2 Understanding Ethical and Legal Considerations

The Role of Corporate Culture in Ethical and Legal Conduct

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The Role of Corporate Culture in Ethical and Legal Conduct

Most employees work within organizations, such as corporations and government agencies. We know that organizations exert a powerful influence on their employees’ actions. According to a study by the Ethics Resource Center of more than 4,600 employees in various businesses (2012), organizations with strong ethical cultures—organizations in which ethical values are promoted at all levels and employees see that everyone lives up to the organization’s stated values—experience fewer ethical problems than organizations with weak ethical cultures. In organizations with strong ethical cultures, far fewer employees feel pressure to commit misconduct, far fewer employees observe misconduct, far more employees report the misconduct that they see, and there is far less retaliation against employees who report misconduct.

Companies can take specific steps to improve their ethical culture:

The organization’s leaders can set the right tone by living up to their commitment to ethical conduct.
Supervisors can set good examples and encourage ethical conduct.
Peers can support those employees who act ethically.
The organization can use informal communication to reinforce the formal policies, such as those presented in a company code of conduct.

In other words, it is not enough for an organization to issue a statement that ethical and legal behavior is important. The organization has to create a culture that values and rewards ethical and legal behavior. That culture starts at the top and extends to all employees, and it permeates the day-to-day operations of the organization.

One company that has earned praise for its commitment to ethical and legal conduct is Texas Instruments (TI). Its culture is communicated on its website, which contains a comprehensive set of materials that describes how TI employees and suppliers are required to act and why (Texas Instruments, 2010). On the TI site are a number of resources, including a statement from the President and Chief Executive Officer, Rich Templeton, on the company’s core values of respect for people and the environment and trust in business relationships; the company’s formal code of conduct for all employees; its code of ethics for company officers; information about the company’s Ethics Office; links to all of its ethics publications; its statement of ethics for its suppliers; and detailed information on how to contact the IT Ethics Office confidentially.

Does the Texas Instruments culture improve conduct? Although that question is difficult to answer, the TI site lists some of the major awards the company has won for its ethics program, presents data from its own employee surveys showing that employees think the company’s ethical culture is good, and describes the company’s outreach to communities and other organizations that have established their own ethics programs.

An important element of a culture of ethical and legal conduct is a formal code of conduct. Most large corporations in the United States have one, as do almost all professional societies. (U.S. companies that are traded publicly are required to state whether they have a code of conduct—and if not, why not.) Codes of conduct vary greatly from organization to organization, but most of them address such issues as the following:

adhering to local laws and regulations, including those intended to protect the environment
avoiding discrimination
maintaining a safe and healthy workplace
respecting privacy
avoiding conflicts of interest
protecting the company’s intellectual property
avoiding bribery and kickbacks in working with suppliers and customers

A code of conduct focuses on behavior, including such topics as adhering to the law. Many codes of conduct are only a few paragraphs long; others are lengthy and detailed, some consisting of several volumes.

An effective code has three major characteristics:

It protects the public rather than members of the organization or profession. For instance, the code should condemn unsafe building practices but not advertising, which increases competition and thus lowers prices.
It is specific and comprehensive. A code is ineffective if it merely states that people must not steal or if it does not address typical ethical offenses such as bribery in companies that do business in other countries.
It is enforceable. A code is ineffective if it does not stipulate penalties, including dismissal from the company or expulsion from the profession.

Although many codes are too vague to be useful in determining whether a person has violated one of their principles, writing and implementing a code can be valuable because it forces an organization to clarify its own values and fosters an increased awareness of ethical issues. Texas Instruments, like many organizations, encourages employees to report ethical problems to a committee or a person (sometimes called an ethics officer or an ombudsperson) who investigates and reaches an impartial decision.

If you think there is a serious ethical problem in your organization, find out what resources your organization offers to deal with it. If there are no resources, work with your supervisor to solve the problem.

What do you do if the ethical problem persists even after you have exhausted all the resources at your organization and, if appropriate, the professional organization in your field? The next step will likely involve whistle-blowing—the practice of going public with information about serious unethical conduct within an organization. For example, an engineer is blowing the whistle when she tells a regulatory agency or a newspaper that quality-control tests on a company product were faked.

Ethicists such as Velasquez (2011) argue that whistle-blowing is justified if you have tried to resolve the problem through internal channels, if you have strong evidence that the problem is hurting or will hurt other parties, and if the whistle-blowing is reasonably certain to prevent or stop the wrongdoing. But Velasquez also points out that whistle-blowing is likely to hurt the employee, his or her family, and other parties. Whistle-blowers can be penalized through negative performance appraisals, transfers to undesirable locations, or isolation within the company. The Ethics Resource Center reports in its 2012 survey that 22 percent of whistle-blowers experienced retaliation (2012, p. 12).