Ethics, front and center

In the post-Sarbanes-Oxley world, ethics policies, by necessity, have taken a
front seat in many companies. While many companies believe they have business ethics under control with documentation, what is happening to the culture of
business ethics?

“Businesses are often ruled by ‘thou
shall nots,’” says Denise Schoenbachler,
dean of the College of Business at
Northern Illinois University. “This, of
course, is critical, but it is also important
to stress the ‘thou shalls.’”

Smart Business learned more from
Schoenbachler about the state of ethics in
today’s businesses and what companies
can do to create a truly ethical business

Businesses are creating business ethics policies, but how is this different from creating
an ethics culture?

The majority of businesses are run ethically and with good principles, but several major scandals have broken the public
trust. While the more stringent rules and
regulations are a good thing — and necessary given the criminal misconduct of
executives in these high-profile cases —
these restrictions are reactive. Defining an
organization’s character through ethical
behavior is a proactive approach. That’s
where culture comes in. Culture is really a
set of shared values — a belief system —
that shapes behavior. The significance of a
culture of ethics is that it both defines an
organization and also impacts everyday
issues within the organization. As a simple
example, employees are more likely to
share the belief that it is not OK to pad
expense accounts. And these employees
will influence the behavior of their peers.
But because companies have spent so
much time, energy and money on government compliance, the practice of viewing
ethics in a culture-based way may be taking a backseat.

Are there other reasons that fundamental
business ethics are falling by the wayside?

Time, and in more than one way.
Employees are more likely to engage in ethical behavior if they know they are in
the company for the long haul. The lack of
company/employee loyalty in this global
economy has a big impact. Another element is the enormous pressure many
employees are under to show short-term
results and financial gains. This leads to
the feeling of ‘deliver at any cost’ because
Wall Street’s quarterly earnings expectations have compressed companies’ long-term performance into an extremely narrow three-month performance window.

What happens in businesses when there is a
weak or nonexistent ethics culture?

Sound ethics are at the core of any successful business. The compliance route
leads to after-the-fact policy-writing and
mandated training programs. Those are
all fine and well, but without an ethics culture, the business may open itself up to
questionable or even criminal activity
within the company, in spite of all the policies. It’s also extremely expensive.
Existing research finds that companies
spend approximately $1.1 trillion per year in systems costs just to comply with standards, notwithstanding the costs associated with lawsuits or judgments.

How can businesses make sure they have an
ethical business culture?

The culture of an organization has to be
lived and breathed at the top on a daily
basis. Leaders must personify an ethical
business culture and make it a visible reality. If it is not a leadership initiative, it will
fail. It can be as simple as being very clear
and direct about what the organization’s
character is, what the policy is, the consequences and what is considered right and
wrong. Business leaders should explain
the financial consequences for lapses in
ethical behavior. Business managers cannot turn a blind eye to even seemingly
minor infractions. There must be consequences. Because if employees get away
with the little infractions, it is reinforced
behavior and can lead to bolder unethical

Along with the ‘thou shall nots,’ reinforce the ‘thou shalls’ — that is, explain
what to do when faced with an ethical
dilemma. This can be done through education and role-playing, for example.
While you need to make it clear that
improper behavior will be called attention
to, you also need to reward good behavior
and choices and publicly recognize

Human resources and hiring personnel
should always ask candidates about their
training in ethical business practices.
Academia is part of the solution, as well.
Business schools that are AACSB-accredited (The Association to Advance
Collegiate Schools of Business) now must
include business ethics within the curriculum. Some are taking this a step further by
teaching business ethics in an applied
sense. So, the next generation of working
professionals will have had vast exposure
to business ethics as a skill set.

DENISE SCHOENBACHLER is the dean of the College of Business at Northern Illinois University. Reach her at [email protected] or
(815) 753-6225.