“Tone at the top” sounds like a cliché. A comment that people make without thinking. But what does that phrase really mean? Whose tone are they talking about?
The “top” is leadership – the Board, CEO, CFO, and COO. The “tone” is the ethical culture of the organization. What actions and behaviors are rewarded? Is leadership committed to openness, honesty, integrity, and ethical behavior? The tone from the top sets an organization’s guiding values.
Examples of poor tone at the top include showing disdain for policies and rules, paying lip service to compliance, overemphasizing profits over ethics, and deflecting accountability. Fraud prosecutions, such as Enron and WorldCom, used poor “tone at the top” as evidence in their cases.
Leadership can take four actions to help set the right tone at the top and promote an ethical culture:
- Communicate what the organization expects. Organizations should state that they will not tolerate unethical conduct. Clear and convincing policies should convey the organization’s values and expected behaviors. A written code of ethics and ethic training should be in place.
- Lead by example. Leadership must set an example through its actions. Employees, volunteers, and others who witness leadership actively following the organization’s code of ethics are more likely to follow it.
- Establish and communicate a confidential reporting mechanism. Confidential tips are how most occupational fraud is detected. Reporting real or suspected fraudulent behavior or ethical violations without fear of retaliation is essential.
- Recognize integrity. 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 from leadership.
These actions alone do not guarantee that everyone in the organization will act in an ethical manner. Taking these and other steps goes a long way to setting the right ethical tone at the top of your organization.