Moving beyond the rules

Organizations must move beyond the rules. Creating and maintaining an ethical workplace culture is essential to avoiding the pitfalls of misconduct.

Workplace culture combines rules and procedures, behaviors concerning the rules, and employee perceptions of what is valued and accepted. Culture is the heartbeat of an organization.

It is more than having an annual training program that is often nothing more than an exercise to “check the [compliance] box.” Now more than ever, organizations must focus on aligning the workplace culture with the rules, creating a culture where integrity is not negotiable.

Challenges affecting today’s workplace culture

Unfortunately, unethical behavior permeates our society today in business, politics, schools, and daily life. Wealth, prestige, personal gain, and self-gratification seem to be the primary goal, often at the expense of organizational and personal integrity and compliance with the code of ethics.

According to a recent Gallup Panel study, “24% of respondents reported seeing or being aware of unethical behavior in the workplace in the past 12 months.”^[1] Yet less than half reported the issue. Based on survey results, the main reason for the lack of reporting is because of workplace culture.

FTX is just one of several recent examples of companies whose leadership openly viewed success as unlimited wealth and prestige, regardless of how it was obtained. Lying became part of the game, and the corporate culture encouraged turning a blind eye.

In a Twitter direct message exchange with Vox writer Kelsey Piper, Sam Bankman-Fried, the former FTX CEO, revealed his views about ethics. In response to Piper’s comment that he was “really good at talking about ethics, for someone who kind of saw it all as a game with winners and losers,” Bankman-Fried replied, “ya . . . hehe . . . I had to be . . . it’s what reputations are made of, to some extent.”^[2]

He went further: “I feel bad for those who get f****ed by it . . . by this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us.”

While Bankman-Fried’s behavior is an exaggerated example of what can happen when ethics are second to winning, the reality is that just one individual’s unethical behavior or lack of integrity can destroy a company.

To avoid a fate like FTX’s, ethical behavior and integrity must be integrated into the organizational culture. Employees must be able to trust their leadership and feel safe reporting observed misconduct. 

Integrating ethics and integrity in today’s workplace

Organizations that incorporate ethics and integrity into the culture have an ethical code of conduct that provides the rules, as well as a stated expectation that employees act with integrity by being honest, respectful, trustworthy, and fair.

In other words, employees are expected to follow the rules and “do the right thing” even when no one is looking. 

Creating this ethical culture can often be difficult in today’s workplace, where multiple generations exist. To say that the various generations have different motivations and values is an understatement. 

In the 1980s and 1990s, there were failures of financial institutions. In 2001 there was Enron—a textbook example of corporate fraud and unethical behavior—and in 2002, it was Martha Stewart’s insider trading incident. 

The mid-2000s brought about the Theranos and Madoff scandals, the collapse of the real estate market, and government bailouts. 

It is no surprise that values and motivators have been colored by the experiences of each generation. A stronger focus on social responsibility and doing good has become the hallmark of younger generations. But so has the desire for meaningful work, more independence in their work, skepticism, and mistrust of others—especially leadership.

We currently live in a time where reality is often masked by phrases and concepts that portray a quest for equity and benevolent motives, along with ill-defined concepts of success and privilege.

Phrases such as “effective altruism,” where the goal is to create wealth for the greater good—often without regard to how the wealth is generated—have become buzzwords. FTX is a prime example of how the idea of “effective altruism,” wealth creation, success, and doing “good” can clash with organizational ethics and integrity.

Too often, we are driven by a “what’s in it for me” attitude, and success is defined by excessive wealth and prestige. Bringing these attitudes into the workplace is contrary to building and maintaining a workplace culture that promotes integrity and ethical behavior.

Bankman-Fried played the game by creating massive wealth in the name of effective altruism, for personal gain and at the organization’s expense.

Wealth and success are not inherently bad; in fact, they are good when obtained ethically. However, glorifying wealth as a measure of success too often results in organizational expectations and incentive programs that promote fraud, lying, and deceit.

The idea of incentives for success was clearly visible in the scandals recently plaguing Wells Fargo.

Wells Fargo’s incentive program involved a sales strategy that pressured employees to achieve extremely aggressive sales quotas. Bonuses were paid based on the number of new accounts opened and other products sold. Accordingly, millions of fraudulent accounts were created. California Treasurer John Chiang described this environment as one that “demonstrate[ed], at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed.”^[3]

Like most organizations, Enron and Wells Fargo both had a written code of ethics promoting integrity and ethical conduct. What they did not have was a culture that put the stated values into everyday practice. 

A strong ethical tone starts at the top. Enron, Wells Fargo, and FTX had leadership that put winning above ethics and compliance. There was a disconnect between the corporate code of ethical conduct and employee behavior. The culture did not encourage or support speaking up about ethical misconduct.

Leadership must, without exception, openly encourage and exhibit the integrity and ethical behavior expected; they must walk the talk.

Having an ethical workplace culture

Having an ethical workplace culture is more than words. A collective understanding that compliance with the ethics code is not an option is essential. It is more than a well-crafted mission, vision, and core values statement posted on a website and in the breakroom. Ethical workplace culture is the very heartbeat of the organization. 

According to the Ethics & Compliance Initiative, “The strength of an organization’s ethics culture is measured through multiple indicators of employee behaviors at various levels within an organization, including leaders, supervisors, and coworkers. These behaviors demonstrate and promote a commitment to ethics on a daily basis. A thriving ethics culture involves commitment, modeling and the right conduct by all employees in an organization.”^[4]

Unfortunately, observed misconduct in the workplace has been slowly increasing. There has been an increase in incidents of management lying to employees, observed conflicts of interest, improper hiring practices, abusive behavior, and health violations.^[5]

As we emerge from the pandemic and experience major changes to the work environment and periods of organizational change, employees are more likely to feel pressure to compromise their organization’s ethical standards.^[6]

It is essential to recognize post-pandemic workplace challenges and promote behaviors to counteract these stresses. It is not enough that senior leaders talk about the rules; they must act on them and be an example that employees want to emulate.

Creating an environment where integrity is not negotiable

To develop and maintain an ethical workplace culture—one where integrity is not negotiable—the organization’s core values must be an integral part of the written ethics and compliance program. 

Having a written code of ethics and a vibrant training program is the first step. It reinforces expectations, ensures that everyone is aware of the rules, and equips managers with a tool needed to enforce organizational values when required.

The next step is to create an environment that encourages adherence to the written standards of behavior. Infuse ethics and integrity into the daily operations of the organization.

Leadership must set the tone. If leadership does not model the way, employees lose trust. If unethical conduct is not addressed, the workforce becomes disillusioned. The result is an environment of mistrust where ethical compromises, failure to report wrongdoing, and attrition become the norm.

The Ethics & Compliance Initiative’s 2021 Global Business Ethics Survey Report recommends the following:

• “Define the standards and behaviors that should guide employees’ actions. Regularly promote values and expectations about employee behaviors in organizational communication.

• “Set performance goals for senior leaders and managers to visibly support the organization’s values and reinforce the importance of speaking up and listening.”^[7]

Build an environment where employees are held accountable for misconduct. Dori Meinert said it best:

“…ethical lapses tend to snowball. Once employees see others breaking rules without repercussions, they may believe it’s OK for them to do so, as well. Or they may get fed up and leave the company. In short, a culture where misconduct is tolerated—or, worse, encouraged—could result in higher turnover, lower productivity, and, ultimately, a diminished reputation and profitability.”^[8]

Communicate with clarity and intent. Set expectations and communicate them. Celebrate examples of integrity, identify where ethical lapses have occurred, and openly communicate organizational issues and challenges.

Create a trust-based environment. Encourage employees to raise ethical concerns knowing they will be supported and free from reprisal.

Provide resources and safe havens where employees can go for guidance and share their concerns and observations.

Make ethical organizational choices. Hire people who share the organizational values and vision. Choose not to deal with unethical vendors, customers, and clients. 

Encourage integrity and ethical behavior in all aspects of life—not just at work—and model the desired behavior.

Conclusion

Having an ethical organization is more than just having a written code of ethics and integrity. It is essential to have a culture that openly encourages and supports ethical behavior.

Make ethics and integrity part of the organizational dialogue. The more issues of integrity and ethics are openly discussed—good and bad—the easier it is for employees to recognize ethics issues and the more likely that the desired conduct will become integral to the organizational environment. 

Ultimately, a workplace culture promoting ethics and integrity will decrease an organization’s risk of an ethics and compliance violation.

Takeaways

• For an organization to successfully navigate the ethics landscape, employees at all levels must willingly engage in ethical behavior and act with integrity in every aspect of their work.

• Workplace culture is a combination of rules and procedures, behaviors in relation to the rules, and employee perceptions of what is valued and accepted.

• Twenty-four percent of employees report seeing or being aware of unethical behavior in the workplace. Yet less than half of them reported the issue. The main reason is because of the workplace culture.

• An ethical workplace encourages adherence to the written standards of behavior, promotes integrity, and creates a safe environment for reporting observed wrongdoing.

• Where integrity and ethics are openly discussed, good and bad, the easier it is for employees to recognize issues, and the more likely ethical conduct will become integral to the organizational environment.