How leaders can make ethical choices when the rules fall short

There are common signals that your company is headed toward an unethical business practice. Here’s how to spot them—and set yourself back on the right path.

[Source Image: Freepik]

BY Richard Bistrong and Anna Romberg

We live in a time when our expectations for ethical business practices are no longer predictable. Global regulation, along with ideas around standards like ESG, are in flux—and building debate around what the standards should be for leaders and managers. 

“Some governments are tightening oversight, while others are relaxing enforcement,” write ethics leaders at the World Economic Forum. Companies may focus on strictly following the law, thinking that it doesn’t make sense to go beyond regulatory expectations. But being compliant doesn’t mean you’re being ethical.

There are three common signals that your company is headed towards a flawed business practice—decisions that may be lawful, but operate in an ethical gray zone. But learning to spot the signals can help any leader or manager steer their work towards ethical choices and keep their company culture strong in the process.

Risk 1: Relying too much on hard compliance 

Research finds that relying on regulations to determine your policies and procedures can result in ethical blindspots, or situations where people might think if there is not a rule for something, that it’s permissible. After years of shifting towards values and culture-based compliance, leadership might be heading the opposite direction.

If we want to avoid using the law as our only index of ethicality, it’s important to double down on corporate values and help employees to understand the reasons behind the law. For example, in Europe, there has been a recent reduction of due diligence requirements around ESG, like ensuring ethical working conditions in factory production lines. Yet companies still face the risks of being complicit in human rights abuses. 

By instead tying corporate rules to values, such as protecting vulnerable communities, leaders can demonstrate that “doing what’s right” is not subject to regulatory ebbs and flows. 

The fix: A number of organizations have moved from a code of conduct to a code of ethics. These demonstrate that values, not just rules, should guide decision making. These codes also demonstrate to employees the long-term vision of a company, regardless of legal frameworks that can shift dramatically over time. 

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