Leaders: Keep Your Culture True to Your Ethical Principles

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Throughout my career, I’ve had the privilege of working with lots of high integrity leaders who are at the cutting edge of developing services and products, and transforming their organizations so they can do more for customers while enabling staff to grow personally and professionally. For instance, as a Master Chair with Vistage Worldwide, a 65+ year old leadership development organization which has serviced over 100,000 leaders, we deliver on our mission: “to help high-integrity leaders make great decisions that benefit their companies, families and communities.”

It therefore disappoints me when large, influential organizations ignore their own cultural values and tolerate unethical conduct. Unfortunately, it happened again.

Several years ago, I addressed this issue when it became clear to me that the injuries and deaths caused by General Motors’ continued use of defective ignition switches. I noted it in our Presentation Excellence blog just before traveling to China to teach a course there. One member of the business press tracked me down and interviewed me to find out why I pointed the finger at the company culture. I explained that too many people had to know about the fiasco since it lasted for several years before the company took responsibility for it. It clearly was not a rogue player.

Similarly, Wells Fargo culturally accepted the violation of its standards., when it engaged unethical sales practices that included opening around 3.5 million fake accounts without customer authorization. 

This week, the Securities and Exchange Commission charged EY (Ernst & Young) for a significant number of audit professionals cheating on the ethics component of the Certified Public Accountant (CPA) license exams and for withholding from the agency evidence of misconduct. EY admitted to cheating on CPA exams and continuing professional education courses required to maintain CPA licenses. The penalty price—$100 million – the largest penalty ever imposed against an audit firm by the SEC. In 2019, the SEC fined KPMG $50 million for cheating on internal training tests.

How did cheating become acceptable? Shane Goodwin, associate dean for Executive Education and Graduate Programs at the Cox School of Business at Southern Methodist University said that these issues at EY “largely stem from a ‘culture of tolerance,’” Goodwin says. It’s the responsibility of the board and the CEO to “set the tone of integrity,” he says. “An issue like this happens easily” when there’s room for the “classic ‘fraud triangle’— motive/pressure, opportunity, and rationalization,” Goodwin explains. “This is how you had a huge issue at Wells Fargo and others,” he says.

The motive/pressure was to get and stay certified, combined with an easy opportunity to cheat and “a simple rationalization that others do it, and ‘it’s not really a big deal,’” Goodwin says. “It’s just a check the box process.”

With our society continuing to tolerate such abuses, we all need to be more vigilant. As we move into the post-pandemic world – with increased virtual and hybrid workforces – and a larger number of independent workers handling gig assignments, the pressures to cut ethical corners is likely to increase. Leaders: hold fast to your ethical principles and empower others in your company to make sure the culture reinforces it, daily. Join organizations, like Vistage, where you can work with other high-integrity peers, who can provide input on how to identify potential challenges to your company’s ethical challenges and resolve them before they gain traction. And if you want additional support, feel free to contact us!