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In my last two newsletters, I revisited two of the three lectures that have formed the core of my teaching on business and organizational ethics for the past 50 years—how to make an ethical decision (see here) and how we shape our own moral character (see here). This newsletter presents the content of the third lecture: how the ethical culture and environment we live and work in shape our ethical behavior—and how we can help shape those cultures ourselves. The ethical cultures we live and work in—of our American society, of our workplace, of every organization we join and participate in—have a great influence on how we think about ethical standards and how we behave. It is easier to act ethically when that behavior is encouraged by our employer and by other organizations we participate in. The converse is also true—it is harder to act ethically on a consistent basis when surrounded by influences and pressures that encourage the opposite. This is why there is so much concern today about the Trump administration “normalizing” demeaning language, discrimination against selected populations, and blatant revenge against enemies. Wells Fargo has recently been a poster child for creating and suffering a toxic ethical environment. The company fired thousands (yes, thousands) of online sales personnel who were caught creating fake customer accounts in order to meet unrealistic and unyielding performance goals. This corrupt behavior led to hundreds of customers’ personal bankruptcies, loan foreclosures, and repossessed cars. The conditions at Wells Fargo were extreme—corporate goals focused exclusively on growth, sales goals expressed in the number of new accounts opened by individual telemarketing employees, not just per month but per shift and per hour—with heavy penalties and firings if all these goals were not met. It was no surprise that employees found a way to meet the draconian goals by creating fake accounts so the employees could keep their jobs. Their supervisors tolerated the fraud because their performance was dependent on the total accounts opened by their units. There are counterexamples of companies where well-designed ethical cultures have encouraged responsible behavior respectful of customers, employees, suppliers, and other business partners, even the regulators and policy makers who scrutinize the company. But creating an ethical culture is a time-consuming and deliberate choice by an organization’s executive team and chief executive. It can only be accomplished by coordinated systems and policies, and by never-ending communication about “how things are done around here.” This language of a strong ethical culture is echoed in the phrase “this is not who we are,” articulated so frequently lately as we witness actions of the Trump administration. Ethical cultures are fragile. A single bad decision—choosing to manipulate a financial report or hide information from a customer just this one time, or giving a star salesman a mere slap on the wrist for violating company rules because “she brings in so much business” is all it takes to destroy years of work shaping an ethical culture. Some executives make a habit of saying, “Don’t tell me how you met your goal, just do it.” This inevitably encourages employees to skirt the rules as long as top management has deniability. Ethical cultures are everywhere. Every organization and institution we are a part of—our family, our church, homeowners or community associations, nonprofit organizations we volunteer for, library boards, and city councils—has an ethical culture that teaches what behavior is acceptable and what is not. Each influences our own behavior in some way, and each urges its members to follow certain ethical rules and norms. Creating and sustaining an ethical culture requires the dedication of both leaders and members. There are several clear steps leaders can take to shape an ethical culture. Among them: Define the values and goals of the organization, emphasizing respect for employees, customers, suppliers, and other business partners, and the community, in addition to shareholders. Leaders should mean it, capture these commitments in written statements, and communicate them ceaselessly. Model the culture’s ethical values in momentous and everyday decisions. Support those in the organization who make good decisions. Leaders can bring the culture’s values alive with their own decisions and by backing up those who do hard things consistent with the culture’s values. Require managers at every level in the organization to define how those values and ethical commitments come alive in their units. Each manager knows best how the company’s values apply to sales, manufacturing, supply chain, human resources, public affairs, etc. They should be expected to articulate those insights and communicate them to their organizations. Communicate that all employees have a personal responsibility to help the company live up to its values and sustain its ethical culture. Leaders depend on followers to live and articulate the company’s values. Create a safe internal whistleblowing or reporting system for employees to report instances of behavior violating the company’s values. Have a no retribution policy. Create an “ethics risk” assessment process that flags areas of vulnerability (e.g. operating in a difficult country, doing business with a company with a poor ethics record, raising performance pressures significantly on a unit) that may lead to unethical behavior. Step up monitoring, auditing or enforcement in those areas. Periodically evaluate the strength of the ethical culture and the adequacy of the ethics effort. Conduct employee surveys or third-party audits to identify areas of concern and system weaknesses.
As noted above, it is often the actual behavior of the CEO and a team’s manager that has the greatest impact on it’s ethical culture. A few years ago, I did interviews with two different organizations in one day. At one the CEO gruffly ordered his assistant to get coffee for us and completely ignored her when she brought it in. At the other, the CEO introduced me to his assistant, politely asked for coffee, and thanked her graciously when she brought it in. I knew which company I would want to work for! A similar idea holds that the ethical behavior in an organization will never rise above the behavior of the leader. It is said “s..t rolls downhill” and if a CEO behaves badly, others in the organization will behave worse. Most of us are employees or members of organizations, not the chief executive. So what can we do to help create and sustain a culture that makes it easier for us and others to do the right thing? We can choose to work for and join organizations that already have an ethical culture. We can vote with our feet. And, frankly, life is too short to subject ourselves to a hostile or unethical culture to advance our careers. We can articulate what our company or our organization really stands for. Every organization depends on its employees or members living by and communicating its values. We need to stand up for an organization’s values in decisions and policy discussions and to counsel others on how the organization’s values apply to a decision they are about to make. We can refuse to do things that violate law, regulation, our own values, or the expressed ethical commitments of the organization we work for. This step can take great courage and may lead to not being considered a “team player” or even to one’s firing. In a more authoritarian environment, it can even lead to one’s indictment. We can report or “blow the whistle” on those who are violating a company’s or organization’s ethics. The best organizations have a confidential “hotline” to make this easier. But this too takes courage and may lead to one’s exclusion from a rogue social or work group that does not honor the organization’s values. If we have a say on choosing the leaders of an organization (as a board member or simply as a voter), we should support the selection and election of leaders who champion good values and have the skills to create an ethical culture. This can be a special obligation of board members who choose a CEO or executive director, but it is the obligation of every voter who should support candidates who will contribute to a humane and compassionate governmental culture.
It is a corollary of the points above that we need to be ready to resign—quietly or loudly—if we find ourselves in an organization that no longer matches our values or is violating the rights of or commitments to its constituencies. The recent resignations of federal employees in the Justice Department and other government organizations are a demonstration of this moral courage. The creation of ethical cultures is the responsibility of both organizational leaders and individual members like us. The personal payoff is that we get to live and work in communities and companies we can be proud of—organizations that treat everyone well, including us! And over time, these cultures will in turn help shape and strengthen our own ethical commitments, strength, and character.
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