Ethics at the Top: How the C-Suite Affects Company Culture

Ethics at the Top: How the C-Suite Affects Company Culture

Because employees look to their leaders when making business decisions, acting ethically is a must for executives.

While 56 per cent of people say that their workplace culture is ethical, 25 per cent report that they've witnessed unethical behavior at work in the past six months. Employees need guidance and examples of ethical behavior when making business decisions.

The C-suite's ethics and company culture go hand-in-hand. If you want an organization with a reputation for honest, ethical operations, you need to start at the top.

Clearly defined core values help establish company culture

If employees don't know what their employer stands for, they're less likely to act ethically and consistently. Download our free cheat sheet to learn about six core values exercises you can do to guide employees' decisions at all levels.

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Benefits of an Ethical Company Culture

An ethical workplace obviously reduces incidents and lapses, meaning fewer lawsuits, fines and punishments from regulatory bodies. However, build ethics into your company culture and you could also:

  • Improve customer loyalty: Customers want to give their business to honest, ethical businesses.
  • Increase employee well-being and productivity: When they aren't worried about toxic competition or unethical responsibilities, employees' mental health will improve, productivity will rise and turnover will decrease.
  • Avoid scandals: When ethics are nonnegotiable, employees are less likely to make a poor decision that could sully your organization's reputation and cause you to lose customers.
  • Attract great employees: When you have a reputation for being an honest, open workplace, the most skilled and creative candidates will want to come and work for your company, giving you a leg up on your competitors.

RELATED: Integrating Ethics and Compliance Into the Entire Organization

How Leaders Can Create a Culture of Ethics

The C-suite sets the tone for the whole organization, both in action and when creating internal policies. Because ethics is a vague, broad topic, it can be difficult to know where to start when you're establishing an ethical company. To fully integrate ethics into your organization, focus on these three areas.

Ethical Employees

To start, set policies that ensure hiring managers only hire employees who share your company's values and dedication to ethics. Hiring managers should ask interviewees how they have handled/would have handled ethically confusing workplace scenarios.

Value ethical behavior over experience. It's easier to train a less experienced candidate than manage a scandal caused by an employee with questionable morals.

In addition, provide ethics training to all employees. This includes not only general ethical behavior, but also how to act ethically in your industry and in each department. For example, employees who handle customer data should learn about ethical data management and HR staff should be trained on ethical hiring practices.

RELATED: Investigating Misconduct in the C-Suite

Ethical Senior Management

First, senior management should lead the organization by example. This means not just encouraging ethical behavior in words, but following through in their actions, too. For instance, senior management should treat every employee with respect, actively participate in ethics programs/training and speak openly with their subordinates.

Similarly, senior management should work to improve transparency within the organization. The C-suite should share the successes and failures of the company as a whole, as well as on an individual level. "Transparency leads to a company culture that creates an outcome because the CEO creates a bigger purpose for the organization than just making money or reaching quarterly numbers," Atkins says.

Finally, have your board vet C-suite candidates. A candidate might look good on paper, but could be hiding a scandal or padding their resume. Someone who lies to get hired isn't the kind of person you want leading your organization.

Building and maintaining a culture of ethics in your company is no easy feat. Watch our free webinar for tips and actionable steps from ethics expert Chris Bauer.

Ethical Workplace

To build ethics into your company culture, explain how acting ethically will help employees achieve your company's mission. This elevates the purpose of ethics from "because I said so" to helping employees be successful at their jobs.

"Accountability of those at the top is improved when there is division of roles, creating a system of checks and balances making it more difficult to get away with unethical acts, such as falsifying expense reports," says corporate governance expert Betsy Atkins.

Be sure to also clarify the difference between ethics and compliance. "Many ethical lapses also involve legal violations," says Jeff Thomson, President and CEO of the Institute of Management Accountants. Emphasize that "just because something is legal does not mean it is the right thing to do" according to your company's standards.

In addition, tap into the employee experience. Do employees seem engaged? Do they speak openly with their managers, or do they seem nervous to speak up with questions and concerns? In an ethical workplace culture, they should feel at ease and supported so they can do their best work.

Nearly half of employees whose workplace leaders have a weak commitment to ethics feel pressured to compromise their ethical standards on the job (2020 Global Business Ethics Survey). When the C-suite shows employees, regulators and the public that they prioritize ethics, your organization will reap more benefits than any unethical behavior could bring.