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Understanding and measuring ethical culture

Guillem Casoliva-Cabana (guillem.casoliva@booking.com) is Senior Compliance & Ethics Associate at Booking.com in Manchester, UK, and is studying for a PhD on team ethical cultures at Rotterdam School of Management in the Netherlands.

Promoting ethical culture in firms through the adoption of effective ethics and compliance programs has been a cornerstone of the United States Federal Sentencing Guidelines for Organizations, introduced in 1991 by the federal Sentencing Commission. Firms can alleviate the harshest aspect of criminal liability by showing adherence to these guidelines, and thus mitigate the potential range of fines imposed on them in the event of wrongdoing. Providing incentives for companies to self-regulate has fueled widespread adoption of ethics and compliance programs. Yet, wrongdoing still persists. Three recent, and major, corporate scandals highlight culture as a root cause for those ethical collapses (see details in the following reports: Barclays, 2013[1] ; Well Fargo, 2017[2] ; and Uber, 2017[3] ). This raises questions about the balance between those programs that focus on formal elements of an ethics and compliance program vs. those that effectively improve their organizational culture to drive ethical outcomes. Elements of the policies and procedures necessary to create an effective compliance program have been well-articulated, but a lack of equivalent guidelines in relation to the ethical culture has left organizations struggling to figure out what ethical culture means and how it should be measured. The measurement and improvement of ethical culture is not only important to fulfill regulatory mandates but also because empirical studies show various positive effects of ethical culture, including reduced misconduct, increased willingness to report observations of misbehavior, improved employee wellbeing, and innovation.

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