Corporate scandals are bad news. They can ruin a company’s reputation, send its share price into free-fall, and — in the worst cases – lead to their demise. No organisation, in other words, wants to be at the centre of such a scandal.
So why do they keep happening? While there are a variety of factors at play, the source of the scandal is frequently a person or group of people stepping outside the boundaries of what would be considered normal ethical behaviour.
That does not, however, explain why they happen so frequently. It’s not exactly like companies are hiring a continual line of sociopaths.
The truth is, as much as we’d like to pretend otherwise, all of us face ethical dilemmas in the workplace. How frequently we make the right choice depends more on the environment within the organisation the one surrounding it.
In a study of C-suite executives from India, Colombia, Saudi Arabia, the US, and the UK, it was found that most of the dilemmas faced by these corporate leaders were the result of competing interests, misaligned incentives, and clashing cultures. Bribery, corruption, and anti-competition issues played a surprisingly small role.
Among the most common causes of these internal ethical dilemmas are:
- Businesses pushing too much change too quickly – the executives in the study reported finding themselves having to make big business moves (including mergers and acquisitions) happen quickly. In order to make those things happen, they found themselves having to act against their own values.
- Inflated pressure to hit targets – In one of the most well-known recent examples of a corporate ethics breach, US banking giant Wells Fargo created millions of fraudulent savings and checking accounts (https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal) for its clients. In the subsequent investigations, it emerged that managers were rewarded for the number of accounts they opened and managed. As a result, many felt driven to open accounts that customers didn’t request or approve.
- Cross-cultural issues brought on by global expansion – In a world of rapid global expansion, many managers find it difficult to navigate cultural issues they’ve never encountered before. These can include everything from breaking a verbal promise to ignoring a “sleeping” business partner.
While all of these issues are undoubtedly major, they can be overcome. Here’s how:
Look beyond your corporate ethics code
According to the study cited above, one major reason that executives battled with these dilemmas is that their organisations’ codes of conduct and ethical guidelines don’t cover the majority of the kind of ethical issues that get companies into trouble.
Even the law can, at times, be a less than perfect guide as it only deals with big transgressions and not the kind of small transgressions that pile up and lead to corporate scandals.
It’s therefore imperative that you look beyond your code of conduct when it comes to improving your organisation’s ethical code.
Start off by clearly explaining the kind of behaviour you want in the organisation. If you want to be an ethical organisation, you can’t adopt a win-at-all-costs mentality.
It’s also worth having individual talks with your employees about some of the situations that have tested them ethically in the past. Doing so will help you understand what kind of people you’ve got within your organisation and how closely they align with the kind of values you want in the organisation.
Look at the business’ operations
One frequently overlooked area when it comes to workplace ethics is the way the business works at an operational level. How does your pay structure work, for example? Are short term gains put ahead of long term success?
What about promotions? Are people genuinely promoted based on skill or are certain people treated better than others? If it’s the latter, then you’re in danger of fostering entitlement and resentment, one of the most sure-fire ways to bring about a corporate scandal.
You also need to look at how engaged ordinary employees are. Do they buy into your company’s mission and get what you’re trying to do? Engaged employees are far more likely t behave ethically than disengaged employees who are only in it for the paycheque.
Get an outside opinion
If you’re a business leader, you should have a network of people around you that you trust. The people in this network should be able to give you honest opinions and options that you may not have considered when it comes to taking these opinions onboard.
Ultimately, however, it’s down to you to reflect on those opinions and implement any useful suggestions in the organisation.
If you’d like help communicating your organisation’s ethical positioning, contact Engage Me here.