Corporate Culture and Ethical Behavior

“ Ensuring Ethical Effectiveness ” ( JofA , Feb.03, page 28) presented an excellent summary of the steps companies need to take in upgrading their ethics codes. However, it did not explicitly mention the role of corporate culture as a strong influence on individual behavior.

Every company I have consulted with has both an espoused culture and a real culture that people live by every day. Real culture is closely linked to the behaviors people are actually rewarded and punished for, primarily through promotion, compensation and bonus mechanisms. Real corporate culture for adults is similar to peer pressure for teens, making it difficult to behave outside the group norm.

Companies need to be aware of any differences between espoused and real cultures, particularly with regard to ethical behavior. For example, if sales personnel who aggressively book revenue are consistently rewarded while those who take a more conservative approach are left behind, one may expect to find problems in the company’s revenue classifications and related financial figures.

On the other hand, a company such as Texas Instruments, cited in the article for its ethics leadership, may well have used the same pressure of real corporate culture to act as a consistent “invisible hand” that enforces appropriate behavior.

The assessment of real culture therefore is an important ingredient in any examination of a company’s adherence to its espoused code of ethics.

George P. Jones, CPA
President
ChangeMakers Inc.
Houston