Post-Philip Green scandal, what new measures can businesses take to promote an ethical culture?

By José Hernandez

Late in 2018 a new corporate scandal exploded into the UK headlines. Sir Philip Green, Chairman of The Arcadia Group – which owns some of the biggest names in British High Street fashion – stood accused of sexual harassment, racism, and bullying. In the wake of the #MeToo movement, it emerged that a culture of fear and silence – in which employees were prevented from speaking up about misconduct by the use of non-disclosure agreements – existed within the company.

In reaction to this, in March 2019, the UK government announced it would bring in legal measures to protect workers from the misuse of non-disclosure agreements, ensuring that these cannot prevent people from reporting wrongdoing to the police.

Most organisations already have a written Code of Ethics that applies to their employees, directors, and third-party business partners. These high-level codes are usually supported by more detailed policies that operationalize the company’s basic expectations for professional conduct. For example: don’t cheat, abuse, or deceive; respect and protect the corporate brand and other assets; act transparently and with integrity. Such policy documents also typically encourage employees to come forward with ethical concerns and reassure them that their concerns will not lead to retaliation or discrimination.

But it is clear from incidents like the one at Arcadia that this simply isn’t enough; ethical codes on paper don’t always translate into ethical cultures. So, what can business leaders do to foster an ethical culture in their organizations – a culture that is built to withstand the intense pressures for performance that too often lead to misconduct and scandal?

Position ethics front and centre

Company leaders too often view ethics as a niche functional concern, or a series of talking points, or a hindrance to strategy and growth; this viewpoint impedes efforts at reform. Incentivizing ethical conduct, empowering whistle-blowers, eliminating double standards, and rejecting wilful blindness are all essential steps towards infusing integrity throughout the fabric of your organization. In the long run, this will make for a more profitable, resilient, and sustainable business.

Ask the right questions

The most effective way for leaders to inspire ethical conduct in employees is to demonstrate it every day in their own behaviour. This means asking the right questions to arrive at ethically informed decisions, getting all the facts about allegations of misconduct, and being willing to say no to business practices (and business partners) that conflict with the stated values of the organization, regardless of how lucrative they might appear. Ethical scandals result from bad choices and toxic cultures; they also kill profits and reputations. The business case for empowering integrity is clear.

Enable a two-way dialogue on ethics

There must be clear, consistent, and frequent communication of the organization’s integrity standards and expectations to all its stakeholders, including third-party business partners. Communication can take many forms – for example, events such as town halls provide a visible platform for setting the ‘tone at the top’ as well as enabling open, two-way dialogue on ethical issues. It’s also important to introduce mandatory ethics training for all employees, training that is designed to address everyday risks and ethical dilemma situations.

Empower employees to Speak Up

Corporate leaders should do everything in their power to encourage a ‘speak up’ culture and investigate all allegations that come to them. Whistle-blowers help bring vision to the wilfully blind; the messages they send should never be ignored or suppressed. As a leader, it’s essential to remember that whistle-blowers are not the enemy. There are too many corporate boards and senior executives who think their companies are doing well because there have been few allegations raised. It is more likely that the lack of allegations is evidence of a problem. Allegations are important signals about the health and culture of a company, including the openness of communication. People should feel safe enough to make them, and leaders need to be wise enough to act on them. Every time.

Incorporate ethics into your hiring process

Reshaping company culture also requires changing how employees are hired, promoted, and rewarded. Looking at a candidate’s ethical track record is an essential component of HR due diligence, and should not be an afterthought in seeking out the best and the brightest. Ethical performance should also be a core consideration in promoting employees to positions of greater responsibility. Furthermore, if an organization fails to visibly reward people for good behaviour (and sanction them for bad behaviour), the integrity culture begins to erode, and the unrelenting drive for profit and growth can cloud judgment and lead to ethical lapses.

José Hernandez is the CEO of Ortus Strategies and the author of new book Broken Business: Seven Steps to Reform Good Companies Gone Bad (published by Wiley), which is available now in hardback and ebook.