n 2006 we mark the fourth anniversary of passage of the Sarbanes-Oxley Act. More than any other piece of legislation affecting business in recent history, Sarbanes-Oxley has transformed the way companies and accounting and financial professionals operate. It has given us a platform for increased dialogue about ethics (or in some cases, a lack of them) within American companies.
Given this renewed emphasis on ethical behavior, the time is right for organizations to move beyond regulatory compliance and solidify a culture of ethics that makes doing the right thing standard operating procedure. If we are going to continue restoring consumer confidence in business, it is imperative we promote the kinds of cultural changes that ensure ethics permeate our companies from the top down.
To foster a culture of ethics that is based on action rather than discussion, companies can begin by taking advantage of the institutional knowledge their accounting and finance teams have gained in complying with Sarbanes-Oxley regulations for the last several years. Because this group is on the front lines of Sarbanes-Oxley compliance, these teams can generate best practices to be implemented throughout the organization and be recognized for serving as a model of excellence.
As another part of this effort, there are three key ethical best practices that can easily be transferred throughout an organization: cultivating ethical role models, demonstrating ethical business decision making and encouraging pushback.
CULTIVATE ETHICAL ROLE MODELS
The first step in developing role models in every part of an organization is to identify key influencers who demonstrate strong ethical behavior in their everyday work. Clearly, the accounting and finance areas, with their deep understanding of the issue, are a good place to start. Companies should give these influencers appropriate recognition whenever possible, involve them in projects in which they can have a positive impact and reward them for their efforts. By doing so, an organization can cultivate ethical conduct and show employees that they too can be rewarded for practicing ethical behavior.
DEMONSTRATE ETHICAL BUSINESS DECISION MAKING
When appropriate, leaders should share examples of business decisions that tested their ethical principles and how they came to make the right decision. This type of candid dialogue gives employees a glimpse into how leaders think and act on behalf of the organization. The tougher the choice to be made, the more influential this type of conversation can be. It also provides employees with a point of reference when they are faced with tough decisions related to their work activities, helping to guide them in the right direction.
The leadership’s ethical behavior also can inspire greater pride and satisfaction among workers. Those who work for trustworthy management teams often have a greater respect for their organization and are motivated to contribute more.
Some companies have formal processes for this type of communication, such as employee ethics hotlines or anonymous feedback e-mails, but it can be handled informally as well. The first step is to discuss the issue with managers. Do they encourage feedback? How do they react when employees raise questions? What is acceptable in terms of employee pushback? What are some effective and ineffective ways employees have pushed back on management opinions or decisions in the past?
As part of this discussion, encourage managers to ask for feedback from employees when opportunities arise, so that challenges need not occur down the line. Managers should communicate their “pushback guidelines” to their direct reports, letting them know that questions are welcome and how and when they might best be raised. This reassures employees that they can have this type of dialogue with their managers and makes it possible for them to handle situations effectively.
Three best practices to adopt in your organization.
BY NEIL S. LEBOVITS
August 1, 2006