Building Blocks for Ethical Corporate Culture

Ethical Corporate Culture

Creating and sustaining an ethical corporate culture in which employees are happy, motivated and following their principles is fundamental for long term success, yet it remains something of a holy grail among business leaders.

This is not least because there are so many diverse inputs that affect each of these three measures, leading to a complex network of cause and effect that can have even the most experienced specialist in organisational behaviour scratching his head. The whole arena of organisational culture is heavily dependent on the interaction between systems, values, rules and personalities — all of which can have their own individual, and sometimes contradictory, influences.

The emphasis can swing wildly from a strong focus on ethical conduct and strong compliance principles, with whistleblower hotlines, compliance audits and well-advertised dire consequences for the bad guys, through to the other extreme of corporate team bonding activities, free pizza and a company ball pit.

Is it any wonder that at both employee and public levels, an underlying lack of trust is still present?

Business for Social Responsibility

Business for Social Responsibility (BSR) is a non-profit business network with a global membership of more than 250 companies. It tackles a wide variety of business issues, and all from the perspective of sustainability, corporate social responsibility and fairness for all.

It recently published a working paper entitled ‘The Five Levels of an Ethical Corporate Culture’, which undertakes a detailed analysis of the steps and theories that businesses need to consider if they hope to come closer to attaining that holy grail. It advocates a broad evaluation of business systems in combination with group dynamics in order to build the right corporate culture.

The benefit of an organisation like BSR is that it can draw upon a wide range of experts from every culture and business type that you can think of. It genuinely offers the opportunity for greater insights to make some real progress in a better understanding of organisational behaviour.

So what are the five levels that BSR identified? Let’s take a look at each of them in turn.

Individual

Unsurprisingly, the first level to be examined is how individual employees are assessed and rewarded. This is clearly one of the fundamental factors when it comes to either promoting or undermining the overall ethical culture of an organisation. We have all encountered companies where employees are given highly ambitious bonus targets, amid a tacit implication that, as long as they meet the numbers, the ends justify the means. Under these circumstances, unethical activity almost becomes the norm.

The rewards system is therefore an ideal place to start. Indeed, base salaries and bonus schemes can do a lot to define the ethical culture. However, it is not all about money.

For example, initiatives that promote and celebrate diversity and inclusion can have a major impact on the ethical culture — employees who feel that they “fit in” regardless of their social identity are more likely to have the confidence to speak openly about ethical issues.

Interpersonal

The way individuals interact with one another at all levels throughout the corporate hierarchy is the next level for evaluation. In particular, the power dynamic between management and their subordinates can make or break organisational culture, particularly if there is the slightest suspicion of any abuse of power.

If employees feel that promotion and reward systems are unfair or motivated by anything other than performance-related measures, they will soon lose faith in the ethical culture. Organisational culture can easily come crashing down as employees simply pursue their own agendas.

It is essential to establish and promote a culture in which every employee and stakeholder is empowered to voice concerns. At the same time, managers and business leaders need to recognise the critical function they perform in setting the culture — this is all about using and wielding the power that they hold wisely.

Group

The study of group behaviour and dynamics fill up many shelves of academic libraries, with both themes at the core of all aspects of human culture. The workplace is no different, but here, the formation and definition of teams and groups has become increasingly amorphous. This is thanks to the digital revolution and the diffuse, global nature of so many modern businesses.

This makes it more of a challenge to define a globally consistent ethical corporate culture. Nevertheless, it is important to understand the modern team dynamic, and business leaders will find that tapping into this level can realise genuine progress in facilitating change and deriving more effective ways of working from a stronger group culture.

Intergroup

The strength, quality and consistency of relationships across groups is just as important as those within a group when it comes to building an ethical organisational culture. It is as important for each team or group to operate within the same parameters as it is for each individual. For example, if a particular team produces great results but through potentially unethical conduct, to celebrate their success regardless of their actions would transmit a damaging message to the rest of the business.

Furthermore, teams that work in areas such as audit or compliance can find themselves struggling for both resources and recognition when the main measure of their success is “things that have not gone wrong.” Like a wicketkeeper in a cricket match, the biggest complement you can sometimes pay them is that you have not even noticed they are there. However, rewards and recognition systems need to find a way to acknowledge the role they play.

Inter-organisational

While this kind of discussion is generally inward-looking, it is important not to underestimate the role played by our business relationships with customers, suppliers, competitors and society as a whole in establishing corporate culture.

One needs only look at examples like Arthur Andersen and Enron to appreciate that business success is highly contingent on a company’s perceived ethical values.

What do BSR think?

The published research reached the conclusion that while companies are good at compartmentalising specific groups within their organisations, they will often overlook the interrelationships between and within those groups.

These relationships play a role that should not be underestimated. The corporate approach to building an ethical corporate culture needs to be comprehensive and consistent across all levels, as any inconsistencies will damage credibility and undermine ultimate success.