Management of Ethics:

Ethical or unethical behavior of individual employees is influenced in the work place both by their own moral development and the influence that the organization culture exerts on them.

They are influenced by a group of forces that surround them such as their peers, their supervisors, and superiors, the reward system, group norms, company values and policies and the manner of their implementation.

Human resource management department ( in big organizations) can execute ethical behavior among employees through training, communication and discipline.

In some other organizations, there may be ethics officers who are entrusted with the responsibility to bring ethics and manage ethics in every endeavor of their organization.

Structure of ethics management:

A sound ethics management programme in an organisation include:

(i) Formal code of conduct.

(ii) Ethics committee.

(iii) Ethical communication.

(iv) An ethic office with Ethical officers.

(v) Ethics Training Programme.

(vi) A disciplinary system.

(vii) Establishing an ombudsperson.

(viii) Monitoring.

1. Formal code of conduct:

Several organizations have started the process with developing and implementing codes of conduct for their employees.

Codes of conduct are statements of organizational values. It comprises of three elements such as a code of ethics, a code of conduct and statement of values.

A code of conduct is a written document, inspirational in contents and specifies clearly what is acceptable or unacceptable behavior at workplace and beyond ,when the employees represent their organizations outside.

In general the code should reflect the managements desire to incorporate the values and policies of the organization.

The statement of values envisages by the management to serve the public and normally addresses the stakeholders groups.

A code of ethics must summarize the beliefs and values of the organization. Those beliefs and values should become internalized by all employees and used regularly in all business practices, no matter the type of business.

2. Ethics Committee:

These committees can rise concerns of ethical nature; prepare or update code of conduct, and resolve ethical dilemma in organizations. They formulate ethical policies and develop ethical standards.

The committee evaluates the compliance of the organization with these ethical norms.

The members of the ethical committee should be selected from those persons who have knowledge in their industry, their code of ethics and community standards.

The following committees are to be formed :-(i) Establishing an ethics committee at the board level -The committee would be charged to oversee development and operation of the ethics management programme.(ii) Establishing an Ethics Management committee -Ethics Management committee would be charged with implementing and administrating an ethics management programme, including administrating and training about policies and procedures, and resolving ethical dilemmas. The committee should be comprised of senior officers.

3. Ethical Communication System:

An effective ethical communication system should allow employees to make enquiries , get advice if needed or report wrong doing. Ethical communication system is a necessity to educate employees about the organizations ethical standard and policies.

Objectives of Ethical communication system:

to communicate the organizations‘ values and standards of ethical conduct or business to employees.

to provide information to the employees on the company‘s policies and procedure regarding ethical conduct of business.

to help employees to get guidance and resolve questions regarding compliance with the firms standards of conducts and values.

to set up the means of enquiry such as telephone hotlines, suggestion boxes and email facilities for employees to contact with and get advice from competent authorities.

Top management can communicate the ethical standards to lower level managers and they can communicate it to operational levels.

Sometimes the organization publishes newsletters. It can be used to expose company‘s code or ethics.

If an organization has briefing and management meeting, these can be used as a means of communicating values.

Certain companies use attractive multi colored posters to publicize their codes and ethics, these posters are placed in most visible places of the organization premises.

4. Ethics Office and Officers:

Ethics offices are to be established to communicate and implement ethics policies among employees of the organization.

For this purpose an ethics officer is to be appointed.

The ethics officer should develop a reputation for credibility, integrity, honesty and responsibility through establishment of such ethics monitoring bodies.

Functions of the Ethics Officers:

Ethics officers are responsible for assessing the needs and risks that an organization-wide ethics programme must address.

To develop and distribute a code of conduct or ethics.

To conduct ethical training programme for employees.

To establish and maintain a confidential service to answer employees questions about ethical issues.

To ensure that the organization is in compliance with governmental regulations.

To monitor and audit ethical conduct.

To take action on possible violations of the company‘s code.

To review and update code in time.

5. Ethics Training Programme:

To ensure a good ethical behavior in the organization the employees are to be given training.

For this purpose a corporate ethical training programme is to be devised.

The main objective of an ethical training program is to offer assistance to employees to understand the ethical issues that are likely to arise in their work place.

When new employees are to be recruited, the induction training should be arranged for them.

This training will help to familiarize with the company‘s ethical code of behavior.

Importance of abiding code should be dealt with at the induction meeting.

6. Disciplinary System:

A disciplinary system should be established to deal with ethical violations promptly and severely.

If unethical behavior is not properly dealt with, it will threaten the entire social system that supports the ethical behavior of the organization.

While enforcing disciplines to ensure ethical conduct, companies should be consistent. ,i.e., the company should adopt a fair attitude towards every one without any discrimination or bias.

7. Establishing an Ombudsperson:

The ombudsperson is responsible to help coordinate development of the policies and procedures to institutionalize moral values in the workplace.

This position usually is directly responsible for resolving ethical dilemmas by interpreting policies and procedures.

8. Monitoring:

To become an ethical programme fruitful and successful, an effective monitoring committee is to be formed.

It can be monitored through keen observation by ethics officers, internal audits, surveys, investigations and supporting systems.

Advantages of Managing Ethics in Workplace:

Significant improvement to society:Application of business ethics helps to avoid many evils from the society. It includes child labor, unscrupulous price fixing, harassment of employees, poverty and starvation of employees etc.

Cultivate strong team work and productivity:Ethical programme helps to tune employee behavior in accordance with the values preferred by leaders of the organization. It helps to build openness, integrity and a sense of oneness among all. Employees feel strong alignment between their values and those of the organization and they react with strong motivation and performance.

Support Employee Growth: Ethics programme help employees to face reality, both good and bad in the organization and themselves. They feel full confidence to admit and deal with whatever comes their way.

Insurance policy:Ethical programs help to ensure that policies are legal. Ethical principles are often applied to current, major ethical issues and become legislation. A major intent of well designed personnel policies is to ensure ethical treatment of employees.

Avoid Penal action:Ethical programs help to detect issues and violations early so that they can be reported or addressed which helps to avoid subsequent penal actions and lower fines.

Helps in Quality Management, Strategic planning and diversity management:Ethical programme identify favorite values and ensure organizational behaviors which are associated with those values. This complex effort can be aligned with values, including quality management, strategic planning and diversity management.

Ethical Dilemma:

Ethical dilemma as situations with conflict between two or more ethical principles and each solution may contain unpleasant outcomes for one or more involved parties.

Ethical dilemma is a situation that arises when all alternative choices or behaviors have been deemed undesirable because of potentially negative consequence, making it difficult to distinguish right from wrong.

Types of ethical dilemmas:

1. Bribery: It is a manipulation where the manager buys the power or the influence of the other person in order to satisfy his selfish need. This will end up in mismatch between the organization interest and individual. When there is a mismatch, he cannot be loyal to the organization and indulge in unethical practices. Bribery undermines market efficiency and predictability.

2. Deception: Deception or frauds are acts to propagate beliefs that are not true. It leads to betrayal and distrust between employees.

3. Discrimination: It means treating the people differently according to the race, caste, colour, creed, religion etc., it has been increased due to diversity. But diversity increased due to globalization. Hence, globalization is the indirect cause for discrimination.

What are the types of discrimination?

a. Gender-based: It involves discrimination against women like less wages than men, sexual exploitation at work place is the example.

b. On the basis of color of skin: discrimination in the form of colour. Ex. Americans will be given preference when compared to blacks.

c. On the basis of Age: Here treating same level of employees according to age.

d. On the basis of Nationality: Employer treats the employees according to their nation. Due to globalization, employees working in different countries will be given preference according to their nation.

4. Black Money: It refers to illegal earning made by the people. It is the consequence of system failure in legal licenses, permits, quotas etc.,

Sources of Black money:

a. Under-reporting of output or sales or over reporting of the costs or mis-classification of personal expenses by organizations.

b. Income generated in relation to capital receipts on sale of assets. Eg: Registering only 60% of the assets value.

c. Substantial quantity of black income generated through over-invoicing of imports by the private sector and sale of import licenses.

5. Coercion: is forcing a person to act in a manner that is against his or her personal beliefs. It may be in the form of blackmail to an individual in an organization. It may be in the form of a threat of blocking a promotion or loss of a job. Coercion violates a person’s negative freedom.

6. Theft: It is the illegal taking of another person’s property without that person’s freely-given consent. The employee leaks out certain confidential data to outsiders or to other insiders, which in turn ruin the reputation of the company.

7. Conflicts of Interest: It arises when managers as well as employees behave with private interests that are substantial enough to interfere with their job or duties. They are morally perturbing.

8. Honesty: It refers to truthfulness, integrity and trustworthiness and impartial.

Issues of honesty are:

a. Employee and the organizational relationship.

b. Security of organizational records.

c. Helping a competitor.

d. Inappropriate gifts, un authorized payment.

9. Insider trading: Here, the employee leaks out certain confidential data to outsiders or to other insiders, which in turn ruin the reputation of the company.

10. Tax evasion: Many large corporations hire the services of professional tax consultants to take advantage of loopholes in the law and evade taxes to the extent possible.

11. Pollution: The high level of pollution due to the indiscriminate and improper disposal of effluents by industries has rendered the world a highly unsafe place for progeny. J.R.D. Tata in his Foreword to the creation of wealth in 1992; wrote “I believe that the social responsibility of our industrial enterprises should now extend even beyond serving people to the environment”.

12. Corruption: Is it the illicit use of one’s position or power for perceived personal or collective gain. It includes terms such as corporate wrongdoing, management fraud and illegal corporate behavior. Ex: Intel Corp, the giant manufacturer of computer chips, is now facing new antitrust charges alleging that it threatened other computer manufacturers and paid billions of dollars in kickbacks to stop them from using a competitor’s chips.

Approaches in ethical dilemmas:

Organizations need a set of guidelines for thinking about ethical dilemmas. These guidelines can help managers and employee to identify the nature of the ethical problem and decide which course of action is the most likely to produce the most ethical results.

The three approaches that provide managerial guidelines for handling ethical dilemmas are:

1. Utility approach.

2. Human Rights approach.

3. Justice approach.

Utility approach:

This approach emphasizes the overall amount of goods that can be produced by an action or a decision. It judges actions, plans and policies by their consequences.

The primary objective of this approach is to provide the greatest goods for the greatest number of people.

It is often referred to as a cost-benefit analysis because it compares the costs and benefits of a decision, a policy or an action.

These costs and benefits can be economic (expressed in dollars), social (the effect on society at large), or human (usually a psychological or emotional impact).

The utility approach supports the ethical issues of profit maximization, self-interest, rewards based on abilities and achievements, sacrifice and hard work and competition.

The main drawback to the utility approach is the difficulty of accurately measuring both costs and benefits. Ex: Things such as goods produced, sales, payrolls and profits etc., can be measured in monetary terms. Other items such as employee morale, psychological satisfactions etc do not easily lend themselves to monetary measurement.

Another limitation is that those in the majority may override the rights of those in the minority.

Despite these limitations, cost-benefit analysis is widely used in business.

If benefits exceed cost, the organization makes a profit and is considered to be an economic success. Because managers sometimes rely on it to decide important ethical questions without being fully aware of its limitations or the availability of other approaches that may improve the ethical quality of decisions.

Human rights approach:

This approach to ethics holds that human beings have certain moral entitlements that should be respected in all decisions.

These entitlements guarantee an individuals most fundamental personal rights (e.g., life, freedom, health, privacy and property).

The human rights approach to ethical dilemmas holds that individuals are to be treated as valuable ends in themselves simply because they are human beings.

The main limitation is the difficulty of balancing conflicting rights.

Ex: Using a polygraph test to evaluate an employee’s honesty to protect the organization’s financial responsibilities may be at odds with the employee’s right to privacy.

Justice approach:

Under the justice approach, decisions are based on an equitable, fair and impartial distribution of benefits (rewards) and costs among individuals and groups.

Justice is essentially a condition characterized by an equitable distribution of the benefits and burdens of working together, according to some accepted rule.

For society as a whole, social justice means that a society’s income and wealth are distributed among the people in fair proportions.

Determining what is just and what is unjust can be a complex issue, especially if the stakes are high.

A major limitation of the justice approach is the difficulty of measuring benefits and costs precisely.

Ethical decision-making:

Ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with ethical principles. In making ethical decisions, it is necessary to perceive and eliminate unethical options and select the best ethical alternative.

Making an ethical decision:

1. Recognize an Ethical Issue: Could this decision or situation be damaging to someone or to some group? Does

this decision involve a choice between a good and bad alternative, or perhaps between two “goods” or between two “bads”?

Is this issue about more than what is legal or what is most efficient? If so, how?2. Get the Facts:

What are the relevant facts of the case? What facts are not known? Can I learn more about the situation? Do I know enough to make a decision?

What individuals and groups have an important stake in the outcome? Are some concerns more important? Why?

What are the options for acting? Have all the relevant persons and groups been consulted? Have I identified creative options?

3. Evaluate Alternative Actions: Evaluate the options by asking the following questions: Which option will produce the most good and do the least harm? (The Utilitarian

Approach) Which option best respects the rights of all who have a stake? (The Rights Approach) Which option treats people equally or proportionately? (The Justice Approach)

Which option best serves the community as a whole, not just some members? (The Common Good Approach)

Which option leads me to act as the sort of person I want to be? (The Virtue Approach)

4. Make a Decision and Test It: Considering all these approaches, which option best addresses the situation? If I told someone I respect—or told a television audience—which option I have

chosen, what would they say?5. Act and Reflect on the Outcome:

How can my decision be implemented with the greatest care and attention to the concerns of all stakeholders?

How did my decision turn out and what have I learned from this specific situation?

Managers Role in Ethical Conduct:

Managers hold positions of authority that make them accountable for the ethical conduct of those who report to them. They fulfill this responsibility by making sure employees are aware of the organization's ethical code and have the opportunity to ask questions to clarify their understanding. Managers also monitor the behavior of employees in accordance with the organization's expectations of appropriate behavior. They have a duty to respond quickly and appropriately to minimize the impact of suspected ethical violations. Lastly, managers make themselves available as a resource to counsel and assist employees who face ethical dilemmas or who suspect an ethical breach.Of course, managers are responsible for upholding ethical standards in their own actions and decisions. In addition to following the organization's ethical code, managers may be obligated to follow a separate professional code of ethics, depending on their role, responsibilities, and training. Fiduciary duty is an example that applies to some managerial roles. A fiduciary must put the interests of those to whom he is accountable ahead of any interests, and must not profit from his position as a fiduciary unless the principal consents.Many managers have responsibility for interacting with external stakeholders such as customers, suppliers, government officials, or community representatives. In those encounters, managers may be called on to explain a decision or a planned action in terms of ethical considerations. The stakeholders will be interested to hear how the organization took ethics into account, and in those cases it is the manager's duty to speak on the company's behalf.Additionally, managers may be responsible for creating and/or implementing changes to an organization's ethical codes or guidelines. These changes may be in response to an internal determination based on the experience of employees; for instance, additional clarification may be needed about what constitutes nepotism or unfair bias in hiring. Alternatively, new regulations, altered public perceptions and concerns, or other external factors may require the organization to make adjustments.

Managers hold positions of authority that make them accountable for the ethical conduct of those who report to them.

Managers monitor the behavior of employees in accordance with the organization's expectations of appropriate behavior, and they have a duty to respond quickly and appropriately to minimize the impact of suspected ethical violations.

Managers may be responsible for creating and/or implementing changes to the ethical codes or guidelines of an organization.

Managers may also be subject to a particular code of professional ethics, depending on their position and training. Fiduciary duty is an example that applies to some managerial roles.

The Role of Leaders: Develop ethical behavioral influences. Provide sound ethics training. Instill strong organizational values. Implement plans and strategies to achieve ethical excellence. Build an integrity based organization.

1. Develop Ethical Behavioral Influences:Objective

Code of Ethics Policy Guidelines Standards of Ethical Performance Training Punishment/Consequences/Discipline Peer Reporting

Subjective Moral Development Appearance of the Act Intensity of the Choice Ethical Climate Culture Management and Leadership

2. Provide Sound Ethics Training:o Provide rationale for ethical behavior.o Help associates make sense of abstract ethical priorities (policies,

procedures, ethical performance standards). o Provide intellectual weapons to support ethical standards.o Enable associates to recognize issues that may result in ethical

dilemmas.o Sharpen sensitivity and conscientiousness of moral issues and moral

solutions.o Strengthen moral courage.o Improve the moral climate of the organization.

3. Instill Strong Organizational Values:

o Strengthens the pursuit of better ways to guide employee decisions and behavior.

o Increases awareness and sensitivity to ethical differences across cultures.

o Coincides with legal and social pressures.

o Ensures that all organizational participants understand and are in close touch with organizational/ethical values.

o Influences the personality, reputation, and image of the organization.

4. Implement Plans and Strategies to Achieve Ethical Excellence:

o Set an example.

o Identify ethical weaknesses.

o Look to introduce and rebuild ethical values.

o Assess compliance programs.

o Get commitment of top managers.

o Align ethics with organizational systems.

o Ensure consistency in implementation.

o Monitor and assess.

o Pursue continuous improvement.

o Design an ‘integrity based strategy.’

5. Build Integrity Based Organization:

o Starts at the top….leadership!

o Set an example of integrity, honesty, and consistent behavior and reinforce it with associates.

o Be involved.

o Pursue a culture of ethics and raise ethical awareness.

o Establish a system of rewards tied to organizational values.

o Make ethics and integrity a core value, and a ‘core competency.’

o Create faith in the integrity of common purpose.

o Inspire! Empower! Build trust!

Value ownership and entrepreneurship.

Respect individual creativity.

Understand socio-emotional behavior.

Develop emotional intelligence/moral consciousness.

“The integrity based organization involves a culture of ethics that is not demanded, but desired by all associates.”

Not a compliance strategy--more than a code of conduct.

Provides a firm foundation for ethical behavior.

Taps into powerful human impulses for moral thought and action.

Defines and gives life to an organization’s values that guide behavior.

Instills a sense of shared accountability.

Serves as a frame of reference for all associates.

Unifies the organization.

Defines what an organization is: its culture, its values, its integrity, its image, its reputation.

In line with a contemporary leadership styles.

Enables responsible behavior and guides self-management.

Ethics Vs. Competitiveness:

There is no doubt that the corporate world (even World for that matter) is getting more and more competitive. Competitiveness is the “key”, since everyone knows that it’s a World where only the fittest survive. Well, is there anything wrong in being competitive? I would say, “No”, but then there is another question – “at what cost?”. If the answer to this question is “Ethics”, then the competitiveness is Hollow. Definitely you can find many examples of people who do not give any important to Ethics but they still rise to higher levels. But there is no guarantee that you will stay at Top if you have compromised with Ethics.

Ethics and Competitiveness go hand in hand. There is no doubt about it. All individuals are faced with situations where one has to choose growth or ethics and even though it’s a straight forward choice, there are people who would choose growth over ethics. To explain this better let us take an example of Misselling. What is mis-selling? It is an approach very commonly taken by sales people to sell their products or services by hiding facts and giving false promises to the customer. This is very much prevalent in the sales world and in the race of being competitive, many professionals fall prey to this monster. This may lead to various types of impact on the end customer which may be inform of financial risk, health risk, reputation risk, other direct or indirect risk/loss. Misselling may not necessarily mean lying about the product, it may also mean hiding important terms and conditions, or operational procedures, or missing features, hidden charges, refund policy, return policy etc. Very frequently most of us fall prey to mis-selling and get frustrated at the sales man, most of the times it is because of the hidden charges. This has really spoiled the image of the sales community.

Sales team is a backbone of every organization as it is the sales team that brings in revenues by selling products or services. But recently there has been increased emphasis in large organizations on Sales ethics. Mis-selling is taken very seriously and strict disciplinary action taken against those who do not comply. Reputation of an organization primarily depends on the sales force representing it. Organizations have started becoming more and more transparent in their sales processes. Most of the times the details of product/ service being sold is documented by way of an agreement, brochure, offer letter which clearly mention all the terms and conditions, product features, pricing etc. Mutual fund companies and Insurance companies also clearly tell their clients to read the terms and conditions before buying the product. This is done to ensure that the client is not cheated and to save the reputation of the organization.

But, despite efforts being taken by large organizations to avoid mis-selling, it is really important to lay emphasis on sensitizing the sales force to understand the importance of ethical sales. Just to be competitive and to achieve or over achieve targets the sales team should refrain from unethical sales practices. Even though in short term you may be able to achieve the numbers but this does not take you very far. Any sales done by hiding facts or lying will sooner or later be unearthed, which may lead to reputation loss for the organization as well as the employee (and a disciplinary action).

Unethical sales may also include compromising the interest of the organization that you are working for. Sometimes a sales person may show value to the customer by promising something that may be against the interest of the organization; this comes in forms of bribery, passing on other tangible or non-tangible benefits to the client who may be from the pocket of the organization or from his or her own pocket. A sales person may ask for a favorable business deal from a specific individual at the client organization and in return he may offer something for the personal benefit of the person who is in decision making position at a client organization. It’s very easy to close out business deals by promising such personal benefits, but then, this is completely unethical and unacceptable. This ultimately leads to loss of reputation for the selling organization.

Many large organizations take this type of unethical sales very seriously and have very strict policies to completely stop such dealings between sales team and client. There are strict gifting policies and very strong disciplinary action taken against employees if they try to do such act. For organizations it is very important to closely scrutinize such transactions.

It may not always be linked to the sales function, professionals use unethical practices to grow within the organization, offering personal benefits to stakeholders or bosses, hiding facts that may be a risk to the organization, snatching someone else’s credit, passing-on blame to others and various other unprofessional and unethical practices.

Compromise with Ethics in any form is not a long lasting tool to success. One is that it spoils the organization culture and more importantly it is a big reputation risk for you and the organization. There are ethical ways of growing and being competitive. Very easily you can find examples of top managers/CEOs who have grown to that level just because of the level of ethics that they maintained during their professional careers. Compromising with ethics may seem to be a shortcut, but it’s definitely not going to take you to the right destination.

Being professional is very much equal to being Ethical. And an Ethical person earns a lot of respect and even if you lose the sales opportunity or promotion because of representing the facts, don’t worry, you have earned mental peace and respect. A customer always respects a fair sales person, a boss always respects a true employee, stakeholders always respect an honest colleague, an ethical organization will always respect an ethical employee.

So, don’t let competitiveness and ethics compete with each other. Make them shake hands with each other and surely it will become easier for you to climb up the ladder of success.

Profitability and Ethics:

A number of factors play a part in making a business profitable, including expert management teams, dedicated and productive employees, consistent consumer demand and careful watch over the bottom line. In addition to these well-known business practices, companies that implement a management philosophy that relies heavily on business ethics are proven to be more successful than those that operate in an unethical manner. Although it may not be the first variable considered in analyzing the profits of a company, business ethics is an equally important catalyst to the success of a company.

Business Ethics in Management

The leadership of an organization holds the key to its long-term success and remaining consistent with a management philosophy built on a foundation of ethics creates a positive example for all workers. Ethical accounting practices, treatment of employees, interactions with the public and information disseminated to shareholders are all responsibilities of the leadership team and can have a direct impact on the overall profitability of the company. When these integral aspects of business are not performed with a resounding theme of business ethics from the top down, each facet of the business beneath the management team has a greater potential to falter in the short or long term.

Business Ethics and Employee Morale

It has been proven time and again that employees who are satisfied with the environment in which they work are more productive than workers who are unhappy. Unethical practices in the workplace can cause widespread unrest with employees, leading to a greater sense of dissatisfaction with the work they are doing and their employers. However, when business ethics are encouraged from management and company executives lead by example, the ability of employees to focus on the work they need to complete to make themselves and the organization successful increases exponentially. Productivity increases when fewer distractions are present and morale is high, and this leads to greater profit levels for the company.

Employee happiness can also have an impact on turnover and retention, as unsatisfied workers are more prone to seek out other opportunities regardless of higher pay or benefits offered by their current employer. Continuous recruitment and training of new employees can reduce the capital a company can spend on revenue-producing activities, ultimately shrinking its long-term profits.

Business Ethics and Public Image

Companies would be nothing without shareholders and investors, and as such, operating with business ethics in mind is most important when interacting with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behavior is discovered. When investor confidence is lost, it can be a struggle for a company to regain the trust of the public, its investors and its valuable shareholders; profitability may take years to build up again. Companies that lay the framework for business ethics in all facets of operations are more likely to become and remain profitable than those that conduct business in an unethical manner.

What is Ethical Profitability?

Consider this balance between profits and ethics to be "ethical profitability." Well-balanced companies not only consistently reward owners, investors and employees with profitable performance, they also genuinely focus on these five key areas:

1. Leadership by example

The chasm between managing and managing well is wide and deep. To manage is to merely lead employees. To manage well is to lead employees effectively, ethically and without arrogance. Company owners, executives and managers must set the highest examples of attitude and conduct for their employees. "Do what I say, not what I do," is a parental anachronism with no value in management.

2. Company-wide ethical awareness

Most employees, when not at work, practice personal ethics in areas such as caring for others, being kind and honest, and not harming others. Do these same people, when they arrive at work, maintain their personal guidelines? In-the-office ethical behavior includes demonstrating trustworthiness to managers and coworkers, respecting privacy and avoiding conflicts of interest. Ethics knows no time clock.

Occasional classes can help, by reminding employees of the simplicity of determining ethical behavior. In a nutshell, examine questionable action and speech, and determine if it's harmful to yourself or another. If it is, avoid that behavior. Employees with any sort of religious background will recognize this ethic of reciprocity as familiar. The Bible's Golden Rule is a good example.

3. Strong management of revenue generation and reporting

Corporate temptation to stretch ethical behavior in revenue generation and reporting is universal. From excessive cost-cutting to expand short-term market-share, to outright lies about revenue to positively affect stock price, it's easy to see why an otherwise intelligent, educated corporate officer can end up behind bars for condoning such behavior.

To overcome these temptations, revenue-related managers must establish and maintain a firm stance on ethical marketing, advertising, selling and reporting. This requires regular dissemination and enforcement of codes of conduct.

4. High level of internal trust

The level of trust within a company should reflect the level of trust the company solicits from customers. If customers are encouraged to put their complete trust in the product or service, then company teams must do the same with each other. Management must guide this internal process.

An increase in trust is a reduction in risk and uncertainty, which in turn will keep the revenue generation process flowing smoothly. Another advantage of running a high-trust organization is improved internal flexibility and creativity. Instead of being constantly monitored, the person to whom a task is assigned can accomplish it the best way possible. The outcome is never in doubt because of the trust the team shares.

5. Formal and active compliance program

Ethical profitability is far more than merely operating within the boundaries of the law. Legal compliance limits unethical behavior, but it does not define ethical behavior. An organizational ethics doctrine does have legal benefits. Properly written, published and disseminated ethical codes will reduce corporate risk if an employee creates a criminal or civil problem because of poor ethical behavior. (Even federal sentencing guidelines recommend lower fines if such violations occur contrary to the existence and enforcement of compliance codes.)

The true test of ethical profitability is whether or not the company is a positive example to its employees, to its customers and even to other companies. Such companies practice the truest form of leadership-by-example. They reach for a higher bar.