There’s never a convenient time to relax and stop talking about how valuable a robust ethics and compliance function is to an organization. With fall budget planning in full swing, now is a good time to consider some of the many business benefits of a strong ethical culture.
The “work” of compliance is reduced when a culture of strong ethics is in place. If employees have a deep appreciation of how the company defines ethical behavior and how it wants them to behave, organizations will have fewer instances of misconduct that trigger investigations, regulatory disclosures or internal control audits.
The words “deep appreciation” in the above sentence are deliberate. They are not the same as clear understanding. A company can always state its ethical principles clearly, and employees can always then disregard those principles anyway. Employees need to embrace those principles in their daily conduct. That’s what turns ethical culture into a preventative measure, which reduces the corrective actions a compliance function might need to take.
Broadcasting company values
It’s also easier to handle hard times if the company culture is strong. Misconduct and mistakes will still happen at the company. Those negative reputation events can come quickly, cause enormous disruption and might not even be accurate portrayals of what actually happened. That’s life in this highly regulated, highly polarized, highly interdependent world.
The disruption such events bring is lessened in companies with a strong ethical culture because the culture acts as a unitive force that conveys the company’s true essence, regardless of the actions of one or two outliers. It’s something all stakeholders, inside the organization and out, can see.
Consider this scenario: one local manager retaliates against a whistleblower, and documentation of that abuse is spread across the internet for all eternity. A strong culture can mean the difference between the public thinking, “That person is a jerk” or “The whole company must be like that.”
Winning regulatory favor
Regulators, particularly in the banking sector, now talk about the importance of a strong culture constantly. That attention to culture could take the form of thoughtful incentive compensation plans (ones that discourage excessive risk-taking) or a clear determination to hold employees accountable for personal misconduct. A strong culture wins favor with regulators.
The Justice Department announced the FCPA Corporate Enforcement Policy last year, and that spirit of taking ethical conduct seriously is behind it. To win full credit under the policy, a company with FCPA issues must voluntarily disclose trouble; cooperate fully with regulators; and remediate the underlying policy or control weaknesses. A company cannot easily (or cheaply) hit those marks without a serious commitment to good conduct—that is, a strong culture of compliance.
Enabling a risk-assured manner
Just as a strong culture reduces instances, it also enables companies to execute business processes in a risk-assured manner. In organizations with a strong culture, where employees know what they’re allowed to do and how to do it, they can go about their jobs more quickly and efficiently. Ultimately, that brings a strategic advantage over competitors.
A company that takes due diligence of third parties seriously, for instance, might not onboard new business partners more quickly, but those relationships are likely to be more stable over time. That will alleviate the organization’s challenge of finding reliable business partners and allow the company to focus more on putting those relationships to full work.
In the same vein, a comprehensive training program for new employees about acceptable conduct won’t accelerate the hiring process, but it will allow those employees to accelerate all the other work they do after they’re on board—because organizations will have less risk of personal misconduct catching them by surprise, forcing them to fire that high-performing star who just made inappropriate contact with an intern.
Worth the work
Creating an environment of strong corporate ethics can be compared to exercise. It’s a daily and long-term commitment, and results are not visible right away. Companies do it because they know it’s the right thing to do, not because it feels good or is easy. And in the long run, they see the benefits in multiple ways. Building a strong corporate culture requires this kind of consistent, hard work, but by doing so, ethical behavior becomes second nature, easing regulatory concerns and improving employee efficiency.
More ways to overhaul your company culture:
- Culture is key to attracting younger talent, but you can make it mutually beneficial
- Is your company culture undermining employee productivity?
- 6 tips for improving company culture
Valerie Charles serves as chief strategy officer for GAN Integrity. She has served as outside counsel, conducted internal investigations and represented clients in connection with matters involving anti-bribery restrictions worldwide.