Ensuring that employees understand the appropriate ways to address daily ethical issues can prevent your company from spiraling into corporate scandal.
When German car manufacturer Volkswagen was caught cheating on its diesel emissions testing regime a few years ago, the subsequent scandal launched numerous lawsuits, cost billions of dollars in fines, and severely harmed the company’s reputation. The actions — and inaction — of dozens of employees at all levels, across divisions and countries, contributed to this disaster, including the software engineers who designed the cheating device, the workers who installed it, the managers who approved the fitting and testing, and the members of the senior leadership team who either orchestrated the scam or simply turned a blind eye.1
Of course, VW isn’t an isolated example. Consider the costly lapses in judgment at Wells Fargo,2 for instance, and at Samsung Electronics.3 Why do such scandals continue, despite the clear moral and financial imperatives for ethical action? And — perhaps more important — what can be done to change matters?
Although some argue that people are innately inclined to behave unethically out of self-interest,4 our research reveals that organizational ethics matter significantly to most employees and managers, and that people want to work for employers whose values and principles are aligned with their own. This suggests that ethical employers are likely to attract and retain ethical employees.5 What’s more, research has shown a link between ethical leadership and task performance, organizational citizenship, and other productive work behaviors6 — companies have many compelling reasons to address ethical failings at the earliest opportunity. The urgency is all the greater in this digital age, since businesses must continually make rapid, high-stakes choices about how to handle sensitive customer and employee data.
To uncover the reasons behind persistent unethical conduct, we asked employees at five U.K. organizations — a national government department, a nationwide retailer, a nonprofit in the social services sector, a county-level police force, and a construction company — to tell us about their experiences of both ethical and unethical practices on the part of their colleagues, line managers, and senior executives.7 (See “About the Research.”) We found that the ethical tone of an organization is the cumulative outcome of how its members address daily ethical dilemmas as they go about their work.