Aug 2 2016
Remember during your employee orientation when your company reviewed their Code of Ethics with you? You know, the short list of basic ethical guidelines to follow when conducting business on behalf of the corporation? I didn’t think so!
Most corporations have Codes of Ethics or Ethical Conduct hidden on their websites, or on their internal intranet buried within their “Values” statements, or somewhere within their Employee Handbooks. But, they rarely call attention to them. Corporations figure their new hires and current associates all have a ‘moral compass’ or they would not have been hired in the first place. However, events in today’s business world demonstrate how a simple slip in ethical conduct can doom an entire company.
Business news has been consumed by cover stories of high profile corporate ethical violations. From the Volkswagen emissions-cheating scandal to the money-laundering allegations against HSBC Holdings and US Bancorp, the media have been focusing on the resulting criminal, regulatory, and other legal troubles of these corporations. For example, news coverage of Theranos, Inc. has focused upon the ramifications of ethical lapses, such as federal agencies revoking the certificate of operations for its flagship laboratory, the banning of its CEO from owning or running a lab for two years, and the dual criminal investigations of the company by the U.S. Attorney’s office and the Securities and Exchange Commission. What is missing, however, from all the media coverage is the fact that violations by these companies’ of their own Codes of Ethical Conduct are the root of all their legal and financial problems.
The reason for the media’s misguided focus is exactly the same reason for corporations’ ignorance of its Code of Ethics: they are viewed as merely a statement of “moral conduct,” not the overriding rules of business conduct. Ethics Codes and compliance programs too often remain narrowly defined, and/or are an afterthought of how a corporation conceives and conducts its business strategy. Rather than looking at ethics and compliance through the narrow lens of avoiding damage to the company’s reputation, companies need to make ethics and compliance a core management discipline and employee mindset.
A Code of Ethics is not simply a statement of moral conduct, or simply “guidelines,” it is a set of rules, which if violated by anyone within a company will lower its revenue, cause loss of business, ultimately destroy the corporation, and with its ultimate demise, the loss of all of its jobs for employees. If you don’t believe an ethics violation can result in such damage, one need only look at two companies as examples. Together, Theranos, Inc. and Zenefits, Inc. represented almost $14 billion in private valuation at their heights. Now, look how quickly their $14 billion in value disappeared after incredibly unethical, and in some cases allegedly fraudulent, actions.
Corporations must make ethics compliance a core company-wide mindset, not simply a statement reviewed only during new employee orientation. A Code of Ethics should define every aspect of work. Pursuing corporate revenue growth through integrity requires a firm commitment by everyone in a company to conduct business in an ethical manner at all times. To achieve this end, all levels of management must promote an ethical culture within their companies. Human Resources, Ethics, and Compliance leaders need to clearly identify and elevate ethical obligations, then formulate strategies—targeted interventions, tailored education, communications, and, if necessary, changes in leadership—to reduce ethical violation risks. The lines of ethics must be clear, with no room for compromise, if a corporation is to survive in our competitive global economy.