You’ve probably heard about the ethics issues at Uber and Fox News. News reports and dinner conversations chalk it all up to the “Tone at the Top” that allowed those issues to occur. So what does that phrase, “Tone at the Top”, really mean? Who sets the tone, and how?
Leadership – the Board, CEO, CFO, or COO – sets an organization’s “tone” regarding ethical culture. Leaders determine which actions and behaviors are rewarded, and which actions are not tolerated. Leaders demonstrate commitment to openness, honesty, integrity, and ethical behavior – or they do not.
Inappropriate Tone at the Top is exhibited by showing disdain for policies and rules, paying lip service to compliance, emphasizing profits over ethics, and deflecting accountability. Fraud cases litigated against Enron and WorldCom used “poor Tone at the Top” as evidence in those successful prosecutions.
Leaders can promote an ethical culture and avoid the risks related to “Tone at the Top” by taking these four actions:
- Communicate expectations.Organizations must clearly state that they will not tolerate unethical conduct. Give examples and define terms to eliminate ambiguity. Clear policies convey the organization’s values and expected behaviors. Reinforce the policy with a written code of ethics and an ethics training program.
- Lead by example.Leaders must set an example and act in line with all expectations, whether they are formally defined or just common practice. Employees, volunteers, and others are more likely to follow the organization’s code of ethics when they see that leaders are actively following it. Walking the Talk matters.
- Support and reward integrity.Leaders should support a culture of doing the right thing by recognizing individuals for ethical behavior. Recognition could be a monetary incentive program, or some other special acknowledgement or reward. Celebrating instances of behavior that you want more of makes for a memorable team experience.
- Implement confidential reporting.Confidential tips are how many frauds and other inappropriate activities are detected. Reporting real or suspected fraudulent behavior or ethical violations without fear of retaliation is essential.
These actions alone do not guarantee that everyone in the organization will act in an ethical manner. They are the first steps to setting an appropriate Tone at the Top to direct and support your organization.