But an ethical company is not simply formed out of strong policies and airtight rules, but instead requires an ethical company culture that starts at the top. In almost every financial scandal, the issue did not stem from a lack of good policy but from policies not being enacted.
A report by advisory firm LRN maintains that it is company culture that creates an ethical company, not policy alone: “An organization’s ethical culture determines whether its rules and procedures will be followed, ignored, or circumvented, no matter how thick the rule book may be.”
Because of this, ethics and compliance are becoming more intertwined. Compliance is no longer just checking a tickbox to satisfy a regulator. To truly mitigate risk from noncompliance? Doing the right thing, the ethical thing, needs to become an ingrained part of company culture.
Ethics and compliance as a competitive advantage
Based on the LRN report, when leaders balance compliance risks that arise in pursuit of new business:
- Employees are 4.3x more likely to question decisions when they conflict with organizational values.
- Employees are 3.8x more likely to do the right thing, even if it’s not in their personal best interest.
- Employees are 3.2x more likely to speak up or speak out, even in front of managers.
Because ethical culture, and only ethical culture, catalyzes ethical behavior. By setting a foundation for an ethical culture, not only do you reduce the risks and costs associated with non-compliance, but you also reduce the reputational risk of being viewed as untrustworthy, and, in turn, gain the trust of your employees, your consumers, as well as an advantage over your competitors.