far exceed those companies where there is little value placed on morals. Additionally, the Ethics Resource Center’s 2009 National Business Ethics Survey (NBES), a survey conducted every two years, shows definitively that companies that adopt an enterprise-wide ethical culture dramatically reduce reports of misconduct. In fact, when comparing the 2007 NBES results with 2009, there was actually a decrease in the number of witnessed ethical misconduct incidents from 56 percent in 2007 to 49 percent in 2009. While it seems that when the economy is down, employees behave well; NBES warns that when prosperous times return, misconduct and disregard for ethics is likely to creep up again.
The International Business Ethics Institute reports that, “customers and investors cite corporate practices and values as primary considerations in their decision making.”  Furthermore, research shows businesses that make ethics a priority have higher employee morale, reduced employee turnover and increased productivity. Those companies named to the “World’s Most Ethical Companies for 2010” understand the rewards of practicing ethics from the top down. ethisphere, a magazine dedicated to business ethics and anti-corruption, conducts an annual survey, which for the fourth year in a row included General Electric, UPS, American Express, Google, Time Warner and AFLAC. In fact, according to Alex Brigham, executive director of the Ethisphere Institute, “…There is a strong correlation between a company’s ethics program and its performance, with ethical companies outperforming the market both in terms of upside performance as well as in avoidance of catastrophic investor loss. This proves that having a commitment to ethics is a competitive advantage and is imperative to business.”
In addition to a strong ethics program, what else do these businesses all have in common? Profit. According to the report, the “2010 World’s Most Ethical Companies” have outperformed the S&P 500 by delivering a 53 percent return to shareholders since 2005. According to the report, other returns on ethics investments include increased consumer loyalty, regulatory leniency in the event of a transgression and stronger employee retention rates.
Certainly the conditions of our current economy have impacted the performance of these companies, along with most others. But, when companies counter the positives of a strong ethics program with the realities of the economic-driven pressures businesses are experiencing today to simply survive, there’s no doubt that ethics needs to make a comeback.
A frightening ethics void
Despite those strong arguments for high values and strong ethics, NBES found that while the reports of ethical misconduct have been lower during the recession, 22 percent reported that “the recession has negatively impacted the ethical culture within my company” and 10 percent reported that “to stay in business during the recession, my company has lowered its ethical standards.”  The NBES revealed that ethical misconduct in general is high: more than half of employees surveyed saw ethical misconduct of some kind over the past year. The report goes on to say that the more a company implements tactics to combat recession (adjusted work schedules, layoffs, compensation/benefits reductions, hiring freezes, etc.), the more employees’ perceptions of an ethical workplace decrease and the less positive the ethics.
Why during this tumultuous economic period, in which every opportunity and action counts, would companies risk unethical behavior? Much of it has to do with ambition, businesses moving too fast to consider problems/issues, and (especially right now), the drive to survive. Businesses that take time today to analyze and improve their ethical performance as service/product providers, employers and marketplace contributors will improve business results and competitive position for the long term.
Set the tone at the top
The Ethics Resource Center identifies characteristics that businesses can emulate in order to operate with high ethical standards. These traits begin with business leaders who are tasked with setting a strong ethical tone at the top. The sheer creation of a code of ethics is not enough to make a difference. To succeed, ethics must be woven throughout all aspects of a company’s operations.
Start at the top (board of directors, senior executives, managers, etc.). Any successful ethics program starts when the executive team sets the tone and espouses high ethical standards as a part of the company’s culture, making ethics the foundation upon which business decisions are made.
Set the expectation of honesty by displaying such behavior on a daily basis. When leadership interacts with employees honestly during everyday business, it sends the message that following suit is expected.
Make communication about ethics and expectations for honesty a regular topic. Encourage leaders to promote ethics at meetings, during speeches or as part of presentations. Make it a topic addressed on an ongoing basis — not just once a year — and initiate a forum for feedback.
Make it safe to report wrongdoing. Create a whistleblower hotline and include other enforcement mechanisms that allow employees to confidentially report transgressions.
Make ethics a top priority from the time employees are hired. Not only during orientation, but offer ongoing training for everyone in the company on what it means to create and maintain an ethical culture.
At UHY Advisors we believe in setting the tone from the top and emphasizing ethics and integrity in all business decisions. We encourage checking in with senior management and promoting conversations with employees at all levels about the status of ethical business practices. Here are several questions business leaders should ask themselves when looking at the ethical practices and performance of a company:
Are you setting the tone of trust? Can your team count on you to do the right thing?
Do you know your company’s core ethical beliefs and are you communicating them to employees — and more importantly living them out yourself?
How are you working against unethical behavior? Does the company have systems in place to assist employees in doing the right thing? Is there a confidential venue for employees to report suspected wrongdoing or questionable actions?
What can you do better as a company to ensure ethical practices throughout the organization?
Do all levels in the organization understand that the business value of your company is one known for its ethics?
The time is now for American businesses to change the landscape of our economy and one important agent of change is ethical business practices. We have seen the demise of businesses that choose to ignore ethics. Our economy is in a position of renewal today and cannot afford the mistakes of yesterday. The research shows that presence of an ethical tone reflects the values, attitudes and beliefs of a company. Knowing that the company with or for whom you work practices strong ethics gives everyone involved, from customers and shareholders to management and employees, confidence in the success of the business. Strong ethical cultures yield high returns, which is exactly what our country needs — now more than ever.
 National Post
 Business Ethics Case Study, http://ezinearticles.com/?Business-Ethics-Case-Study;-Unbelievable-Government-Credit-Card-Abuse&id=251197.
 Ethics Resource Center, http://www.ethics.org/.
 ethisphere, World’s Most Ethical Companies for 2010.
 The International Business Ethics Institute, http://www.business-ethics.org/corpadv.html.
 “Ethisphere Announces Worlds Most Ethical Companies,” http://www.benzinga.com/press-releases/b184388/ethisphere-announces-2010-world’s-most-ethical-companies.
 2009 National Business Ethics Survey
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