Ethical behavior in organizations depends on a healthy dynamic between individual self-awareness, corporate culture, and leadership judgment, each reinforcing the other through accountability. When any link in these connections is weakened, the damage spreads to all of them.
Below, Kellogg faculty offer actionable, research-backed advice on how to build and sustain an ethical workplace culture.
1. Promote humility and reflection
There is evidence that ethical companies perform better in the market and has happier employees, he says Mariam Kouhakiprofessor of management and organizations studying decision making and ethics. He offers many recommendations for organizational leaders who want to achieve this high level.
First, ethics must be embedded at every level of corporate culture. From hiring to training to performance reviews, ethical leadership has been shown to reduce deviance and increase positive behavior among employees. Building an ethical culture isn’t just about telling employees what not to do. Companies can offer awards to employees who demonstrate integrity or create appreciation boards where employees can anonymously praise and thank each other. These measures can promote an environment where positive, pro-social behavior prevails rather than extreme competition.
Next, leaders should promote humility and encourage reflection. Organizations can expand their ethics training to include information about the types of situations where people are most likely to go astray. They can also create spaces for groups to reflect on a project or experience, such as during “post-mortem” meetings. “This gives the opportunity to learn from successes as well as failures,” says Kouhaki. Leaders should equip employees with the tools to evaluate their own performance, countering the frequent assumption that “I would never do that.”
Leaders can also model and promote ethical behavior by giving back to their community through volunteering and service opportunities for their employees, which research has linked to reduced selfishness and greater social responsibility.
2. In codes of conduct, language matters
Most companies assume that a code of conduct setting out rules for ethical behavior is sufficient safeguard. If you state the expectations, employees will follow them. However, the way these rules are worded can be just as important as the rules themselves.
In a separate paper, Kouhaki and her colleagues conducted multiple studies to assess the potential effect of formulating a code of conduct on people’s behavior. They found that codes of conduct with communal language—such as “we” and “us”—seemed to be associated with more rule breaking, likely because such language inadvertently signals to employees that transgressions will be met with understanding rather than consequences. The study shows “how challenging and complicated it is to try to guide people to be good people,” Koutsaki says. “It’s not just the presence of the code of conduct that matters, but your culture.” So if a company uses warm and community language, it should also make it clear that violations will be penalized — and follow through with those penalties, he says.
“What helps is being very clear about expectations and enforcing them,” he says. “You don’t want to just look warm. You want to look warm and ethical. That’s the best combination.”
3. Ethics begins with the self
No matter what type of organization-level interventions a company implements, some elements of ethical behavior will boil down to individuals and their choices.
Rima Touré-Tilleryassociate professor of marketing, investigated how people with a less clearly defined “self-concept”—the understanding of the beliefs and characteristics that define who they are—are more likely to engage in unethical behavior. This stems from moral disengagement, where people psychologically distance themselves from their actions, relaxing their internal boundaries between right and wrong.
Touré-Tillery observed this pattern in several studies. Participants who were less clear about their self-concept clarity were less likely to act ethically in hypothetical scenarios (eg, returning a worn shirt for a refund) and less likely to donate a small bonus to charity. Furthermore, participants who had begun to feel a vague sense of self were more likely to cheat and misreport the results of the coin flip when there was a financial incentive.
However, Touré-Tillery also found that the effect is reversible. For example, have participants sign a simple honor pledge before a task narrowed the gap in honesty between individuals with low and high self-perception clarity.
Knowing yourself can be difficult — especially in times of turmoil. However, interventions in schools and workplaces that help people reflect on values, goals and meaning in their work could help. “It could go a long way in reducing cases of unethical behavior and ethical violations,” says Touré-Tillery.
4. Ethical branding can attract customers
The ever-expanding selection of eco-friendly, fair trade and locally produced products suggests that people want to feel that the products they buy support their ethics and values. However, some research studies have found the opposite and argued that the “ethical consumer” is a myth.
Jacob Teeny, an associate professor of marketing, entered this debate by studying whether ethics actually affect what people buy. To do this, Teeny developed an “attitude-level approach” that separates whether a consumer’s positive feelings about a product are rooted in morality versus utility.
In several experiments, consumers who felt that their preference for products such as fair trade coffee or eco-friendly household cleaners was morally justified were more likely to say they would buy that product. The takeaway: ethics does they shape purchase decisions, but not uniformly. It comes from the individual consumer moralizing a particular product.
For companies, this means there is ample opportunity to market products around consumers’ sense of right and wrong to improve their sales. And this dynamic can yield positive results for society as well.
“There’s a hunger for consumers to be able to stand up for their ethics,” Teeny says. “And so positioning products in ways that relate to the consumer’s sense of morality has the potential to be an effective form of motivating consumer behavior. And sure, maybe it’s motivated by greed, but if it also makes those companies act more ethically, then it’s a win-win.”
5. Transparency is not a failure solution
Transparency is supposed to keep people honest. Audited meeting minutes, monitored trading platforms and documented recruitment processes are based on the assumption that audit enforces good behaviour. But a study by Nemania Anditsassociate professor of managerial economics and decision sciences, suggests that the assumption is not always true.
Using a game theory model of two decision makers sharing information under public observation, the research found that it is possible to achieve a desired outcome while still maintaining a plausible deniability of what was actually known at the time.
The trick is not so much deception as careful restraint. By trading information back and forth in a deliberate order and stopping short of full disclosure, the parties can leave enough ambiguity that an outside observer can never prove that they acted against the public interest. As a manager, Antic says, you have to show that “given all the information available to you at the time, you made a decision that was palatable to the public.” A vague phrase instead of a specific figure, for example, can do the job of protecting a decision without ever devolving into an outright lie.
The moral implications seem to fall into two directions. For bona fide communicators—business leaders who want to discuss a potential acquisition without having their words later taken out of context by antitrust regulators—this kind of strategic ambiguity offers protection.
But for regulators and the public, the transparency requirements are a loophole. If the people involved control how and when information is shared, the result may be that nothing changes at all.
“Maybe it shows why some of these policies don’t lead to real change,” Antic says.
