CEBC IN THE NEWS

Questioning Authority:
Corporate ethics
are in the eye of the beholder,
says Ron James.

Published in the January/February 2006 edition of Across The Board.

By Vadim Liberman

Is your company ethical? The answer may depend on whom you're asking. CEOs and senior management will probably say yes. But the lower down you go in an organization, the more likely that employees will answer the opposite. Why the disconnect? Ron James, president and CEO of the Center for Ethical Business Cultures, affiliated with the University of St. Thomas in Minneapolis, has a few ideas. His center, along with Gantz Wiley Research, recently surveyed more than ten thousand employees at about 3,500 companies to gauge their thoughts on corporate ethics. James, 55, visited Across the Board's New York offices to discuss his findings. —Vadim Liberman

Why the gap in perception between senior executives and lower-level workers when it comes to how ethical their company is?

While senior leaders often establish ethical guidelines, in reality they aren't reinforcing the norms that they are supposed to be setting. For example, senior leaders tend to consistently emphasize the importance of performance and the bottom line. But if you aren't also emphasizing ethical behavioral messages, then all employees hear is that it's all about the numbers. Get the numbers at all costs, they think. And that causes some to compromise ethics.

Second, compensation, appraisals, and promotions are all based on quantitative results — again, numbers. So employees will think: If I want to get promoted, then I have to focus on the numbers and not necessarily the behavioral standards. Evidence of that is embodied in our research, where employees answered the question: Can I get ahead in this organization even if I don't live up to the values? About six out of ten employees said yes. So leaders may be saying that you have to live up to the values, but the way they run their companies gives employees the impression that it isn't about how you behave — it's about what you bring in.

How do you know whether the views of senior execs or people lower down are the more accurate reflection of reality?

Senior leaders don't see what's really going in terms of climate and culture at the front line, the day-to-day activities of the organization. In fact, more than half of all workers have observed unethical practices going on in the workplace. Now, granted, I don't know whether or not they're seeing these instances with the same person or with different individuals, but it still indicates a pattern of unethical behavior in the workplace.

Are you distinguishing between illegal and unethical?

There are some companies that say, Let's do whatever it takes to meet the requirements of the law. There's nothing wrong with that, but you have to recognize that the law, by definition, typically is made up of rules that have been made to address previous situations. It's tough for it to anticipate future violations that might occur. Companies that invest in building an ethical culture recognize that when new issues arise, people will need an ethical compass that will help them make the right call, or at least get help in a gray area. Then, too, ethics are good for the business.

How?

Our research shows that companies that we've identified as having a strong ethical culture have a greater number of employees who have said that they intend to stay at the organization. Besides retention, we found workers at ethical companies to be many times more likely to recommend stock purchase in their companies. Other factors like teamwork, communication, pride, and emphasis on quality were also found to be rated higher by employees at ethical organizations.

Your research also indicates how employees rated the industry in which they work.

Yes. We found that employees working in financial services, banking, and healthcare products, for instance, believe their fields to be ethically above the norm, while those in manufacturing and the food industry ranked their own fields below the norm. I imagine the reason that financial services ranks high is because it's heavily regulated and compliance is a big deal. The implication, then, is that regulation works to build a better ethical culture.

Is it possible for a company to have a weak ethical culture and still prosper?

Perhaps in the short run. Some organizations will tolerate great performers who bring in results but don't live up to certain ethical standards. But more and more companies are realizing that in the long run, they run a higher risk that these workers will do damage to their organizations. There's a higher risk that they will publicly get caught. So the question you have to ask yourself is: Do I want this kind of unethical behavior happening in my organization?

© Copyright 2006 Across The Board. All rights reserved.

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