The role of culture in ethical behaviour

There is a well-publicised picture of Andrew Fastow, Enron’s infamous CFO whose accounting trickery played no small part in the energy trading company’s dramatic decline, holding his prison ID card in one hand and a ‘CFO of the year’ award in the other. Both, he claims were given to him for the very same accounting transactions. The ‘Chief Loophole Officer’, as he affectionately refers to himself, acknowledges that while his actions in hindsight were absolutely wrong (he “undermined every principle possible”), he didn’t believe that he was breaking any rules. And so, Enron and many other corporate collapses since have put a spotlight on the overlap between the law and business ethics, highlighting in a very dramatic way that business ethics cannot be neatly tied up in blind adherence to rules, nor does it stop with impressive codes of conduct (Enron’s was award-winning FYI). Rather, ethics is about everyday behaviour. Where rules inform the black and white, ethics lies in the grey, governing how individuals and groups conduct themselves.
Although we may not always view it as such, there are ethical implications for decisions taken at all levels of the organisation – strategic through to operational. Yet, the ethics of a given situation may not always be immediately clear to us. Ethics can fade into the background as we cope with multiple, competing organisational pressures and business complexities, strive for promotions or struggle to keep our jobs. We can take Fastow’s accounting or Bernie Madoff’s Ponzi-scheme as extreme examples of the slippery slope of unethical behaviour, but each of us can be socialised into the prevailing norms and expectations of our work environment whatever that may be, learning very quickly the behaviours that are expected, rewarded and, just as importantly, ignored. So strong is the cultural impact that unconsciously we can begin to behave in ways that may be different to or even at odds with our own ethical values and beliefs, rationalising unethical behaviour as we do so (“everyone’s doing it”, “it’s standard practice here” or, in Fastow’s case, “I followed the rules, technically”).
How then do we make ethics ‘stand out’, encourage more conscious ethical behaviour, and help navigate those 'grey' areas in business? The role of culture cannot be underestimated. To build and maintain an ethical culture, ethics needs to be reinforced through the formal recruitment and selection processes, induction and training programmes, and the performance management systems, ensuring that ‘how’ employees achieve results is as valued as ‘what’ they achieve. Just as importantly, leaders themselves have a central role to play in pursuing ethical business practices. The behaviours expected of employees must be mirrored by the board of directors and senior management team, in what they do, say and encourage. By living and breathing these ethical principles themselves, leaders will send clear and consistent messages about their expectations for good ethics and good business to be aligned. 

The Institute of Banking is hosting a webinar, presented by Dr Kate Cullen, on ethics on Tuesday 14 November 2017.  Find out more here