What is a code of ethics? how can one reduce unethical behavior in business?

​In the not-so-distant past, the misdeeds of corporate leaders would often be swept under the rug. But that’s happening less frequently these days.

The percentage of CEOs forced out of their jobs for ethical violations increased to 5.3 percent of all successions between 2012 and 2016 from 3.9 percent between 2007 and 2011, according to a study by PwC’s Strategy& released in June. The study analyzed CEO exits at the world’s 2,500 largest public companies over the past 10 years.

However, it’s not clear whether more ethical violations are occurring. 

“That’s a nearly impossible statistic to measure,” says Kristin Rivera, forensics services partner with PwC U.S. and study co-author. “It’s fair to say that it seems the world is less tolerant and more apt to take action than in previous times.”

Public trust in large corporations has declined significantly since the 2007-09 Great Recession. Business scandals have led to increased government regulation. And more companies are moving into developing markets where the rules of operation are murkier and global supply chains raise their risk.

Meanwhile, digital communication methods such as e-mail and social media make it easier to capture evidence of misconduct—and a 24/7 news cycle ensures that such revelations are disseminated quickly.

The study captured data from CEOs whose departures were triggered by their own acts of impropriety or by ethical lapses of those further down the chain of command. That points to a cultural problem that HR professionals can help address, Rivera says, by taking the following key steps:

• Ensure that the company isn’t creating incentives for employees to act unethically.

• Develop business processes and financial controls that discourage bad behavior.

• Prevent employees from rationalizing improper conduct.

“One thing that HR can do to help prevent employees from starting on that slippery slope is to call out those small issues early on and nip them in the bud,” Rivera says. In cases of major fraud, there was often an early red flag that was ignored or inappropriately addressed, she says.

Changing a culture that encourages unethical behavior can be tough, especially when corporate leaders are among the violators. 

“There should be someone who is objective that the HR professional can work with,” such as an external audit committee or an internal auditor, compliance officer or legal counsel, Rivera says.

It’s far easier to build ethics and integrity into the corporate culture from the start, says Teri Barros, HR director at Pyrotek Inc. in Spokane, Wash. It helps if that message comes from the top. At Pyrotek, each new hire receives a letter signed by the company president stating that every employee is expected to maintain high ethical standards.

The company also adopts processes to help achieve those high standards. For example, it doesn’t pay bonuses to its salespeople because that might encourage them to sell for the wrong reasons, says Barros, who is a member of the Society for Human Resource Management’s Ethics/Corporate Social Responsibility and Sustainability Special Expertise Panel.

To maintain an ethical culture, HR leaders must ensure that the rules apply equally to everyone—even executives. That takes courage, but it can be easier if the HR leader has built prior relationships with members of the executive team and the board of directors, she says.

“It’s important for every company to have someone from HR at the executive table so they can be an influence for good,” Barros says. “If HR isn’t courageous and willing to make those decisions, then who will?”    

Dori Meinert is senior writer/editor for HR Magazine.

Photo Illustration by ​Laura Bruce for HR Magazine.

Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. Join/Renew Now and let SHRM help you work smarter.

The display of unethical behaviour in the workplace is detrimental to the overall financial performance of a business. Unethical conduct decreases productivity and transcends to every part of the business from employees and managers all the way to the consumer level.

Photo by Blake Cheek on Unsplash

In a national survey of 14,500 representing the U.S. economy and demographic across a variety of sectors and industries, one in four workers felt pressured to behave unethically.

The respondents reported they have experienced and witnessed actions that violate rules, lying and emerging causes of ethical concerns such as sacrificing safety, stealing, discrimination and bullying .

The study also found that four in five workers were afraid to speak up.

In the UK, the major ethical concerns relate to an increase in reported stories about behaviour and culture, treatment of employees and diversity and discrimination.

Photo by Bermix Studio on Unsplash

Unethical behaviour is a tale as old as time, it’s not unique at all.

Yet it’s the cause of the major downfalls of multinational organisations and the root of corporate scandals reported by the media.

But this doesn’t just affect the large organisations.

It affects ALL businesses.

Every business regardless of size or sector will have experience of unethical individuals in some way. From SMEs all the way to the big conglomerate companies. From the public sector and charity organisations to private companies.

Therefore, making it an evergreen and all-time relevant business topic to anyone and everyone who is working within an organisation.

Unethical behaviour will always have a way of manifesting if rules and regulations are not established and followed.

However, for the most part, it is the organisational culture that facilitates and enables the occurrence of unethical behaviour.

In contrast, an organisational culture with strong ethical values builds credibility and trust not only with consumers but also with current and prospective employees.

A business lacking in ethical values will not stand in today’s highly competitive world where most organisations are aiming to establish strong ethical values that creates competitive advantage.

What are Unethical Behaviours?

Unethical behaviour has multiple and often subjective definitions but broadly it can be defined as:

The display of morally unacceptable behaviour or action that causes harm to individuals or community at large.

Photo by John Noonan on Unsplash

When we think of unethical behaviour within a business context, we usually think of serious corporate crimes reported by the press such as:

• Tax evasion.
• Fraud.
• Sexual harassment.
• Theft.

Although this is true, unethical behaviour is not always illegal and can manifest in more subtle ways you wouldn’t expect:

• Exploiting company resources for personal interest.
• Lying and deceiving.
• Prioritising financial gain over safety.
• Values profit over environmental impact.
• Distorting or withholding information.

Generalised examples of unethical behaviour in context:

• Waiting staff or restaurant managers constantly eating food from the restaurant.
• IT technicians accessing people’s private information for personal reasons and use.
• Bankers manipulating financial accounts or misrepresenting data.

As a manager, beware and conscious of any unethical behaviour that you allow your employees to pass, as well as any unethical acts you yourself exhibit.

Done once, makes it easier to do the second time around and this will have unintentional and unforeseen consequences for other employees and your business.

Photo by Joshua Hoehne on UnsplashHow to Deal with Unethical Behaviour in the Workplace

There are two ways you can tackle this problem: the staff and the environment.

Below are suggestions that are applicable to SMEs (small and medium-sized enterprises) and MNEs (multinational enterprises) experiencing unethical behaviour in their workplace:

Hiring Ethical Staff

The best way to manage unethical behaviour within your company is to prevent it in the first place.

Develop a more ethically rigorous hiring process to ensure the people you are hiring meet the ethical standards the company requires.

1. When writing the job specifications, emphasise the importance of ethical conduct as one of the main responsibilities. Depending on the nature of your business, you may even put it as an essential requirement. This is particularly applicable to those within the healthcare industry or NGOs as having strong ethical values are a must and a critical component of jobs within those industries.
2. During interviews, enquire about ethically questionable situations that candidates have been in and what action did they take as a result.
3. Incorporate ethical practices or tasks during on-boarding process or induction training.

Create an Ethical Culture

It is important to remember that hiring ethical staff is less impactful if the environment does not reinforce ethical values emphasised during the hiring process:

1. Provide a code of conduct highly accessible to all members of staff presented in the new employee induction pack and online. This should highlight the company’s ethical standards and actions the company does not tolerate. The document should also include a system that punishes unethical behaviour and rewards ethical behaviour.
2. Create a procedure for whistleblowers to report unethical behaviours undertaken by individuals and ensure their privacy are protected.
3. Emphasise ethical symbols in the office. This can be done by displaying tangible objects that highlight ethical values such as awards for being an ethical organisation or certificates of ethics training by an employee. This can also include publicly praising an employee for their ethical deed.
4. Create ethical reminders perhaps through weekly emails/newsletters or during meetings of success achieved by berth ethical. This could be the amount of charity donations the company has made or individuals who volunteer regularly or staff that has participated in a charity running marathon.
5. Ethical leadership must be strong at management level and managers must role model the appropriate behaviours that are expected of the employees. Expecting employees to behave ethically when their employers or managers are behaving otherwise creates a conflict of interest and negatively affects employee motivation and productivity.
6. Provide online ethical training courses that are compulsory to further emphasise that ethics is a significant core value to your company.

Photo by Nathan Dumlao on UnsplashConclusion

Unethical behaviour has always been an important issue particularly in extremely profit-driven businesses such as those in the financial investment sector. If left unchecked, it could cause damage to your organisation in terms of profitability regardless of the size and sector of your business.

However, moving towards a more ethical business model and practices can have a positive impact on ROI (return on investment). Organisations with strong ethical values creates a good brand reputation which attracts and retains talented employees. It also improves thought leadership position in the consumers minds.

How can one reduce unethical behavior in business?

How to Promote Ethical Behavior in the Workplace:.

Establish straightforward guidelines. You should develop an easily understood yet comprehensive code of conduct that outlines company expectations for ethical behavior at work. ... .

Promote knowledge. ... .

Provide tools. ... .

Be proactive. ... .

Employ data monitoring. ... .

Foster ethical behavior..

How does a code of ethics prevent unethical Behaviour?

A corporate code of ethics cannot prevent unethical behavior, but it can have an impact on employee decisions. If a worker knows that a certain course of action violates his company's ethical code, he is likely to give more thought to whether or not he should pursue that course of action.

What is ethical and unethical business behavior?

Ethics can be defined as going beyond what is legal and doing what is right, even when no one is looking. So when we talk about unethical behavior in business, we're talking about actions that don't conform to the acceptable standards of business operations, failing to do what is right in every situation.

How would you defeat or reduce unethical problems in the workplace organization?

Having a Code of Ethics will create a sense of fairness and a clear understanding of the rules and repercussions so both employees and leaders are aligned. In order to overcome unethical behavior in the workplace, leaders must also create an environment in which employees feel safe and comfortable.