Is Your Business Ethical?

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We do not act rightly because we have virtue or excellence. But, rather we have those because we have acted rightly.” — Aristotle

The times are tough. The pressure on you and all your employees is intense. You have employees that are being foreclosed upon. You have managers that cannot make their numbers. You have teams of people who have worked longer hours for no extra pay and feel that they “deserve” something more for their efforts.
In short, the conditions are fertile for ethical infractions in many companies.

As the leader of your company and/or business unit, how do you ensure that your solid ethics and high integrity infiltrate your organisation completely, thus minimising the risk of ethical violations?

First, I will tell you what not to do. Do not do what every company does. Do not bring in a consultant or a canned program discussing ethics and integrity and have everyone be forced to sit through the program and answer 10 ridiculously simple questions that Bernie Madoff could answer correctly blind-folded. This a waste of time and somewhat insulting to your employees with virtually no impact other than ensuring that you can say that you have an ethics program.

You need to do the following three things:

  1. Set the example
  2. Regularly talk about ethics and ethical situation
  3. Be aggressive in chasing down ethical violations and then air the dirty laundry

Set the Example

My regular readers knew that setting the example as the leader was going to be one of the three keys. It is vitally important that you are and that you are seen to be ethical. That means not involving yourself in any situation that may appear to be unethical or inappropriate.

Of course, this applies to the big and obvious ethical violations such as taking bribes, kickbacks, collusion, or price fixing. Do not even go near any of these things being especially careful about conversations that you may have with leaders of competitor companies at trade shows or trade association meetings.
Further, be attuned to the risk to your reputation found in the grey area of such things as favoritism, nepotism or excessive entertainment or gift-giving.

Finally, be seen setting the correct example in small things. Yes, you are the leader of the company, but… Do not take office supplies and bring them home. Do not use tools or any other items for your personal use. Do not treat yourself to special breaks that are not available to others. Be especially aware on all your expense reports that you pay for everything that could appear to be personal or explain why they are bona fide business expenses. Yes, bookkeepers and accountants are not supposed to talk, however… In short, every small ethical transgression eats away at the fabric of what you are preaching.

Be ethical and be seen to be ethical in all things, big or small, black, white or grey. Enough said.

Regularly Talk about Ethics and Ethical Situations

This is easier than you think. When you attend meetings or have training sessions or have brown bag lunch sessions, bring up ethical situations that you or others in the company may have seen. Make sure that they are relevant to what the employees might experience at the office or factory. Invite 5 – 10 minutes of roundtable discussions. No more. And repeat on a regular basis. Over time, it will be more powerful if others in the group discuss ethical situations that they have encountered. By discussing, you lay down the ethical framework that you and your management team want and you will often set policy for certain types of ethical situations.

Some discussions points:

  1. A supervisor in the plant borrows tools over the weekend to do a personal task
  2. A salesman exaggerates and embellishes his or her expense report
  3. An employee in the plant sees a broken item in the trash that he can fix and takes it home
  4. Unethical incidences at other companies that you may have heard or read about

The key in all of this is the example, the discussion, and you or your top management team driving home the ethical issues.

Be Aggressive in Chasing Down Ethical Violations and Then Air the Dirty Laundry

I have personally failed in the past on aggressively chasing down ethical violations.

Several years ago, there was a good employee reasonably high up in a very successful and profitable business unit. The individual was, to my view at the time, devoted to the company and was definitely a workaholic, travelling 3 ½ weeks a month. Some discrepancies appeared in spending with his credit card. We immediately confronted him. He denied everything offering an excuse that stretched the boundary of credibility, but could have happened. We believed him and did not dig any further…

By now, you know the story.

Several months later, other discrepancies came to light, we finally decided to investigate in depth, and it was revealed that this individual had used corporate funds to buy personal items. Once this was determined, we acted immediately, and the individual was terminated. The monetary amount was not that high – $5,000 – $10,000. But, the damage to our reputation was much higher. This person, by virtue of his senior role, was, in the customer’s eyes, a reflection of our company. As a result, both suppliers and customers thought that this business unit lacked high ethical standards.

The lessons learned are ample:

  1. Without pre-judging, where there is smoke there is usually fire. So, seek it out.
  2. When you find out about something, it has usually been going on for a long time and is a whole lot worse than you first thought.
  3. Any employee’s lack of ethics represents, in the minds of outside stakeholders, the lack of ethics of the company.

The fourth point that we learned is that you need to air the dirty laundry about these incidents. For legal or other reasons, most companies sweep such events under the rug and they are only known through the “rumour channel.” Don’t do that. As we did in this situation, explain what happened (you can do this in vague enough terms to please your corporate lawyers or human resources department), explain how it went wrong, explain what you did wrong, explain what lack of control has been fixed and how you will act differently. As I said, this Mea Culpa (“I’m guilty!!”) is not the easy way to go, you expose your weakness and mistakes to your team. But, doing so really begins to show your strength, your leadership, and your commitment to ethics and integrity.

Finally, ensure that you report on other incidents that might have happened at sister companies.


The character, ethics and integrity of you and your entire team are really the bedrock upon which your businesses success is built.

  1. Financially, you want ethical people in your organisation to be your eyes and ears to ensure that others do not steal or defraud and to communicate that fact upward if it happens.
  2. Legally, an ethical organisation is much less vulnerable to lawsuits and retribution.
  3. From an employee perspective, ethical people want to work with ethical people. You, as the leader, may be the most ethical person in the world. But, if an employee’s immediate supervisor is not, then, in that employee’s mind, the organisation is an unethical, potentially corrupt, organisation.
  4. From a customer’s perspective, they assume, rightly or wrongly, that any unethical act by an employee has the blessing and support of higher management.
  • When the customer is aware of the unethical act, it is, of course, obvious to them.
  • Thus, they think that it should be obvious to everyone in management at the organisation,
  • Ergo, the organisation is unethical.

Only by doing the tough and right things of setting an example, maintaining the discussion, and aggressively chasing down and then publicizing transgressions will you bring your high values in ethics and integrity to life for you and your entire company.

Until Next Time.

David Shedd is an experienced corporate executive, now consulting and blogging on Winning B2B Leadership. See more articles by him at, or contact him directly at [email protected].

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