Companies and their leaders can establish formal codes of behavior, but if they are not reinforced by strong ethical climates, the organizations can be vulnerable to various kinds of wrongdoing, according to a recent study by a graduate student and a psychology professor at the City University of New York’s Baruch College.

 

Nicole Andreoli and Dr. Joel Lefkowitz looked at some of the conditions which lead to corporate misconduct and found that the ethical climate or culture of an organization, more than corporate practices or individual morality, are key indicators of whether a company is headed for problems.

 

Corporate practices include the public posture of the organization. For example, does the company have a code of ethics, are there procedures to report unethical practices, is ethical training provided to workers?

 

“You can’t find a major organization that does not have a code of conduct or ethics,” says Lefkowitz. “However, when senior leaders don’t follow the standards they have set and employees are aware of that double standard, then that can lead to trouble.”

 

A classic example is at Enron where an elaborate code of ethics existed, but the values and actions of management conveyed a different picture.

 

“Even good employees can get caught up in unethical behavior if they see it going on around them, or if managers don’t talk about ethical behavior as a company value,” he says.

 

Ethics can become lost when managers pressure their workers by stressing the importance of performance and profits. That can lead to employees compromising their own ethical standards in order to deliver bottom line results. Employees then perceive that top management is only concerned about profits, no matter the cost.


“Ethical climate is where leaders walk the talk. They set good examples for ethical behavior; supervisors stress the importance of ethics; workers talk about them and people are held accountable if caught violating ethical standards,” Andreoli says.


A strong ethical climate can be a preventive for wrongdoing.

 

“It rubs off on people. If a person who might be inclined to unethical behavior is working in a culture in which ethics are strongly supported by management, there is less likelihood that employee will engage in unethical practices,” Lefkowitz says.

 

Companies that invest in building an ethical culture tend to have more satisfied employees and that, in turn, likely leads to better performance and results.