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Go further than the law by developing ethical culture

By DEREK SMITH

A company’s ethics must extend beyond its regulatory requirements. An integral part of this process is establishing a culture of integrity, transparency and accountability in decision-making. Even when the law remains silent, ethics demands that businesses do the right thing regardless of the law’s requirements. These two forces do not always align.

This article will delve lightly into key priorities that must be embedded within companies, and how they can navigate between ethical and legal considerations.

Key ethical priorities

The foundation of any ethical system is a clearly defined code of ethics. This document serves as a moral compass for decision-making and behaviour. In addition to following legal requirements, it should articulate the company’s values and ensure employees know acceptable ethical behaviour in different situations. However, having a code is not enough. It must be reinforced through continuous communication, training and leadership endorsement. Employees must see that ethical behaviour is not just encouraged but expected.

Second, ethical training programmes play a crucial role in reinforcing these values. Regular workshops and discussions allow employees to engage with real world dilemmas and develop the critical thinking skills to navigate complex situations. Leadership must drive and participate in these sessions. When leadership actively participates in these sessions, it sends a clear message that ethics is a priority at every level of the company. Beyond structured training, fostering a culture of open dialogue where employees feel comfortable discussing ethical concerns is equally important. If ethical considerations are treated as an after-thought, companies risk a disconnect between their stated values and actual business practices.

Third, a robust reporting mechanism is another essential element of an ethical workplace. Employees must not fear retaliation for reporting unethical behaviour. Providing confidential whistleblower channels encourages accountability and strengthens trust within the company. However, for such mechanisms to be effective, companies must demonstrate a genuine commitment to investigating concerns and taking corrective action. A reporting system that exists only in theory, but fails in practice, can breed cynicism and discourage employees from speaking up.

The ethical dilemmas

Despite these efforts, companies often encounter ethical dilemmas where compliance with the law does not necessarily equate to ethical conduct. For example, companies may comply with environmental laws but fail to adopt more sustainable practices if they are not legally obligated to. This example shows that legal permissibility sometimes differs from ethical responsibility.

Conflicts of interest present another common ethical challenge. A decision that benefits a leader personally, such as steering contracts towards a company they own, may not violate any legal statute, but it raises serious ethical questions. Individuals without a strong ethical framework can rationalise decisions that, while technically legal, compromise a company’s integrity and reputation. This is where ethical leadership becomes indispensable. Leaders must set the standard if inconvenient or unpopular decisions must be made.

Navigating the challenges

Businesses must commit to continuous ethical self-assessments to navigate the tension between ethics and compliance. An internal audit evaluating legal compliance and ethical alignment can help identify areas for improvement. We can make more principled decisions by encouraging open discussions about ethical concerns rather than treating them separately from legal compliance. Moreover, staying on top of changing regulations and ethical best practices is imperative for a company striving for a higher moral standard.

In short, businesses that ultimately prioritise ethics alongside legal compliance build more substantial, more resilient organisations. When ethical considerations are deeply embedded in company culture, employees, customers and stakeholders develop greater trust.

NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years with a leadership, innovation and mentorship record. He is the author of ‘The Compliance Blueprint’. Mr Smith is a certified anti-money laundering specialist (CAMS) with multiple governance credentials. He can be contacted at hello@pineapplebusinessconsultancy.com 

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