Value Systems : Poor Ethics in Organizations – How to Avoid Fleas Coming Back
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Review of the literature reflects that a single person rarely is responsible for unethical scandals within an organization. Poor ethical behaviors are often the result of interaction among several individuals that have rationalized their values. Thomas, Schermerhorn, and Dienhart (2004) found that the 12 months following the crisis of Enron in 2001, 13 of the largest corporate bankruptcies in U.S. history were filed – each had been involved in unethical business practices. The foci of this paper is to review what appears to be a decline in the ethical cultures in business and provide recommendations on how organizational leaders might be proactive in promoting ethical cultures.
The following examples show that poor corporate ethics involves more than one individual. Leaders of the world’s largest retailer, Wal-Mart, were cited for practices of employee abuses and gender discrimination. Questions emerged in the news whether leaders of the tobacco industry had prior knowledge of a link between the use of tobacco and lung cancer. Leaders at Dow Chemicals and Union Carbide leaders made the news over the poisoned chemical incident in Bhopal that killed thousands of India’s citizens. Questions relating to auto safety, truth in packaging have emerged. The collapse of 90-year old Arthur Andersen, one of the five largest accounting firms in the world, was among the most profound events in the history of American business ethics that resulted in loss of jobs and retirement income for thousands of employees. When Watergate unfolded, national leaders were exposed for unethical political practices. News reports exposed Wall Street analysts who created phony reports, made profits, and pushing worthless stocks, left citizens questioning if they should invest their money. Corporate executives like Kenneth Lay and Martha Stewart were taken before the court for poor ethical practices. Leaders of pharmaceutical companies have been found knowing about distribution of unsafe products. An aeronautical firm scandal resulted in several executives resigning when allegations of bribery, insider information on military contract bidding surfaced. Leaders at Coke Cola were found guilty of racial discrimination and leaders of cruise ships fined for dumping waste in the ocean. The educational system has not been untouched by unethical practices. The television show, 60 Minutes, ran features relating to scholastic diploma mills and schools that reported placement of graduates, which turned out to be false advertisements. During the trial of priest Paul Shanley, leaders of the religious community acknowledged knowing of his unethical sexual misconduct since 1976, and would transfer them from parish to parish as an attempt to stop the behavior. According to Cornehis (2004), “What was originally proclaimed to be one or two rogue corporations and their executives enriching themselves and their friends now has become a flood of reported ill-gotten gains and financial irregularities” (p. 29). There are unethical leaders from almost every professional, industry, and type of business. The following Fortune 1000 leaders have been in the news for unethical practices:
Adelphia Communications, April 2002; AOL Time Warner, July 2002; Arthur Andersen, November 2001; AOL Time Warner, July 2002; CMS Energy, May 2002; Duke Energy, July 2002; Dynegy, May 2002; El Paso, May 2002; Enron, October 2001; Global, February 2002; Halliburton, May 2002; Homestore.com, January 2002; Kmart, January 2002; Merck, July 2002; Mirant, July 2002; Nicor Energy, LLC, July 2002; Peregrine Systems, May 2002; Qwest Communications International, February 2002; Reliant Energy, May 2002; Tyco, May 2002; WorldCom, March 2002; Xerox, June 2000. (Patsuris, 2002)
Proactive Measures to Prevent Ethics Violations
To reshape an unethical organizational culture, leaders must employ ethical and moral codes as a standard. Reshaping an unethical organizational culture requires all individuals to look beyond themselves and focus on higher purposes. The following recommendations provide a proactive stance for leaders and educators.
- Communicate clear vision. Look for warning signs within the culture of potential unethical practices that might include harassment, discrimination, and double standards.
- Incorporate ethics policies into new employee orientation and training programs. Senior leaders should openly express support for ethical practices within the organization and each employee should sign a statement acknowledging the value of workplace ethics and practices.
- Name an executive position, like Vice President of Ethics or some vernacular that alerts all employees, customers, and citizens that ethics is a valued part of the culture, to raise the visibility of ethical performance to the same level as safety, audit, and other value added programs within the business/institution.
- Establish an ethics hotline. What allowed some of the Wall Street scandals to occur, and what allows unreported wrongdoings to continue in many organizations, is fear-based silence and complacency. While a few people might be the perpetrators of the wrongdoing, there are much greater numbers of co-conspirators who enable the perpetuations through their silence and fear of retaliation. Martin Luther King once said, “A time comes when silence is betrayal.” Leaders might consider setting up a hotline where employees that fear reprisal might alert leaders of ethical violations. The U.S. Navy has a 1-800# hotline where individuals can call in anytime and report unethical practices. This hotline number is widely distributed.
- Personal ethics must start at the top. Within the military, individuals are taught to act ethically, courageously and dependably and to inspire others to do the same. In the military, failure to report any wrongdoing that comes to one’s attention makes that individual part of the problem and accountable for not taking corrective action. Establish such a culture within the organization of personal responsibility for ethics.
- Leaders of business schools should ensure curricula include training on ethics.
- Create a leadership training and development course that focuses on ethics and accountability. Coke Cola Company evaluates all executives on their ability to lead ethically in their annual performance review.
- Avoid group think cultures. According to Thompson, Aranda, and Robbins (2000), groupthink occurs in situations when team consensus is placed above other factors in the decision-making process, such as the exercise of sound judgment or ethical considerations. The result is a faulty decision that may become the basis for adverse outcomes.
The crisis of poor ethics in corporate America has jeopardized public trust, caused an erosion of organizational cultures, created human suffering, caused unemployment, and profit losses. These ethical issues may also cause a loss in competitive standing, erosion of the American economy and standard of living. Transformational leaders and educators should help make a proactive change toward ensuring high ethics within the area they lead. The examples provided illustrate how some of the largest firms in the U.S. have allowed several individuals within the culture to rationalize their values and it has ended with disastrous results. It is up to organizational leaders to turn this around and create ethical workplace cultures.
Ó Copyright Freda Turner, 2005
Cornehis, J. V. (2004, March). Veblen's theory of finance capitalism and contemporary corporate America. Journal of Economic Issues, 38(1), 29-58.
Patsuris, P. (2002, 26 August). The corporate scandal sheet. Forbes.com, Work/Management. Retrieved 30 October 2004, from http://www.forbes.com/2002/07/25/accountingtracker.html
Thomas, T., Schermerhorn, J., & Dienhart, J. (2004, May). Strategic leadership of ethical behavior in business. The Academy of Management Executive, 18(2), 56-65.