Ethical Culture Drives Financial Success

We grew up thinking that good behavior is rewarded. Current events can really rock that thinking. But it’s been proven that good organizational behavior, also known as an ethical culture, can result in financial success. Yes, the Good Guy really can win by running an organization in an ethical manner.


In fact, a February 2016, article, The Profit Potential in Running An Ethical Business by @SteveParrish4, says that an ethical business is easier to manage than an organization with disdain for rules and disrespect for accountability. As Mr. Parrish says, keeping a second set of accounting records is time consuming and expensive. Fraud losses and prosecutions can get expensive, too. Just ask the former employees and shareholders of Enron, WorldCom, etc., etc.


An ethical culture starts with that proverbial “tone at the top” set by leadership – the Board, CEO, and CFO. Tone at the top sets the organization’s guiding values. So how does ethical culture happen?


Leadership takes four actions to establish the right tone at the top to promote an ethical culture and drive financial success:


  1. Communicate expectations.Organizations must make it clear that unethical conduct will not be tolerated. Clear and convincing policies should convey the organization’s values and expected behaviors. A first step is to establish a written code of ethics and ethics training.


  1. Lead by example.Leadership must set an example through its actions. Observing leadership actively following the organization’s code of ethics increases the likelihood that it will be followed by others. Leadership must also be mindful of perception, and understand how their actions could be interpreted.


  1. Recognize integrity.Support an ethical culture by recognizing individuals for ethical behavior. Recognition could be a monetary incentive program, or some other special acknowledgement from leadership. Whatever the reward, publicly celebrate the behavior and clearly communicate the link between ethical behavior and the reward.


  1. Establish confidential reporting.No matter what leadership does to promote an ethical culture, some individuals will still engage in unethical, or even illegal, activities. Establish a confidential tip line or other mechanism for reporting real or suspected fraudulent behavior or ethical violations without fear of retaliation. Set up a mechanism to follow-up on tips.


These actions alone do not guarantee that everyone in the organization will act in an ethical manner, but they can go a long way to setting an ethical culture and driving financial success.