Team members discuss the role of ethics and compliance in their company.
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March 26, 2019
    Article highlights
  • The difference between ethics and compliance.
  • The importance of ethics in corporate culture.
  • Creating a culture of ethics and compliance.

The terms “ethics” and “compliance” get tossed out a lot these days, often used interchangeably when talking about businesses doing the right thing.

While they certainly both strive to achieve similar goals, they are not quite the same thing.

If you want to enhance your corporate culture, it helps to understand the connection between the two, as well as the subtle nuances that set them apart.

Difference Between Ethics and Compliance

It’s important to draw some distinctions between the terms “ethics” and “compliance.” Certainly, they are related, but they are not the same thing. Take a look at these ethics and compliance definitions to gain some clarity.

Ethics is “the decisions, choices, and actions (behaviors) we make that reflect and enact our values,” says the Ethics and Compliance Initiative.

But ECI also points out that ethics encompasses other nuances, such as this definition from Stephen D. Potts, author The Ethics of Non-profit Management: “A set of standards of conduct that guide decisions and actions based on duties derived from core values.”

Compliance is “conforming or adapting one’s actions to another’s wishes, to a rule or to necessity,” says ECI. So, while you might be meeting compliance standards, your motivation to do so might be to stay within the law rather than because you think it’s morally the correct action to take.

To bring this to a simplistic level, think of how a child acts when no one is looking. Does he refrain from stealing a candy bar because he might get caught by the store manager or yelled at by his parents (compliance with rules and expectations)? Or does he simply not steal because, in his heart, he knows it is wrong to take something that is not his (guided by an inner moral compass)?

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Ethics, then, takes a proactive approach, as it guides you to moral thinking and behavior based on the internal motivation of your own character, values, and principles. On the other hand, compliance takes a more reactive approach, as it forces you to make a mindful decision to follow a rule or law that someone else created. As Ethisphere notes, “compliance is letter of the law and ethics is spirit of the law.”

In light of their intertwined meaning, take a look at how ethics and compliance play a pivotal role in creating a positive corporate culture.

Importance of Ethics in Corporate Culture

Assuming you are more interested in creating a good culture as opposed to avoiding a negative culture (bad ethics = bad culture), what are the benefits of ethics influencing corporate culture?

  • Boosts morale. Employees want to work for a boss they can trust. Ditto for working alongside fellow employees who are both honest and honorable. Employees want to feel safe, secure, encouraged, valued, and respected. We all want that. Fostering an ethical compliance culture enhances all of these elements of a positive, thriving corporate environment and thus improves employee morale.
  • Misconduct declines. When you establish a code of conduct that outlines expectations of fair treatment and ethical behavior, you provide employees with the standards they can use to conduct themselves in a professional manner. This written code often goes beyond what the law requires, and it provides a solid foundation for building a culture of respect, trust, transparency, and accountability.
  • Increases productivity. Research shows that “upholding ethical practices in the offices enhances better performance of the office manager,” especially when the code of conduct aligns with employees’ personal values.
  • Improves compliance. While an action or behavior might be legal, it is not always ethical. A focus on business ethics is at the underpinning of legal compliance. You need both to build and sustain a culture of ethical compliance, as they go hand in hand. The more you communicate your values and principles, provide training to reflect them, and hold every employee accountable, the more you decrease your risks and increase your compliance.

Employees discuss ethics and compliance in their corporate culture.

Creating a Culture of Ethics and Compliance

Corruption is certainly nothing new, but as a society, we’re more aware of it and more likely to take allegations seriously.

Rather than sweeping accusations under the rug or dismissing complaints, companies are increasingly giving a voice to those who step forward with concerns.

But you might be wondering what you can do to prevent corruption and unethical behavior from occurring in your business in the first place. In other words, how can you encourage business ethics and foster a compliance culture?

1. Put your expectations in writing

For starters, you need a detailed policy manual, and more specifically, a written code of conduct and/or code of ethics policy. Employees need to know they can look to a reference for understanding what the business expects of them. This needs to be done in an official, trackable policy; otherwise, your ethics and compliance efforts will have no teeth.

2. Have a dedicated compliance officer

Once you have tackled the first step of creating written policies, you need a person responsible for overseeing your company’s ethics and compliance initiatives. This makes your entire ethics and compliance process run smoother. The key to an effective compliance program? Putting a Corporate Compliance Officer (CCO) at the helm rather than just a figurehead with no real power. In this designated role, the CCO serves as a champion of corporate integrity, ethics, and accountability—the cornerstone of a compliance culture.

3. Hold employees accountable

Accountability within your business is all about setting common expectations and holding all employees to these standards. By clearly defining the company’s mission, values, and goals – and developing policies such as a written code of conduct to reflect the mission, values, and goals – you are creating an ethical compliance culture.

Underscoring the importance of accountability in your business will help drive a proactive atmosphere of responsibility among employees at all levels, from the part-time hourly worker to the C-suite executive. When you promote organizational accountability, you build trust, improve performance, strengthen corporate culture, increase morale, and boost compliance.

The bottom line: you need to monitor how people are doing compared to what the expectation is.

4. Communicate clearly and consistently

The next step involves communicating your ethics and compliance efforts thus far to your employees. You might approach this in a variety of ways, from one-on-one and small group meetings to mass email distribution and phone conferences. Regardless of your communication methods, the goal is to convey your ethics policies clearly and consistently and make sure employees understand how these policies impact their jobs.

Workplace communication can be tricky, for sure, especially when you are trying to convey intangible “ethics culture” messages. But if you create a safe space for communicating, set clear norms (in terms of channel, frequency, and expectations), and do it consistently, you are boosting your chance for successful top-down, bottom-up, side-to-side communication throughout your company.

5. Implement ethics training

Just because you write a code of ethics policy, set expectations around it, and communicate all this to employees doesn’t always mean they get it. That’s where the training component comes into play.

It is vitally important that you train to your ethics policies. Just like “book learning” isn’t the same as “hands-on application of knowledge,” you need to provide training in a meaningful way. Sharing the policy with employees and telling them the why’s and how’s of ethics and compliance certainly lays a good base of understanding. But training employees on how each element of the policy specifically applies to the day-to-day jobs they carry out provides the real-world connection they need.

Furthermore, when you cover a topic regularly in training, you drive home its critical importance. Repeated conversations and training about ethics and compliance reinforces that your company takes them both seriously. Plus, the more you talk about ethics and compliance and train to their related policies, you are regularly equipping employees with the tools they need to act in specific situations.

Employee reads crucial ethics and compliance documents on his tablet.

The Ethics and Compliance Key

If you are truly interested in changing your corporate culture, your ethics and compliance efforts should not be a one-and-done approach. It certainly won’t happen with just a memo or written directive. And, perhaps most importantly, your motivation for change needs to be about more than covering your bases or reducing liability. It needs to spring from your desire to create a positive ethics and compliance culture that reflects your company’s mission, vision, and values. Start with your “why” to effect true, lasting change.

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