13 Feb 2008 in Corporate Culture
Law and Ethics
Many organizations have turned to their lawyers to ensure proper conduct by employees, only to have the U. S. Sentencing Commission redress the focus on law with a call to take into account the influence of the ethics and culture of an organization on its employees’ decision-making and conduct. It may be useful to ask, just what is the relationship between ethics and the law?
Law and Ethics
Many organizations have turned to their lawyers to ensure proper conduct by employees, only to have the U. S. Sentencing Commission redress the focus on law with a call to take into account the influence of the ethics and culture of an organization on its employees’ decision-making and conduct, as well as to “reflect the emphasis on ethics and values incorporated into recent legislative and regulatory reforms.” The prior admonition to implement “an effective program to prevent and detect violations of law” has been replaced by an emphasis on “compliance and ethics programs” that “promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law." It may be useful to ask, just what is the relationship between ethics and the law?
Former Supreme Court Chief Justice Earl Warren put it this way: “In a civilized society, law floats in a sea of ethics.” The image is illuminating. For some executives with whom we have worked, the “sea of ethics” is seen to be shrinking as the island of the law grows, displacing areas once governed by moral consensus, honor and trust with civil and criminal statutes and regulations that add to the costs of doing business, increasing litigiousness and adversarialism. Others, not disputing the increasing reliance on legislation and litigation, believe it a necessary means of protecting many in business, as well as consumers and the affected public, from the disreputable few who cannot be trusted.
But Warren’s imagery is richer than that. Law is surrounded by and buoyed upon a society’s shared values and moral principles. Where those are threatened, where their effectiveness as means of governance breaks down, the shoreline of law properly extends in an effort to preserve and protect those values and principles. And it does so at a cost, often in terms of efficiency, as well as moral freedom and judgment.
Within a company or other organization, there is a duty of compliance with laws and regulations. The question then becomes, how best do we meet that duty? Many organizations have relied upon their lawyers to explicate the meaning and application of laws in the operations of the organization, often creating internal laws—policies and procedures to follow to ensure compliance—which can add further to the costs and inefficiencies of doing business and still leave the organization vulnerable to noncompliance in the situations not contemplated or addressed.
There is a better way, and it is this that the revised Guidelines from the Sentencing Commission are intended to address, with their focus on the culture of an organization and how culture can promote ethics and affect the judgment, decision making and conduct of managers and employees.
Simply put, the culture of an organization comes down to “how we do business around here.” That is, what values inform our decisions and actions? Those values are not necessarily the ones enshrined in company credos or mission statements. Indeed, those aspirational documents may be antithetical to the real, operating values of the organization, the values that are implicit in who gets rewarded and promoted and for what kind of conduct. As I have been told many times in dozens of organizations, “You get what you incent.” Grammar aside, we all know the truth of the assertion. So, then, the culture of an organization is, in part at least, a function of the incentive and reward system that communicates more powerfully than codes or credos—or CEO speeches or “tone from the top” pronouncements—“how we really do business around here.”
Setting incentives and rewards, linking them to strategic planning and goal setting, evaluating success and failure—these are the responsibilities of management, not lawyers. If you would have compliance, look to ethics in the culture of your organization. Bring its operating values into congruence with its aspirational values.
You cannot command and control compliance, but you can use the tools of management to encourage and reward reflection and good judgment. In so doing, you may find that compliance for which you seek, and a healthier, more cost effective way of doing business.
GE
