Integrating Ethical Leadership into Organizational Culture

Executive Summary

Formal compliance programs are only a recent phenonmenon in corporate life. We are only now just beginning to get a realistic sense of how to plan and implement an “effective” program in our organizations. It is a truly daunting task.

But precisely because compliance is so daunting, we may be tempted to turn too quickly to other pressing concerns. Before we do, however, we ought to think ahead about the "next step" in compliance: how to sustain it. After the planning and initial implementation steps are complete, after the consultants are paid and out the door, and after the roll-out hype wears off, how will we sustain our compliance programs?

We at the Institute for Corporate Ethics and Governance are concerned about what we call sustainable compliance. We believe that organizations need to institutionalize compliance. This requires that organizations realize at least two goals:

• organizations must direct the overall orientation of a compliance program toward the creation and maintenance of an ethical organizational culture
• organizations must link compliance and the bottom-line.

Here is why we think these goals are key to sustainable compliance.

First, other industries have taught us that sustainable compliance aspires to more than regulatory minimalism. Rather, companies that sustain compliance over the long term create and nurture an ethical organizational culture that rewards ethical leadership and ethical conduct at all levels. Such companies have found that this strategy not only reduces the likelihood of regulatory violations, it also leads to greater "buy-in" from employees and, over time, enhances morale, trust and the organization’s reputation among its customers. This leads us to the second goal.

Reducing the chance of wrong-doing and enhancing morale, trust, and the organization’s reputation has proven, positive financial implications. In order to sustain a compliance initiative, organizations must find ways to use compliance to gain greater efficiencies in the way they do business and serve their customers.

For example, compliance officers can work together with risk managers, operations and marketing to uncover areas where organizations can reduce and morally manage potential liabilities. Then, using the communication channels and educational forums created within ethics/compliance programs, organizations can utilize such findings not only to bring the organization into formal compliance, but also to discuss ways to improve performance. Compliance can be organizationally transformational.

The key to sustainable compliance is to link rigorous organizational regulatory compliance to the creation or maintenance of ethical culture, and ultimately to performance results and service. It has been our experience that ethics/compliance programs without the technical edge of regulatory compliance lack credibility with employees and managers, and that compliance programs without the moral underpinnings of ethics lack integrity and can be viewed cynically.

We have developed a comprehensive, cost-effective ethics/compliance program called Sustainable Compliance^SM which establishes this linkage.

Sustainable Compliance^SM involves a systematic, overlapping and mutually reinforcing three-phase approach: (1) assessment and review; (2) implementation; and (3) evaluation and monitoring.

Please contact one of our principals at the Institute to discuss Sustainable Compliance^SM in detail.