Building an Ethical Culture

By Eric R. Feldman

Due Diligence

Corporate ethical culture is not static, and even the best policies can easily be undermined by poor hires, unwise promotions, and ill-advised partnerships or acquisitions. Thus, an important aspect of maintaining an ethical culture is having measures in place for filtering out “bad apples,” both when hiring individual employees or executives and when partnering with, merging with, or acquiring other entities. Those checks should be conducted not only initially but whenever a relationship changes, such as when an employee is promoted.

For these screening and due diligence processes to be effective, they must be set up to recognize and value ethical behavior and sound decision making over profit generation—though measuring these intangibles is not always easy. Due diligence for new hires might include, for example, scenarios of ethical dilemmas used during the interview process to gauge the candidate’s attitude. Vendors and suppliers might be queried about their own codes of conduct and ethics training in addition to checking their record of corporate behavior. Ethics criteria, such as an employee’s commitment to modeling ethical behavior and sharing ethical dilemmas with staff, should be factored into performance appraisals and promotion criteria as well.

With regard to third-party contractors that pass the initial vetting, companies might also consider making their ethics and compliance resources available to them (and their subcontractors) to ensure consistency in the ethical approach to business decisions and actions.


What leaders say, or fail to say, affects the tone and culture of the organization as much as a formal code of conduct. One key driver affecting the actions of subordinate employees is the extent to which company leadership at all levels is viewed as personally committed to a company’s ethical culture—and the extent to which they are seen as taking every opportunity to communicate and demonstrate ethical priorities. Conversely, an atmosphere that breeds mistrust, cynicism, or indifference can erode loyalty and push ethical leaders and employees out the door.



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