Progress in Corporate Ethics? Not So Much

06/30/2010 05:31 pm ET | Updated May 25, 2011
  • Donna Flagg Author, 'Surviving Dreaded Conversations'; President, The Krysalis Group; Creator, Lastics

It was a busy week last week on the corporate ethics front. First, the Supreme Court ruled in favor of Jeffrey Skilling, former CEO of Enron and Conrad Black, former Chief at Hollinger International, saying that certain convictions of theirs could be thrown out due to faulty instructions that were given to jurors. It's not as though they will walk away as free men now because of it, but it is said that parole may be more within reach as a result.

Second, we had the Dodd-Frank Bill take one step closer to President Obama's signature which, in turn, brings Wall Street one step closer to having regulators sit on them in much the same way that babysitters watch irresponsible children who cannot be left unsupervised for fear of the damage they could do to themselves and others. Doesn't that sound familiar? Sometimes I wonder if it wouldn't be better to simply place Nanny Cams in their offices.

But even back when Enron fell and the other ethics debacles followed, there were do-the-right-thing training courses, new governance departments, oversight committees and Chief Ethics Officers sprouting up everywhere. So what happened? In the end, did any of it really work? Is there, or can there really be, such a thing as changing the moral fibers of individuals via the rule of law, policy and procedure?

It doesn't appear to be so. That's because integrity can't be "written in" to organizational behavior, especially for companies who have unprincipled people working there to begin with. But still, we are mired in regulations because each new set of rules becomes necessary due to the people who found a way to get around the old set of rules that came before. Meanwhile, it goes on and on -- a perpetual cycle of making rules for people to break, so we need to create more rules that they'll eventually figure out how to break again. It's crazy. Think of the resources that go into this nonsense. Well we don't have to think, we can see. We are feeling it now.

Now, I know (and believe) that controls are necessary, but bogging the rest of the world down with legislative hoops to protect it from the "loop-holers," seems unjust (and stupid). If you've ever been audited, you know what I'm talking about.

I'd like to think there is a better way, meaning that as a strategy, law enforcement is not the most constructive or productive way to manage ethics in the workforce. Let's remember, penalties may or may not deter bad behavior, but they most certainly will affect the spirit of the company and perhaps more importantly, the sense of security among the conscientious majority.

The only deterrent you really need is, "You're fired." Not cutting the cord when necessary is where I constantly see companies get themselves into trouble. They're afraid -- of what exactly, I don't know. But as a result, businesses tiptoe around terminations when they shouldn't. Dishonesty manifests inside a company and brings debilitating cost along with it, not only because of the potential legal ramifications, but because it adversely affects all of those people who want things to be done "right."

It is possible. Business behavior can be shaped around a set of principles that reflect organizational values. The best way is to identify, communicate, enforce and reward/sanction behavior on a regular and consistent basis to create a strong, sound and safe company from the ground up and inside-out. That is, before the ethics police come after you.

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