Together, Reducing Fraud Worldwide


Flunking the Ethics Test


Aspects Fostering Unethical Behavior in Corporate Culture

 





While riding the terminal shuttle at the international airport in Atlanta, Ga., a fellow passenger initiated a conversation with me by asking what I did for a living. When I told him I was a professional consultant, he retorted with a sneer, “Oh yeah? And who's doing the work?”

His questioning my work ethic disturbed me and wounded my professional pride, but it also led me to ask questions of myself: What does ethics actually mean? What causes a person to become unethical? Likewise, what keeps a person on the “straight and narrow”? These questions spurred me to take a closer look at the role of ethics in the corporate environment and the attitudes that foster unethical behavior. The list of factors is partial and fluid, but should be helpful to fraud examiners and managers.

Consequences for not braiding ethics into corporate attitudes may include loss of revenue, loss of market share, and irreparable harm to a firm’s reputation. But the results of not being ethical personally and professionally could result in suspension or revocation of professional licenses, financial bankruptcy, and even incarceration.

Designing and implementing ethical standards within a corporation requires rigorously examining the management of the business by benchmarking the ethics of each business unit against the industry standards. This can only be achieved through a holistic analysis, covering the entire range of ethical issues as they affect shareholders, customers, employees, society, and partners.

Therefore, the guidelines I present here are partial. They should be treated as an open list of potential issues that could be changed by additional situations that may compromise or affect the ethical integrity of a corporation.

What is ‘Ethics’? 

The word, ethics, stems from the ancient Greek root ethos, which refers to how a person’s character is regarded.1
The definition of the word is fairly consistent in dictionaries: “a set of principles of right conduct or a theory or a system of moral values” (American Heritage); “principles of conduct governing an individual or a professional” (Webster’s New International); and “a system of moral principles” (Random House Collegiate).

But perhaps the most comprehensive definition is found in Black’s Law Dictionary, which defines the word as “of or relating to moral action, conduct, motive or character; … ethical emotion; … treating of moral feelings, duties or conduct; containing precepts of morality; moral. Professionally right or befitting; conforming to professional standards of conduct.”

Most executives, managers, and fraud examiners are familiar with the concept of ethics. However, patterns of actual unethical behavior are not always predictable or easily detectable.

Scientists tell us that behavioral patterns are affected by genetic makeup. But social behaviorists maintain that genetic predisposition is modified greatly by surrounding environments such as family upbringing and educational background.

With the latter opinion in mind, management should recognize external elements that tend to foster unethical behavior. Two important elements affecting employees’ behaviors are the corporate attitudes embedded in company policies and culture, and the overall attitudes of the employees.


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