5 Telltale Signs of a Weak Corporate Culture

Michael Volkov
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We all know it when we see it – a company with a weak corporate culture of ethics and compliance. Many companies claim they have an ethical culture but few really do.

With increasing emphasis and understanding of the tangible benefits of an ethical culture, companies are striving to achieve such a goal. Unfortunately, there is no single solution to companies that want to establish a culture of ethics. Each company has a distinct culture and therefore a unique path to achieving an ethical culture.

In assessing a company’s state of culture, there are several signs of a weak culture of ethics and compliance. Here are five:

The Single CEO Video Statement – Some companies maintain a fig leaf of culture of ethics by citing its tone at the top. Exhibit 1 for its claim is a canned video statement, recorded and replayed to demonstrate a company’s commitment to ethical principles. I have no objection to such a video, but there is much more that is required for a company to establish its tone at the top. Recorded messages have to be reinforced with actions and conduct taken by the CEO and senior management to publicize and demonstrate their commitment to an ethical culture.

The “Vanilla” Code of Ethics and Business Conduct – A company’s code of conduct has to reflect the company’s principles, its standing in its industry, and its objective to integrate ethical business decision-making into its operations. A cut-and-paste code of conduct reflects a company’s failure to realize the unique opportunity to design and implement a code of conduct that advances its objective of ethics. The message must be clear, succinct and designed to reinforce selected ethical values. It cannot be a mere statement of laws and behaviors that a company is committed to with little relevance or explanation in the context of its business.

The Chief Compliance Officer’s Position and Role – A CCO’s position in the corporate organization is an important – if not critical – indicator of a company’s commitment to a culture of ethics.   If a CCO is part of the legal department, has little visibility into the business and has little access to the C-Suite, you can bet that the company has no real desire to build a culture of ethics. On the other hand, if you observe a CCO who is empowered, independent, and with a senior management role in business decisions, that is a strong indicator of a desire to build an ethical culture. The CCO is likely to have an office in the C-Suite with direct access to the CEO and the audit/compliance committee. A CCO who has this stature in the company can play a defining role in building, measuring and monitoring a culture of ethics.

CCO Focus on “Easy” Metrics and Accomplishments – A CCO who focuses on some of the basic aspects of a compliance program is an important indicator of a lack of priorities and lost opportunities. For example, a CCO who defines compliance “success” by achieving close to 100 percent annual compliance certifications from employees is giving themselves a self-defined pat on the back. By aiming low, the CCO can almost guarantee success in his or her own mind. The danger of such an attitude is that the CCO informs and educates the CEO, senior management and the board of this criterion is doing everyone a disservice. If a CCO devotes extraordinary time and attention to “measuring” such certification percentages and reporting to the board on such issues, the CCO needs to reexamine his or her priorities. In a company dedicated to a culture of ethics, a CCO is devoted to promoting a culture of ethics, monitoring the company’s culture and reporting on its culture to the CEO and the board.

Reporting, Investigations and Discipline – A company that fails to understand the importance of maintaining an effective system of organizational justice is bound to miss the importance of such a system to an ethical culture. If a company does not encourage employee reporting of misconduct, ensure prompt responses to such concerns, or maintain consistent discipline of executives, managers and employees, a company will not have a culture of ethics. An effective system for employee reporting of concerns and misconduct is a fundamental foundation for a culture of ethics. It is a basic requirement that has to exist for a culture of ethics to flourish and for company leadership to maintain credibility in the organization.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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Michael Volkov
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