Ethics start right at the top: Study

CEOs paramount to maintaining an ethical culture at work

A new study confirms what many HR professionals have known for years — a chief executive officer is the most important person when it comes to creating and maintaining an ethical culture in an organization.

But the research, conducted by Ottawa-based Conference Board of Canada, doesn’t find consensus on whether the CEO requires the support of a formal ethics and compliance position to achieve this.

The report, Ethics and Compliance Functions: Canadian Corporate Leaders’ Views, is based on interviews with 20 top senior executives and directors in Canada.

Co-author Michael Bassett said the study looks at how top corporate leaders feel about the responsibility of compliance and ethics. They unanimously agree CEOs must embody the culture and ethical behaviour of an organization through their actions.

“It was confirmation of a trend that we had been seeing,” Bassett said. “It’s not just words. It’s living and being ethical.”

As one of the anonymous interviewees explained: “Without the CEO’s personal ethical behaviour and position on ethical behaviour, the ethics and compliance officer will be meaningless. He or she doesn’t really have any authority or power unless it’s given by the words and actions of the CEO.”

Just look south of the border. The Enron scandal showed what can go wrong when an ethical culture is missing at the top, said Bassett.

“A lot of the challenges that happened there were through the culture, the culture of extreme risk-taking,” he said. “So it very much was the culture that was in place in those organizations — the culture that the CEO created through his actions and behaviours — that created the type of environment where this sort of stuff could happen.”

But is it the sole responsibility of the CEO to determine how best to build a solid ethical culture? Or is the job better left to a dedicated position, with the CEO remaining the symbolic “talking head?” This is where unanimity broke down in the study, said Bassett.

“It’s still not a clear picture, in terms of whether there’s a trend towards all organizations having a uniform ethics officer approach,” he said. “Or, as we saw in our study, that different organizations deal with these issues differently.”

Ethics administration is certainly becoming more complicated, whether providing orientation to new employees, establishing codes of ethics, installing confidential “snitch” lines or offering internal training to provide a consistent message on corporate ethics. Can a CEO be reasonably expected to provide all of these services?

Those respondents who favour the role of a dedicated ethics and compliance officer say no. They tell Bassett someone is needed whose sole focus is ethics because it’s “the fabric of the organization, our daily lives, our culture. It can never be the responsibility of just one individual.”

In fact, they argue the ethics and compliance officer saves senior executives’ time by identifying and prioritizing issues while ensuring policies and practices are uniform across the organization.

On the other side, some participants feel that because ethics and compliance are cornerstones to reputation and integrity, they couldn’t be delegated. They also suggest the position is redundant if those issues are already being handled by others within the organization, such as legal, audit or HR teams. Furthermore, they feel that giving one person the job might weaken accountability.

“A lot of the differences seem to be based on the size of the organization and the scope of the organization,” Bassett said. “There was clearly support for the ethical function and for the role of ethics in these businesses. It’s the execution of that function where there’s a difference.”

While the study doesn’t answer the question of which style works best, Bassett said it does open the door to further discussion.

“The lesson is for organizations to think about how the culture is embedded within their organization and reflect on how they make that ethical culture alive and vibrant,” he said. “From that you can determine whether different approaches might be needed.”

Whatever the approach, the senior executives interviewed agree that compliance and ethics can, and must, co-exist. An earlier report by the Conference Board of Canada, on the evolving role of compliance and ethics officers, suggested compliance might undermine ethics by removing the “softer side” of ethics — fostering values and empowering employees to make better decisions.

Not so, say these corporate leaders.

“You can put in all the controls you want, but in the end your best protection is culture,” said one participant. “You get into trouble if there aren’t people who will put up their hands and say, ‘Hey, this isn’t the way we do things here.’”

That person, they all agree, must ultimately be the CEO.

Danielle Harder is a Whitby, Ont.-based freelance writer.

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