The Process of an Ethics Investigation (from Start to Finish)

In the corporate world, your business’s reputation is worth its weight in gold. Many studies and surveys have shown that customers
and shareholders prefer to engage with companies that are known for being highly ethical. What’s more, ethical business practices can
prevent your company from suffering the financial burdens of lawsuits and fees due to misconduct.

Of course, your company is comprised of many individuals, and it is possible that some employees may not be as dedicated to ethics
as you are. Therefore, it’s so important to conduct proper ethics investigations whenever you get word of non-compliance,
misconduct, or any other form of unethical behavior. A thorough ethics investigation can bring the bad behavior to an end, weed out
workers who don’t meet your company standards and help foster a corporate culture based on doing what’s right.

But what, exactly, IS a “proper ethics investigation”? Here’s everything you need to know.

What Warrants an Ethics Investigation?

There are many issues that can lead to an ethics investigation for your company. These can include:

 Health and safety violations

 Time theft (altering time sheets to receive greater earnings)
 Office theft or fraud
 Misconduct (harassment, workplace violence, etc.)

However, there is a simpler answer to this question: EVERY employee complaint warrants an ethics investigation. This is because
ethics investigations can often lead companies to discover inappropriate behavior. According to the National Whistleblower Center
(NWC), employee whistleblowers expose fraud within an organization about 43% of the time; by contrast, professional auditors
successfully identified fraud only 19% of the time.

Additionally, investigations prevent any problem your employee has with your company from escalating further. The NWC also
reports that over 89% of employees who sue their employers initially reported a complaint internally. These employees only turned to
litigation when it became clear that their managers, HR staff, or others within the company were not going to make a change to
resolve the issue. Simply taking an employee complaint seriously and conducting an internal investigation can save your organization
tons of money in legal fees.
What is the Process of the Investigation?
Once you get wind of an employee ethics complaint – whether it’s from a manager, a third-party hotline, or from the employee
himself – it is vital that you begin the investigation process as soon as possible. Make sure that your investigation follows the template
below to get the most thorough and successful investigation you can!

The Initial Complaint

Firstly, an ethics investigation begins when someone alerts your company of any unethical behavior. There are many ways you can
receive the complaint; the employee might inform their manager or the HR department, or they may call your company’s tip hotline
(assuming you have one set up through an outside vendor).

The individual who received the complaint should document as much information as they can about the alleged misconduct. Who is
the employee accusing? What information can the employee give you about the behavior? Take any complaint seriously and ask
specific questions about who, what, where, and when. Then, it is important to forward this information both to HR and to the
department most affected by the incident.

The Investigation

Once your organization decides to fully investigate an employee’s claim (and remember, it’s always wise to do this), you’ll have to
select an investigator to help get to the bottom of the situation. The investigator will be responsible for conducting interviews with
employees, gathering evidence and other documentation, and ultimately determining whether the allegation is true.

During this time, it is vital that you work quickly (so the unethical behavior stops as soon as possible), be incredibly thorough (to find
the truth), and reassure your employees that everything they tell you in confidential and non-retaliatory (so they will be more honest).

Avoid asking employees loaded or leading questions during the interviews. Protect your employees’ privacy. And above all, REMAIN
CALM AND PROFESSIONAL. This will help ensure a smoother investigation.

The Aftermath
Once your investigation is complete, your company’s designated investigator will need to present all the information he or she has
gathered and give a recommendation for how the company should move forward. This may involve disciplinary action against the
accused employee, as well as policy changes to prevent the incident from happening again.

But however your company decides to handle the incident, there is one thing you ABSOLUTELY MUST do: write a detailed and
comprehensive report on the investigation. Not only will this be a useful tool to reference in future investigations, it provides clear
evidence of everything that occurred during the investigation (just in case the accused employee tries to dispute any discipline they
receive).

Importance of a Proper Investigation

A proper ethics investigation will weed out bad actors within your company, which helps you build a more honest workforce for the
future. But conducting a “proper” investigation isn’t just about being dogged in your search for the truth – it’s also about being
unbiased, professional, and protective of your employees’ privacy.

If you begin your investigation already convinced of an employee’s guilt or innocence, you will be more likely to seek out evidence
that supports your conclusion. In this case, even the most thorough investigators will not be effective, as their research isn’t based on
an unbiased desire to learn what really happened.

Additionally, confidentiality is a necessity during these investigations – particularly when they involve an accused employee. Your
employees likely have formed friendships with one another, and that can make things complicated during the investigation process.
Your employees must know that the information they share with you is completely confidential, so they can feel comfortable telling
you things about their colleagues.

If you follow these tips, you will be able to conduct your investigations effectively and easily – and your business will be all the better
for it! Visit ComplianceLine today to learn more about ethics investigations, training programs, and third-party hotline services that
can help make your company a more ethical environment.
Conducting an Ethics Investigation: A
Comprehensive 20-Step Guide
1. Document Everything Right Out of the Gate
A huge percentage of ethics issues are caught via report. If an employee or customer drops this information in your lap,
don’t waste it by taking too long to respond.

As soon as that original tip comes in regarding ethical misconduct, start your documentation process. Ideally, your
organization should have a formal reporting hotline that employees can use when they are a witness to, or suspicious
of, unethical behavior.

If you don’t have a hotline, or if the reporting employee comes to you directly, let them speak, and jot down detailed
notes. Write down everything the individual says, such as where and when the alleged misconduct occurred, who was
involved, and how long they knew about the actions.
2. Never Presume the Outcome
Go into every investigation completely neutral. Never enter an investigation with preconceived beliefs about what
happened or who is telling the truth. Jumping to conclusions will only harm the credibility of the investigation process
and of you as an investigator.

Only once you have collected all of the evidence, spoken with all of the witnesses and reviewed all of the relevant
documents can you begin to form a story. The key is to build a narrative based on the information you’ve gathered, not
to gather information to fit into the story you believe.

Sometimes, even once you’ve collected all of the information possible, there still isn’t enough to come to a solid
conclusion.

If you don’t think your team can remain neutral, hire an external investigator. They’ll be able to uncover what
happened and make suggestions for next steps without bias about the accused person or your organization.
3. Take On Your Role (and Your Role Only)
Does your organization have a code of ethics or ethics policy? If so, it should include a description of the different roles
in the company and their responsibilities in promoting and maintaining an ethical environment.

For example, administrators are responsible for receiving reports of ethical misconduct and assigning them to an
investigator. Working-level employees are responsible for reporting wrongdoing if they witness it.

Things become problematic (and sometimes illegal) when employees take on tasks outside of their role, especially
during an ethics investigation. They might have a conflict of interest or access sensitive information.

Before starting your investigation, make sure each team member knows their responsibilities, as well as deadlines to
complete them. Each person should complete their tasks, nothing more, nothing less.

4. Keep Your Goals Top of Mind

The goal of any ethics investigation is to determine whether the allegations are true and, if they are, to recommend how
the situation can be prevented in the future.
If you become too deeply immersed in the investigation or the circumstances surrounding it, you may forget the main
purpose of your work. If you forget the purpose, you could derail the entire investigation process and end up doing
more harm than good.

Don’t get hung up on one detail shared in an interview or what the investigation could mean for your organization.
Simply focus on figuring out whether or not your policies were broken based off the evidence you’ve gathered.

5. Work Quickly but Carefully

According to Lockheed Martin, the average time to complete an ethics investigation is around 35 days. However,
depending on the nature and complexity of the allegations, an investigation can take months or even years to conclude.

For ethics investigations, it’s important to work as quickly as possible without sacrificing quality. Assign roles, and
start gathering evidence and scheduling interviews ASAP.

If word gets out that an investigation is happening, those involved can start to coordinate cover-ups, excuses, and alibis.
This could compromise your investigation and put you at risk of further incidents and a huge scandal in the future.
6. Follow Company Protocol
Certain aspects of an ethics investigation should be predetermined. Following preset standards will ensure consistency
and fairness in the results, and will also prove the validity, transparency, and defense of your investigation, should it
ever be questioned.

In addition, set protocols help you get your investigation started faster, decreasing your resolution time.

To streamline your process, consider establishing protocols for:

 How long the team has to start their investigation following the initial report or tip
 How/where/when/what order to question interviewees (including the accused, the reporter, and any witnesses)
 Where/how to store physical and digital evidence
 When/where/to whom/in what format to share the final investigation report

For a consistent and transparent investigation, follow your organization’s pre-determined protocol as closely as
possible.

7. Develop and Stick with a Plan

A pre-determined protocol can only simplify the process so much. Depending on the type of ethics investigation and
the unique circumstances at hand, you will need to come up with an investigation plan.

Without a relatively narrow and descriptive plan, your investigation may become too vast and, potentially,
counterproductive.

Before beginning the investigation, when you’re 100 per cent neutral, consider the following questions:

 What evidence do you need to confirm or invalidate the allegations?

 What is the scope of the investigation?
 Who would you need to interview? What will you ask these people?
 What documents should you find and review?
 Which team members will complete which tasks, in what order, and when?

Share the completed plan with each member of the team and set clear deadlines and expectations to avoid bottlenecks.

8. Have the Right Skills

An ethics investigation will only be successful if the right person (or team) conducts it. Due to the job’s unique
demands, not just anyone can be an investigator, especially an investigator who deals with ethical misconduct.
For this reason, it’s vital that the investigator has the right skills.

For example, the right investigator will know to keep interviews serious and business-like. They will agree an interview
is no place for jokes, sarcasm, or threats, and will understand that behaviors like this harm the validity of the entire
investigation.

The right skillset will also include an understanding of emerging markets for a bribery investigation, or basic forensics
for a fraud investigation.

If your in-house team doesn’t have the ideal set of skills or knowledge for the investigation, hire an external
investigator or expert (e.g. forensic accountant or IT expert).

Shelling out a bit of extra money is worth it to ensure you uncover the truth in an objective, thorough way.

9. Have the Right Personality Traits

The right investigator will also have a certain personality. To increase your odds of a successful ethics investigation,
the person who carries it out should be appropriately skeptical.

Imagine an ethics investigator who is gullible or easily deceived. They would assume everyone they speak with is
telling the truth and it would be difficult for them to identify discrepancies or inconsistencies in witness accounts.
Choose an investigator who is comfortable speaking with interviewees as well as other investigators, experts, and
stakeholders. This person should have an open mind but be good at reading people.

A successful ethics investigation depends on an investigator who is skeptical, intuitive, and logical. They should be
friendly but firm, and intelligent but approachable.

10. Look at Small Details for Big Clues

Another way to increase the chances that your ethics investigation is successful: pay attention to the details.

For investigations with a lot of detail and moving parts, it is painstaking work to try to closely analyze every small bit
of information. However, it’s important not to overlook small details because they can provide vital clues that can help
everything else make sense.

For instance, let’s say you’re investigating a report that Bryan hired his best friend Tim Smith’s company as your
organization’s new maintenance crew. There is no indication that the two men know each other.

However, in an interview with Bryan’s secretary, she says that she and Bryan follow each other on Facebook. She
noticed Tim recently added a photo of himself and another man, tagging someone called Tim Smith.

While this isn’t definitive proof of a conflict of interest, it’s a tiny detail that gives credibility to the accusation.
11. Keep it Objective
Ethical investigations can draw out a lot of opinions, biases, and feelings.

Imagine you work in the corporate headquarters of a big box store. You’ve been asked to investigate allegations that a
store owner has been funneling money from mandated support initiatives into his own pocket.

You may have personal feelings about this situation. You may feel angry and demand justice at once.

However, the credibility of the investigation and of you, as an investigator, depend on your remaining objective and
fair. Keep the investigation objective; don’t let personal opinions or feelings influence your work.

12. Assess the Credibility of Everyone Involved

For an ethics investigation to be successful, you want to assess the credibility of each person you speak with. This
includes the person who reported the incident, the accused employee, and witnesses or other people who could be
involved.

Assessing someone’s credibility may include:

 Conducting a background check

 Evaluating their relationships with the organization and other involved parties
 Looking for context and motive

Everyone has biases; it’s impossible not to. You just want to figure out what biases the interviewees have so you can
consider them while contemplating their answers to your questions.

For example, a witness who is a friend of the subject will speak differently than someone who is an enemy.

Your goal is to figure out each person’s biases and the basis of their knowledge of the operative facts.

13. Never Stoop to Immoral Tactics

Investigations don’t always go as planned.
Your witnesses might refuse to talk or the physical evidence you’ve gathered isn’t strong enough to confirm the
accusations. To wrap up the investigation faster and more cleanly, you might be tempted to cut corners or reach a
conclusion without enough proof.

When conducting an ethics investigation, though, you too must act ethically.

Don’t lead (or mislead) the witnesses or share information that was revealed in previous interviews. Don’t do or say
anything that could influence their statement. If you don’t have enough evidence, don’t fudge details to condemn the
accused person.

If anyone found out about your unethical approach, your integrity and that of your investigation would be at risk. Not
only would your reputation suffer, but a wrongly disciplined employee could sue your organization and/or file a
complaint with the EEOC.

Remember, a little aggression is acceptable; abuse is not.

14. Offer Appropriate Recommendations

If your investigation finds that the accusations have merit, your final report will have to offer recommendations for
appropriate disciplinary measures against the employee.
Corporate Compliance says that ethics investigators should consider the broader implications of the incident for the
affected unit or department and the organization as a whole. Did the incident negatively impact your corporate
reputation? Did it cause stress to the bad actor’s coworkers?

When making disciplinary recommendations, first turn to your internal policies. Do you have set consequences for
certain infractions? Then, consider how you handled similar issues in the past. How did you discipline those
employees? Sticking to protocol can help you avoid wrongful discipline lawsuits.

Appropriate discipline ranges from counseling to termination of employment (and, depending on the severity of the
behavior, anything else the courts deem appropriate).

Finally, you must recommend a punishment that fits the crime, but that’s not all you need to include in your report.
Also offer suggestions for other corrective and preventive actions, such as:

 Changes to policies and procedures

 Training updates
 Workplace monitoring changes
 Audits
15. Accept Help from Experts
A great investigator needs a myriad of skills. They will be a great listener, a great communicator, organized, and quick.
They will have attention to detail, respect timelines, and think strategically.

Perhaps the most important skill of all, though, is professionalism and knowing when it’s time to ask for help.

An ethics investigation will always be more successful when the investigator knows they’re not qualified or unable to
take on a task and get help from an expert in the area, as mentioned above.

16. Use an Ethics Audit in Your Report

The Society for Human Resource Management (SHRM) recommends conducting an ethics audit in the final
investigation report. The audit helps you compare actual employee behavior with the recommended behavior that is
outlined in your organization’s policies and procedures.
Ideally, your organization has specific policies that outline ethical, appropriate employee behavior in all areas. More
detail makes it easier to compare what’s truly happening with what’s supposed to be happening. It will also help you
conclude whether or not the alleged behavior was unethical and/or a violation of company policy.

Most importantly, an ethics audit can help you make those recommendations about changes to your policies and
procedures. For example, if you have numerous incidents each year of employees breaking your gifts policy, it might
be time to rewrite it or better train employees on the rules it includes.

17. Close Out Formally

Every conclusion you make, whether it’s concluding a preliminary interview or concluding the entire investigation,
should be made formally.

At the end of your interviews, offer your contact information. Often, especially in high-stress situations such as an
investigation, a person can suppress details or not even realize if a certain bit of information is important. With your
phone number, the witness can provide more detail or clarity later on.

A proper conclusion to an investigation would include informing the reporting party and subject of your findings,
explaining the company’s stance on retaliation and directing them toward the appropriate resources.
Formal documentation at every stage helps your team twofold. First, it keeps your ethics investigation on track and
ensures everyone is on the same page about its status. Secondly, you’ll have proof of who did what, when, and why.
This can help your case if an employee ever challenges your decision in court.

18. Protect Involved Parties from Retaliation

While investigating an ethics incident, protecting whistleblowers and anyone else who cooperates with the
investigation is just as important as the investigation itself.

In interviews with both the accused and the reporter, highlight the company’s retaliation policy. Explain that you don’t
tolerate retaliation of any kind, as well as the consequences of violating this policy. Tell the whistleblower where and
how they can get help if they think they’re facing retaliation and have questions about their rights.

Corporate Compliance explains that any allegations of retaliation stemming from an existing investigation should
be treated as an additional report of possible misconduct and reported and investigated accordingly.
19. Keep it Confidential

Another key to a successful ethics investigation is that it stays under wraps. From the initial report to the very last
follow-up email, only share investigation information on a need-to-know basis.

Failing to protect the confidentiality of the investigation can cause serious harm to many people. It can result in
irreparable damage to the subject’s reputation (even false allegations can impact a person’s image). The subject could
use the information to coordinate a cover-up. Your organization might even experience negative publicity.

In some situations, the benefits of minor disclosures outweigh the risk. For example: offering a relatively insignificant
detail to get a witness to come clean. Use your judgement and err on the side of confidentiality.

20. Consider the Circumstances

You may be tempted to follow the exact same investigation routine every time. Send the same emails, ask the same
introductory questions, and use the same techniques.
However, every investigation should be tailored to fit the situation. Having a plan helps your team get organized, but
flexibility is key to a successful outcome.

In some circumstances, for example, it may be best to conduct interviews without a warning. Now, this isn’t a move
you’d typically make, but if you’re concerned a witness may destroy evidence otherwise, it might be the right one. Or,
a witness might mention someone involved in the incident who you hadn’t thought to add to your interview plan.

Ethics investigations can differ greatly. It’s a category under which many actions fall. No single routine will work for
every investigation, so don’t be afraid to adapt as necessary.

The most important part of an ethics investigation happens after the final report. Prevention is the easiest way to avoid
repeat incidents, so focus your team’s time there.

BEHAVING ETHICALLY
 3.3 BEHAVING ETHICALLY

Describe the methods to encourage ethical behavior in contemporary

organizations
As you read in the last section, ethical violations can happen on an individual or corporate level. It is
imperative to implement ethical standards and behaviors throughout every level of business operations. An
ethical company begins with smart hiring practices and onboarding processes. It then continues into the
company’s code of ethics and company-wide training to help foster and promote an ethical environment.

Ethical behavior requires accountability from all levels of the organization and needs to be audited and
enforced on a daily basis. Unethical decisions and actions can have a detrimental effect on an organization
and it is up to each individual to ensure ethics is at the cornerstone of every business decision.
Learning Outcomes

 Examine smart hiring methods

 Discuss the importance of a company’s code of ethics
 Examine how training can impact ethical behavior
 Describe how upper management impacts ethical culture

Hiring Ethically
 Companies place a lot of resources into their hiring process as it
is a fundamental part of a successful company. The human resources department spends many hours on
each new hire selecting who they believe to be the correct individuals for the job. But when the right person
is not hired for the right job, chaos can ensue.

A bad hire can be toxic to a work environment—hiring the wrong person can negatively impact morale,
productivity, and company standards. Consistently making bad hires effects multiple levels of an
organization.

While the hiring process can prove to be lengthy, the process of terminating an employee is equally, if not
more, strenuous. Unfortunately, hiring a new employee isn’t a simple or inexpensive process. Therefore, it is
critical to use smart hiring practices to increase your odds of hiring and retaining the right person for the right
job. When a company is unable to retain new employees, it leads to a lot of wasted time and energy.This
section will examine some smart hiring practices and how they are beneficial to the hiring process.

Roadblocks to Making a Good Hire

Before we dive into the different types of smart hiring practices, let’s examine some roadblocks to making a
good hire:
 If a company is desperate to fill a position, they are more likely to rush through the hiring process and
focusing more on filling the void rather than hiring the right person. Therefore, a short staffed company is
oftentimes at a greater risk for making a bad hire and continuing the turnover trend.
 Companies often make decisions heavily on resumes and how a candidate looks on paper. Although a
resume is a great place to start, candidates’ GPAs, resume buzzwords, and where they went to school do
not always tell the whole story. A candidate’s interview should play a much larger role.
 Interviewers often have different ideas of who they’d like to fill a position. There should be a system in place
to properly evaluate a candidate’s interview. If there are multiple people participating in the hiring process, it
is important to have a streamlined way of ensuring fair and consistent hiring practices. This can include a
rubric system that evaluates how well a candidate performed based on their responses.

Smart Hiring Practices

Now let’s review some smart hiring practices. First, you need to make sure you partner with the departments
who have spots to fill to fully understand the type of employee they are looking for. Meeting with their team
to create a list of qualifications and behavioral needs is the first step to ensuring you have a clear picture of
the type of person that would work well on the team. You can then use this description and list of desired
traits to start searching for the best candidate. The next step includes creating a smart recruiting process.
Once a recruitment plan is in place, you are ready to start the search! While collecting resumes, now is the
time to screen candidates and pull the ones with proper qualifications aside. It is also a great time to
prescreen your candidates to help narrow down your applicant list. Once you have a pool of qualified
candidates, it is time to start the interview process.
 It is important to remember that how you interview a candidate
can make or break your success rate. A behavioral-based interview style is a great way to better understand
how a person would act in certain situations. Behavior-based questions help gain insight into how people
would perform in the future. If you only ask questions based on the candidate’s resume, you will miss your
opportunity to get a full picture of that person. Here are some behavioral-based interview question
examples:

 Describe a stressful work situation and how you handled it.

 Tell me about a time you used logic to solve a problem.
 Tell me about a time you did not meet your goal. How did you handle that?

Personality tests are another great way to gain a deeper understanding of the candidate. Personality tests
can help hiring teams determine how candidates would contribute, or take away from, a team. Learning
about someone’s negative personality traits may be helpful in avoiding making a hiring choice that could turn
out to be toxic to a team environment. On the other hand, learning about a candidate’s positive personality
traits may help guide the team to find the perfect placement for the candidate. We will discuss personality
traits further in the next module.
After the interview, it is time to run a background check and follow-up on their references. This step should
either solidify your hiring decision or force you to find another candidate. These additional checks can help
ensure you are hiring an ethical candidate who will bring value, not conflict, to your company.

Practice Question
https://assessments.lumenlearning.com/assessments/13928

It is important to remember that there is no such thing as a perfect hiring system. There is a chance you will
go through all the “right” steps and still end up with a candidate who is not the best fit. However, having a
smart hiring process in place will help increase your chances of finding the right candidate for the job.

Code of Ethics
Before we can understand why a code of ethics is important, we need to first understand what a code of
ethics is. In school, you probably had to sign a student code of conduct. In these documents, rules and
regulations for your behavior were outlined. The school created this document to make sure their students
knew exactly how they were expected to behave. Similar to a student code of conduct, businesses have a
code of ethics they use to help guide the behavior of their employees. While not every company is required
by law to have one, a code of ethics has become an expectation by today’s standards. Since a code of
ethics is such an extremely helpful tool for an organization, it makes sense for all companies to create one,
regardless of legal obligations.

A code of ethics should include a company’s mission, values, and principles. A code of ethics allows a
company to connect these important components to clear professional expectations and standards. It is a
framework from which the entire company should operate and should reference on a daily basis. A code of
ethics also gives actionable ways to measure performance. The clear guidelines and values included in a
company’s code of ethics can be used to help promote and educate employees. While a code of ethics is a
great internal guide for a company, it is also an important external declaration. Externally, a code of ethics
informs the public of the company’s values and goals. It is a way for outsiders to learn about a company and
hold it accountable to its promises.

So how do you implement a code of ethics within an organization? There are many answers to this question.
The exact way in which to apply a code of ethics may differ greatly from company to company; however,
there are a few key trends. First, the code of ethics needs to be delivered to all employees in some way. It
can be an electronic copy or a hard copy, depending on preference. A company should give time for all
employees to review the code of ethics and ask any questions they may have. Training is the next step to
ensuring proper implementation of a code of ethics. We will discuss the training portion in more depth in the
next section. After training is held, every employee that received the training and a copy of the code of ethics
should sign the document to verify their understanding and commitment.

The last step in implementing a code of ethics is the reinforcement of the code. After employees have been
trained and signed the code of ethics, they are now under obligation to abide by the code. It is the
responsibility of everyone in the company to enforce the code of ethics. If you observe unethical conduct, it
is your responsibility to report it immediately. It then becomes the responsibility of the management and
human resources teams to handle ethics violations according to company policies.

Practice Question
https://assessments.lumenlearning.com/assessments/13929

Let’s move onto the next section where we will further explore the importance of training to ensure ethical
behavior.

Training for Ethical Behavior

Could you imagine starting a new job and receiving zero guidance on how to perform your job functions?
There would be a lot of confusion and frustration. In addition, there would not be any consistency in day-to-
day operations. Job training is imperative to creating an effective workforce that is able to meet goals and
required output. Without training to align all employees with company policies and procedures, a company
would suffer tremendously.

Training is also a fundamental part of implementing a

code of ethics. Without training, parts of the code of conduct may be left up to interpretation. Training will
help to ensure that every employee is on the same page about their obligation to the code. It is also a great
way see a variety of ethics-violation scenarios. Seeing examples of ethics violations and being able to ask
questions can be a wonderful learning opportunity. So why is it so important to train employees on every
aspect? A code of ethics is the foundation on which a company operates. If employees of the company are
not fully aware of the code of ethics and its expectations, it creates a weak foundation. Although it takes time
to train everyone, training is a critical part of implementing a successful ethical culture.

Training can occur in many different ways. Some companies hold large group training sessions, others
prefer one-on-one training or online training modules. Regardless of how a company decides to train their
employees on the code of ethics, a refresher course should also be made available. Some companies
retrain their employees on their code of ethics every six months or every year. This is done to ensure
everyone understands the code of ethics’ expectations and has the opportunity to refresh their knowledge
on the subject. A lot can happen in a year, and it is a good idea to reexamine expectations to help realign
and guide employees moving forward. A code of ethics should be used as a daily guide for members of an
organization. Although it may not be referenced every day, it should still be at the forefront of employees’
minds when making daily decisions. Therefore, it should not be a document discussed one time during
training, but rather a living, breathing document that is used at all levels of an organization on a regular
basis.

Practice Question
https://assessments.lumenlearning.com/assessments/13930

Training employees on the code of ethics and how to report violations is key to implementing the code of
ethics on the ground level. It is equally important to train the management team on how to handle enforcing
ethical conduct on their team. Management ethics training should include how to handle an ethics violation
report from an employee. If management does not know how to process a complaint or violation, the code of
ethics is compromised. If they do not properly handle violations, they will continue to occur without
repercussions. Managers play a big role in ethical culture. We will discuss their role further in the next
section.

Creating an Ethical Culture

Each organization is responsible for creating and fostering ethical culture. The organizational level of a
company creates a code of ethics to support the company mission statement and business principles. It is
then passed down to every level of the organization to align everyone to the same goals. Individuals are
then responsible for using the code of ethics to guide their daily decisions. So does it end there, where
individuals are responsible for acting independently under the guidance of the code of ethics? In some ways,
yes. Individuals are responsible for their own actions and decisions. However, management also plays a big
role in helping to foster an ethical environment.
Management at the highest level creates the company code of ethics. They are the first level of
management to influence company culture. It is up to them to ensure the code of ethics aligns with all of the
company’s values and principles. As we discussed in the last section, the human resources management
team is next in line to help implement the code of conduct by developing training programs for all employees
to attend. They are also responsible for enforcing the code of conduct through managing ethics violation
concerns. While the top dogs in the company and human resources each have a large role to play, the
lower-level managers are equally important.

Managers interact with their team on a regular basis. Therefore,

they tend to have a better idea of what ethical culture looks like in their department. It is up to managers to
reinforce ethical standards on their team. The best way for a leader to create an ethical environment is to act
ethically themselves, to lead by example. That is the number one responsibility of leaders. When a leader is
acting ethically, they become a role model for other employees. In addition, it gives them credibility and
makes them more approachable. If someone witnesses an ethics violation by a coworker, they are more
likely to report it to their manager if the manager follows ethical guidelines. It is then up to the manager to
continue up the chain of command to report ethical concerns. If a report of an ethics violation is swept under
the rug, more than likely, the unethical behavior will continue and possibly worsen. It is up to the
management team to follow all policies and procedures in place to handle ethical concerns. There need to
 be repercussions in place for unethical behavior. On the other hand, it is wise for management teams to
reward ethical behavior. This can help to create a positive incentive for acting ethically.

Practice Question
https://assessments.lumenlearning.com/assessments/13931

It is also important to note that even one manager or employee has the ability to damage a company’s
reputation. Earlier in this module, we examined recent lawsuits and investigations; these cases are the
perfect example of how even a few employees can destroy ethical culture and company reputation.
Consistency in how ethics violations are handled is key to developing a strong ethical culture. If some ethical
concerns are addressed while others are not, it creates inconsistencies that may suggest that unethical
behavior is sometimes tolerated. Unethical behavior should never be tolerated. It is up to the management
team, on every level, to enforce each component of the code of ethics and lead their team to do the same.
Without a strong ethical management team, companies face an uphill battle to establishing an ethical
culture.

References
Employment, Small Business and Training. “Implementing a Code of Conduct.” Business Queensland.
January 02, 2019. Accessed April 12,
2019. https://www.business.qld.gov.au/running-business/employing/taking-on-staff/staff-code-conduct/
implementing.

Heathfield, Susan M. “10 Best Ways to Ensure You Find the Right Person for Your Available Job.” The
Balance Careers. October 16, 2018. Accessed April 12, 2019. https://www.thebalancecareers.com/top-tips-
for-hiring-the-right-employee-1918964.

“Smarter Hiring Practices.” The Predictive Index. Accessed April 12,

2019. https://www.predictiveindex.com/how-we-help/hire-smart/.
 “Why Have a Code of Conduct.” Ethics & Compliance Initiative. Accessed April 12,
2019. https://www.ethics.org/resources/free-toolkit/code-of-conduct/.

CC licensed content, Original

 Behaving Ethically. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC
BY: Attribution
 Image: Resumes. Provided by: Lumen Learning. License: CC BY: Attribution

CC licensed content, Specific attribution

 Untitled. Authored by: LinkedIn Sales Navigator. Provided by: Unsplash. Located
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 Sample Code of Conduct Training Video. Authored by: Xcelus. Located
at: https://youtu.be/Bo5TXYaIeUM. License: All Rights Reserved. License Terms: Standard YouTube
License

How to Define Ethical Behavior & Why It’s Important in the Workplace

The plot of good versus evil, good guys versus bad guys, or right versus wrong has played out in books and movies for ages. It is arguably the
most common struggle at the center of narratives of all types. So it should be no surprise that the same struggle is prevalent in corporate
environments under the umbrella of ethical or unethical behavior. It’s certainly no secret that the desire to be perceived as ethical is important
to organizations as we consistently see narratives surrounding potentially unethical behavior within organizations play out publicly.

Headlines frequently peddle allegations of unethical behavior in the workplace which can create public relations crises, operational distractions,
financial liabilities and in some cases lead to the total collapse of organizations. Given the severe financial and reputational consequences of
unethical behavior, and the mere allegations of unethical behavior, it is no surprise that organizational efforts to prevent, detect and respond to
it are consistently scrutinized by stakeholders. The intense scrutiny makes it critical to understand the definition of ethics in the workplace, why
ethics are important in the workplace, and the single most important thing organizations can do differently to encourage ethical behavior in the
workplace.

What is the definition of ethics in the workplace?

Ethics in the workplace is defined as the moral code that guides the behavior of employees with respect to what is right and wrong in regard to
conduct and decision making. Ethical decision making in the workplace takes into account the individual employee’s best interest and also takes
into account the best interest of those impacted. The latter of the definition is often where individual employees struggle to act ethically.
Furthermore, ethical behavior doesn’t only apply to individual employees, the organization itself should exemplify standards of ethical conduct.

Why is ethical behavior in the workplace important?

It is important to understand that ethical behavior in the workplace can stimulate positive employee behaviors that lead to organizational
growth, just as unethical behavior in the workplace can inspire damaging headlines that lead to organizational demise.
Simply put, organizational stakeholders that include individuals, groups and organizations of various types enter into a relationship with a
business organization for that business to protect their interests in a specific way. Therefore, there is a mutual expectation that stakeholders and
business organizations act in an ethical manner and in each other’s best interest.

A decision to act unethically, by the organization or a stakeholder, can strain the relationship and damage the reputation of the organization.
The increased risk of reputational damage and harm from negative headlines is often the catalyst for organizations to promote and encourage
ethical behavior and prevent and report unethical behavior. Furthermore, where many individuals are connected to social media with mobile
technology, the risk that unethical behavior will cause reputational damage to an organization is arguably much greater that in decades past, as
behavior is more easily recorded on video, captured in photos, shared online and propelled into headlines.

However, there are benefits of ethical behavior in the workplace beyond the avoidance of reputational harm. An organization that is perceived
to act ethically by employees can realize positive benefits and improved business outcomes. The perception of ethical behavior can increase
employee performance, job satisfaction, organizational commitment, trust and organizational citizenship behaviors. Organizational citizenship
behaviors include altruism, conscientiousness, civic virtue, sportsmanship and courtesy.

What can organizations do to encourage ethical behavior in the workplace?

The good news is that organizations can take steps to create a good narrative around their reputation by implementing measures that help
ensure ethical conditions and perceptions of organizational support are present in the workplace. Many organizations implement reactive
systems to report unethical behavior. However, the single most important thing organizations can do different to promote ethical behavior is to
implement a proactive employee voice system and use voice of the employee tools to proactively give employees the capacity to be heard.

Voice of the employee systems that effectively promote ethical behavior and encourage reporting unethical behavior meet five key criteria:

1. Elegance: be easily understood, applicable to the entire organization and all employees and effectively diagnose issues
 2. Accessibility: be easy to use, widely promoted, accessible to all employees

3. Correctness: be well-administered and include follow-up to complaints

4. Responsiveness: be timely, be responsive, be used by management and show results

5. Nonpunitiveness: be anonymous and be free of retaliation – managers and employees must be protected

The challenge is that many organizations implement voice of the employee systems with good intentions, but the voice of the employee tools
used are not effective. Voice of the employee tools, like interviews and surveys, that proactively seek to uncover and stop unethical behavior
should be conducted:

 Using an Open-Ended Question: to ensure all possible issues are uncovered, voice of the employee efforts should focus on asking an
open-ended question about awareness of compliance issues. Closed-ended questions do not provide the ability to uncover all possible
issues or all details to understand issues.

 Externally: to ensure accuracy, the research should be conducted through an independent third-party to remove biases and remove
barriers to employees feeling they can express their true perceptions related to unethical conduct in the workplace. When conducted
internally, it’s likely that true perceptions aren’t revealed because employees aren’t being honest with the organization. Employees may
not want to risk burning a bridge or disappointing a manager. When conducted externally, data is systematically collected and
thoroughly reported.

 Using Mixed Methodology – Asking “Why?”: to obtain detailed reasons for perceptions of unethical behavior, it is critical to use a mixed
methods research instrument that asks “why?” in an open-ended, qualitative manner to avoid limiting the scope of what can be learned
from each individual employee. Third-party researchers can offer high-quality telephonic interviews and web interviews that capture in-
depth qualitative responses in a systematic manner. In asking fewer open-ended questions, specifically following up to ask why the
participant perceives unethical behavior, you obtain in-depth data and reveal the root causes of perceptions.

 Systematically: to track trends and progress, data should be systematically captured for use in subsequent data collection and analysis.
External research uses a consistent question set, data collection technology and a dependable methodology to capture responses in a
reliable system to facilitate future reporting and analyses. This information can then be analyzed to identify issues that might exist in
specific employee segments, departments, job groups or even certain supervisors.
 The struggle between right and wrong amongst your stakeholders and the perception of good or evil about your organization are a constant.
And the implications of a perceived ethical or unethical reputation could be helpful or harmful to your business. Your reputation is on the line
and your employees provide valuable information when given a true voice. It’s imperative to proactively promote ethical behavior in your
organization before you are potentially destroyed by tomorrow’s headlines.

Updated: 2/1/2023

A Culture of Ethical Behavior Is Essential to Business Success

Sean Peek
Contributing Writer

Updated Apr 28, 2023

Research from the University of Notre Dame finds that ethical business
operations are highly important to success, while unethical behavior can
negatively impact a business's prospects.
 Unethical behavior has consequences for future business, including heavy fines, expensive lawsuits and
reputational damage.
 Ethical behavior includes honesty, fairness, integrity and understanding.
 There are several ways to encourage an ethical workplace culture, including establishing a companywide
code of ethics.
 This article is for entrepreneurs and business owners who want to establish a culture of ethical
behavior among their employees.

Business ethics isn’t always exalted in every workplace, but it’s critically important when it comes to
providing customers with quality service, adhering to regulatory compliance standards, and avoiding steep
fines and lawsuits. Establishing an ethical culture starts with company leadership and involves ongoing
emphasis that ethical standards are respected.

Although this can be a lot of work, it can also positively impact the bottom line, protect a company’s brand
and result in higher customer satisfaction. This guide breaks down the importance of business ethics and
how to establish an ethical culture in your company.

What is ethical behavior?

A person who demonstrates ethical behavior demonstrates a strong moral code and a consistent set of
values. Ethics can be rooted in belief or the pursuit of making the world better. Those who exemplify ethical
behavior do the right thing regardless of whether they get credit for it. This sort of behavior is not limited to
the workplace; it can be present in every facet of life.

In a business setting, ethical behavior applies to any employee, team lead or supervisor. They should
display behavior that is honest and fair in their relationships with co-workers and their clients. Displaying
good ethical behavior can boost company morale and client relations. It’s easier for a business to retain
employees when they work for a company that they believe in. Employees want to work for companies that
treat everyone and their clients fairly and have good and ethical business practices.
A high ethical standard extends to customers as well. A reputation for positive ethical behavior entices more
potential clients, customers and partners to work with you. It also builds customer loyalty over time, creating
a customer base that is likely to refer your business to others.
Key Takeaway
Ethical behavior means your team operates according to fair and transparent standards, not just complying
with legal rules or regulatory requirements, but going above and beyond to ensure decisions are applied
through an ethical lens.

Why is ethical behavior important?

To understand why ethical behavior is important, it might be helpful to know how unethical behavior affects a
company. Think about a business that hires only family or one that gives inappropriate incentives, for
example. While these actions might not be illegal, they can definitely have negative effects on the morale
and success of a company, especially if their dirty laundry is aired publicly.

Then, of course, there are the more serious consequences of highly unethical behavior. Businesses that
violate ethics and engage in illegal activities can be subject to costly fines and lawsuits. For example,
international bank HSBC was subject to a decade-long enforcement action costing it $1.92 billion after the
federal government determined the institution violated money-laundering laws and sanctions rules.
On the flip side, a leader who personifies ethical behavior will be fair in all situations. In turn, employees will
trust that their leadership team is working toward the greater good of the entire company. By being ethical,
leaders can foster an environment that rewards and encourages good attitudes.

What are examples of ethical behavior?

Ethical behavior includes honesty, integrity, fairness and a variety of other positive traits. Those who have
others’ interests in mind when they make decisions are displaying ethical behavior. Here are other common
examples of ethical behavior:

Respect for others

No matter the relationship between two people and what they agree or disagree upon, people within an
organization should always respect each other. This includes managers and subordinates, peers and
clients. When there is a base level of respect established, people take criticism less personally, are able
to communicate more openly, and can see and value the other person’s perspective.

Open communication

All successful businesses communicate effectively. When the lines of communication are open and
employees are willing to have conversations with one another, misunderstandings can be avoided. Having
constant conversations and reminders makes it less likely an employee will break a rule or have a low-
quality output.

Responsibility

Mistakes and misunderstandings are bound to happen in any work setting. But when they do, employees
need to take accountability for their actions. They need to take responsibility for what happened and be
proactive in fixing it. When there is a standard of accountability at an organization, its people hold
themselves and their peers to a standard of responsibility.

Tip

The best way to instill a culture of ethics among your employees is to lead by example and maintain a clear
zero-tolerance policy on specific unethical behaviors, such as lying, cheating, stealing and fraud.

What is a code of ethics?

In the workplace, there might be a standard for ethics set throughout the company. Many organizations
create a code of ethics, which might include generic guidelines for ethical behavior about doing the right
thing or remaining fair. It could also mention specific protocol within the business.
For example, a code of ethics at a doctor’s office might include putting the patient first and remaining
understanding in tough situations. At a college, a code of ethics could include being honest and unbiased
when grading and being a catalyst for diverse perspectives in the classroom.

Businesses should create and display their code of ethics publicly. The company’s vision, values and
mission should be clearly stated and visible to both employees and clients so that the company can be held
to those standards. A code of ethics builds trust and credibility in an organization and creates a culture of
open and honest communication. If an ethical tone is set at the top and followed by management, everyone
who works there will hold themselves and each other to those standards.

What does the research into business ethics say?

Research into ethics and business performance has shown the two are linked in some important ways. In
fact, data collected by Ethisphere, an organization that tracks the ethical conduct of the world’s largest
companies, found that the businesses listed on its 2022 list of most ethical companies outperformed an
index of similar large cap companies by 24.6 percent overall.

Certain studies have revealed some of the reasons why the companies on Ethisphere’s ethics index may
have outperformed other less-ethically-focused businesses.

In one such study, led by Kaifeng Jiang, a professor at the Ohio State University Fisher College of Business,
researchers examined the intersection between the quality of service a business offers and its adherence to
ethical mores by looking into conditions at nearly 200 movie theaters. The findings reveal that quality service
and an ethical business plan are essential to long-term business success.

“Both high-quality service and low unethical behaviors are important to predicting business unit
performance,” said Jiang. “This is especially so when the market is very competitive, because then the
customers have a lot of options and could … switch to another product or service provider.”
In the study, researchers determined that a higher quality of service positively impacted business operations
when ethical adherence was also high. Conversely, when unethical behavior was commonplace, the quality
of service had a much-diminished impact on the success of business operations.

The researchers also determined that businesses could take certain steps to rectify ethical lapses that
impacted performance. These steps included creating a climate based on service quality and ethical
behavior that guides employees without direct supervision, taking corrective actions before unethical
behaviors occur by periodically measuring employees’ perceptions of the company’s ethical climate, and
emphasizing the importance of service quality and ethical behaviors as they relate to competition in the
marketplace.
Key Takeaway

Ethical behavior positively impacts a business’s financial performance. If you’re concerned your company
culture isn’t rooted in ethical behavior, consider taking corrective action to reduce and prevent further
unethical activities by employees.

Don’t make ethics an afterthought in your company culture

Ethics may seem like an intangible, but there is a clear connection to overall performance. From retaining
employees to ensuring brand loyalty to avoiding lawsuits and fines, a strong code of ethics is key to
continued success. Bake ethics into your company by establishing a code of ethics and reinforcing its
principles with your team regularly. It may just be the cornerstone of your success.

Source interviews were conducted for a previous version of this article. Tejas Vemparala also contributed to this
article.
Business ethical behaviour and why it matters

 Joshua Stanley
 July 16, 2021
 4 mins

With the world becoming more and more aware of environmental issues, fair trade practices, and suitable
working conditions, businesses that want to succeed need to be very mindful of their reputation. Ethical
behaviour means businesses acting in a way which is open, fair, and honest, and takes into account everyone
from customers, to employees to shareholders. Businesses that behave in an ethical way are more likely to be
seen as trustworthy and dependable by their customers and to be viewed as a positive force in society.

In this article we’ll talk about what business ethics are, why they matter, and how businesses can make decisions that
follow these principles.

What is ethical behaviour in business?

Ethical behaviour refers to the moral principles, rules and attitudes that organisations demonstrate in their conduct and
dealings. Ethical behaviours are necessary for maintaining employee safety, adherence to law and regulation, and
protection of the environment. Business ethics also include a number of specific principles and practices which help an
organisation perform well as an enterprise but also with a sense of social responsibility.

Why do business ethics matter?

Ethical behaviour is actually in a business’s interest because it can have a positive effect on their bottom line. In 2011,
research from the Global Reporting Initiative found that 84% of consumers said they would be more likely to buy goods
and services from a company if it acted responsibly. This is especially important for companies looking to target
millennials – 78% of whom say ethical behaviour is an important factor when purchasing products.

In addition, there are legal requirements around ethics in certain industries like healthcare or finance which require
businesses to act ethically as part of complying with regulations set by government regulators or auditors. If businesses
don’t comply, they risk sanctions or legal actions against them. A business that acts ethically will have a lower probability
of committing fraud, engaging in bribery and corruption and breaking the law on employment rights like discrimination or
harassment.
How to create an ethical company culture
In order to maintain an ethical company culture, businesses should set out clear expectations about what behaviour is
acceptable and unacceptable from employees. This can be done through company policy or procedure and by educating
employees on established ethical principles.

It’s also important for companies to be honest in their dealings with consumers. They should provide accurate information
about products and the business itself, including any potential risks. Businesses should never mislead customers by
telling half truths or concealing relevant facts from them. Transparency is at the heart of running an ethical company
because it means that everyone knows what goes on inside the organisation, and the appropriate individuals can be held
accountable if things go wrong.

What are the main principles of business ethics?

There are various principles that different individuals and organisations believe should underlie business practices. For
example, the Institute of Business Ethics has their own code which businesses can follow to guide behaviour:

Honesty

Businesses should always be truthful in communications with customers and employees, as well as not misusing
intellectual property or trade secrets for personal gain.

Respect

Businesses should recognise that all stakeholders and shareholders have rights but that so do suppliers, consumers, and
society in general.

Transparency

As mentioned above, organisations should be open about their activities. This includes explaining policy decisions,
disclosing information about conflicts of interest too, and not concealing gifts offered or accepted in order to curry favour
with a government official or regulatory board.
Responsibility and accountability

All businesses should be answerable for their actions and take responsibility for the consequences of any decisions.

Justice

Organisations should respect human rights such as labour laws and equal opportunities legislation where these exist.
They should ensure that workers have safe working conditions, and always follow discipline and dismissal laws.

Fairness in dealings

Business should treat all parties fairly and not use undue influence to get a better deal for one side over another.

Respect for communities

Businesses should recognise the impact they can have on community well-being, whether it’s through pollution or
excessive noise levels.

What is leadership’s role in business ethics?

An important aspect of running an ethically sound company is leadership’s ability to adhere to these principles and make
the right decisions when faced with difficult circumstances. These are often incidents where there is a conflict between the
wants or needs of shareholders, and what is right for employees, the environment, or society in general. A leader must be
able to understand the perspective from all sides before making the best decision.

Examples of ethical companies

Toms Shoes

This shoe company donates one pair of shoes to children in need for every purchase made.

Patagonia
This clothing company creates products out of sustainable materials and promotes environmental awareness by donating
at least 20% of their profits to grassroots environmental organisations. They also educate customers on how they can
make an impact with the clothes they buy, such as getting rid of plastic water bottles or recycling old items instead of
throwing them away.

Examples of unethical companies

Google

Various criticisms have been levelled at the web giant including allowing China to run a restricted search engine service,
and Google’s unsanctioned tracking of users in order to improve their maps.

Amazon

Despite Jeff Bezos’s obscene wealth, Amazon’s treatment of its warehouse and delivery employees has long been
criticised. Furthermore, Amazon was caught surveying the data of their Prime customers, and then creating a service that
provides lower prices for items they had viewed in order to tempt them into shopping more.

Nike

The sportswear giant has consistently found to be in breach of child labour laws in various countries around the world,
prompting Nike to relocate their factories in countries where there is less regulation.

Business ethical behaviour is so important. It helps protect employees, show customers and society that the organisation
is trustworthy, and ensure adherence to the law. Far too often, the most successful businesses act unethically in order to
make more money or bypass the law. However, with so many social and environmental issues causing real existential
crises, it is vital that businesses start to take ethics seriously.
REFERENCES:

https://ethico.com/the-process-of-an-ethics-investigation-from-start-to-finish/

https://www.lockheedmartin.com/content/dam/lockheed-martin/eo/documents/ethics/supplier-guide-to-ethics-investigations.pdf

https://granite.pressbooks.pub/mgmt805/chapter/behaving-ethically/

https://workinstitute.com/how-to-define-ethical-behavior-why-its-important-in-the-workplace-2/

https://www.businessnewsdaily.com/9424-business-ethical-behavior.html\

https://www.lano.io/blog/ethical-hiring-why-it-matters-and-how-to-make-it-happen

https://www.businessnewsdaily.com/9424-business-ethical-behavior.html

https://www.eduployment.com/blog/what-is-ethical-hiring/

https://www.mncland.com/codeofethics

https://brainhub.eu/library/benefits-of-code-of-ethics