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CEO Best Practice: Business Ethics

Executive Tools

  • Executive Summary
  • Self Assessment Checklist

Expert Practices Articles

  • Are You an Enron in Disguise?: A Business Ethics Overview
  • The CEO: Building an Ethical Culture
  • Communicating Ethics
  • Ethics Training
  • Ethics Programs
  • Codes of Conduct
  • Ethics as a Brand Weapon

Tools & Analysis

  • A Leader's Steps for Ethical Growth
  • Top Ten Classic Rationalizations

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Are You an Enron in Disguise?: A Business Ethics Overview

For Vistage speaker Peter Schutz, a company's ethics is the single most powerful way to differentiate itself from the competition. "Customers buy from people before they buy the product or service offered. That means trusting in an ethical business."

Best of all, Schutz notes: "It's free! The ROI on ethics is limitless."

Fellow TEC speaker Harvin Moore agrees. "Ethical values fall into two distinct categories: core and personal. Core values are intrinsic to a large body, like a civilization, and embody certain characteristics like honesty, courage, justice, fairness, respect for others -- qualities that are recognized by all civilizations, and that don't change over time."

Virtually all business situations can be considered in an ethical light, since just about every action we take -- as well as those we decide not to take -- can be subjected to ethical evaluation. "Values aren't just additional factors to consider when making a decision," Schutz says. "For that reason, we need to look inside at our core values and make sure that dealing honestly with ourselves and everyone we come in contact with is our first priority."

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The CEO: Building an Ethical Culture

Even if your actions aren't unlawful, he adds, they send a terrible message.

"Your behavior is disproportionately symbolic to employees. If there's a disconnect between what you say and what you do, employees will see it -- and, most likely, emulate the wrong behavior."

Shutz concurs. "Whether it's simply through ethical behavior or by instituting a full-blown ethics program, the company's leader must stand behind his or her actions fully. If a mistake is made, admit it. Anything less runs the risk of breeding cynical attitudes among the staff that are very difficult to dislodge."

Effective moral leadership includes:

  • A framework of principles. A personal code of conduct should be so integral to your viewpoint that unethical behavior never becomes an option.
  • "Selling" ethics to others. You are the leader. Lead by example. Your decisions and actions send a clear message of what is tolerated and what isn't.
  • Respecting yourself and others. Although people may define "respect" in different ways, everyone knows when they're being "disrespected." Moral leadership supports actions that avoid any harm or discourtesy to others.

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Communicating Ethics

When it comes to communicating ethics, several "delivery strategies" are available:

  • Safe feedback systems. One true test of a company's commitment to ethics is an atmosphere where employees can safely tell their supervisors about perceived "cracks" in the program. Creating a mechanism for reporting problems encourages such behavior. This can include (1) suggestion boxes; (2) one-to-one meetings; and/or (3) anonymous hotlines. Employees should never feel they are jeopardizing their positions by reporting ethical concerns.
  • Company communications. Look at existing modes of communication for ways to spread the word about your company's dedication to ethical behavior. Appropriate venues include new employee orientation, sales training sessions, business planning and other day-to-day activities.

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Ethics Training

A comprehensive ethics training program offers these substantial benefits:

  • Provides tools for people to behave in an ethical manner
  • Enables people to understand the consequences of their behavior
  • Raises awareness that the company values ethical actions

"The first step is defining yourself and your business as an ethical enterprise," Schutz continues. "Take another look at your mission and vision to ensure they are clear, consistent and up-to-date. Communicate those values throughout the organization. Make sure people within the company understand that support and guidance are there when needed."

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Ethics Programs

According to Moore, the answer is a qualified yes. "In most TEC-sized companies, this role seems to naturally reside with the owner. Dealing with employees is a lot like dealing with your children. You're the role model and authority figure. As a result, you better do what you say you want them to do."

Schutz feels the position itself may be superfluous. "The job of enforcing an ethical standard belongs to the CEO and can't be delegated," he says. "The organizational leader is like God. God can have prophets but can't relinquish primary responsibility. Only the CEO can be the custodian of corporate culture."

By its very nature, an ethical structure in the workplace means advocating certain behaviors and discouraging others. It's important, say the TEC experts, to be clear in how you go about it.

"Reward and celebrate ethical behavior," Moore says. "Start by instituting accountability standards for employees at all levels of the organization. Make it clear that your policy is zero tolerance for ethical lapses."

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Codes of Conduct

"A code of conduct that emphasizes positive values -- including respect for others, quality for customers, responsibility toward society -- can instill a sense of pride among employees," says Schutz. "In this environment, each employee understands that his or her decisions have an ethical impact on everyone around them."

What's appropriate to include in the code of conduct? The TEC experts suggest the following guidelines:

  • Comply with laws and regulations.
  • Avoid sexual or racial discrimination.
  • Maintain confidentiality.
  • Avoid personal use of company property.
  • Avoid conflicts of interest.
  • Report illegal activity to your supervisor.

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Ethics as Brand Weapon

When a company dedicates itself to fostering an ethical culture, there's no reason it shouldn't be known for this dedication, according to Moore and Schutz.

"A commitment to ethics projects a strong public image," Moore says. "The company's customers, as well as the public at large, respond positively to this, particularly in these ethically troubled times. The message an ethical company sends is: We value people as much, if not more, than profits."

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