Barriers & Facilitators
to Ethical Management
Nearly all men can stand adversity, but if you want to
test a man's character, give him power.
-- Abraham Lincoln
Virtue Isn’t Enough
Good character is important in business. But virtuous people can
be:
 bamboozled into thinking that up is down, wrong is right.
 hamstrung by rules, regulations, power plays, lack of
information, etc.
 bullied and terrified into following along with something that
doesn’t smell or feel right.
 isolated and silenced through ridicule, being ignored, or being
placed in hyper-competition with peers.
 lazy, distracted, blindsided, or in denial.
 overwhelmed, stressed out, and incapable of rational thought
and action.
So…
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The structures and processes of organizations
need to be designed and implemented to
relieve the pressure and ambiguity and to help
people make better choices.
Organizations have to help their people be
virtuous.
Consider some examples.
Barrier ………….Facilitator
Vague, general ‘values’:
 Organizational values are
too vague and general.
 everything is left to the
discretion of individual
managers.
 There's too much room
for variable applications
and “cults of
personality.”
Clear, specific values:
 Articulated in a values
statement
 Spelled out in a code of
conduct
 Interpreted with respect
to practical situations
 Referred to frequently
 Used as decision guides
 Revisited and revised as
needed
Barrier ………….Facilitator
Total CEO control:
Total CEO control:
If the CEO ignores or
condones or expects
unethical behavior
If the CEO is a jerk or a
bully or a sociopath.
If the CEO intends to
enforce ethical
standards, sets an
example, and builds
the organization
around values.
If the CEO is ethically
and mentally sound.
Barrier ………….Facilitator
Corporate transformations -mergers, divestitures,
acquisitions, downsizing,
reorganizing –
All require major cultural
transformations and may
(a) open up opportunities for
unethical behavior that didn't
exist when the organization
was stable, or
(b) introduce a new culture that is
less supportive of ethics than
the old one was.
Corporate transformations –
If the resulting company takes
advantage of the opportunity
to structure specifically and
clearly in support of ethical
conduct.
If “ethics champions” emerge and
are supported by the new
structure.
Barrier ………….Facilitator

High labor/management
turnover:
New personalities, values,
motivations, and
behaviors are continually
brought into the
organization, making it
more difficult to sustain a
common set of values and
a strong culture.
Stable labor/management
workforce:
Employees can establish a
long-term culture of trust
and ethical behavior once
they know each other and
have track records to
refer to.
EXCEPT THAT: New blood
can encourage ethics in
companies that haven’t
paid attention before!

Barrier ………….Facilitator
Cultural differences:
Cultural diversity:
Language barriers and
different interpretations.
Status/hierarchy differences.
Different ideas of right and
wrong.
Different ideas about how
business is and should be
done.
Opens minds and attitudes.
Fosters respect for people of
alls sorts.
Permits learning and growth.
Encourages adaptive
behaviors that can also be
strategically important.
Barrier ………….Facilitator
Industry Factors:
Industry Factors:
Competitive environment
Regulatory climate
Common/best practice
Stakeholder expectations
Competitive advantage
Political/regulatory
interactions
Industry leadership
Stakeholder pressures
Barrier ………….Facilitator

Opportunity to act
unethically


No one cares

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Lax control systems

Incentives favor
“whatever it takes”

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Management control
systems that reduce
opportunity
Senior managers lead by
example
Control systems are
secure, orderly, doublechecked
Incentives take law and
ethics into account.
Barrier ………….Facilitator
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Talk about ethical goals,
reward only financial
performance.
Look with great approval
on those who meet
financial targets, but never
inquire how they do it.
Tie major compensation to
short-term performance.
Play favorites; pick on
people; reward and punish
inconsistently – eventually,
no one will believe
anything you say.

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Make it clear to everyone
that business goals must be
met legally and ethically.
Make a place for long-term
performance in the
incentive scheme.
Be consistent with positive
and negative sanctions.
Be fair – don’t play
favorites or pick on people.
Don’t reward or tolerate
bad behavior.
Barrier ………….Facilitator
Executive Personality:
Executive Personality:
Bullying, aggressive,
loud, intimidating
Sociopath – lack of care
for others
Narrow focus on profit
goals
Reasonable,
collaborative
Kind to others,
compassionate
Broad focus on profit
and other goals
Lead by Example… DO
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Demand honesty and trustworthiness of yourself.
Whatever you expect of your employees, be willing
to do yourself.
Seek out information and understanding; show how
it’s done.
Consult with those affected by a decision as well as
those more knowledgeable than you.
Meet regularly with staff to discuss issues, to
encourage, and to demonstrate how to engage in
ethics dialogue.
Lead by Example … DON’T
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Don’t dump on the people below you as you climb
the ladder.
Don’t use the company’s assets as your personal
piggybank.
Don’t bully, yell, intimidate. Don’t worry about
letting them all know who’s boss.
Don’t be afraid to confront people; don’t hide out
until conflicts blow over.
Don’t deny, rationalize, avoid.
Don’t avoid getting the facts.
Barrier ………….Facilitator
Structures/Processes:
No code, or a phony one.
No ethics training or
supervision.
No concern for ethics in
incentives.
No channels for
communicating problems
& concerns.
Hiring based on skills alone.
Structures/Processes:
Code of conduct – real.
Regular training and
reinforcement.
Incentives accommodate
ethics.
Communication channels are
clear.
Due diligence in hiring.
Barrier ………….Facilitator
Lemmings:
One manager violates;
everyone else falls in
line.
Voice – no “moral
muteness.”
Escalation:
One small mistake is
covered up, leading to
more and bigger
problems.
Mistakes are not cause
for ‘execution.’
Barrier ………….Facilitator
Psychological Defenses:
Psychological Defenses:
Denial
Entitlement
Rationalization
Blame-shifting
Ignorance is bliss
Rose-colored glasses
Hopefulness
Physical & emotional
reactions to ‘red
flags’
‘something smells fishy’
‘too good to be true’
Follow up on what you
feel!
Barrier ………….Facilitator
Implementation:
Implementation:
Ambiguous or changing
message.
Incentives out of whack.
Violations sometimes
punished, sometimes not.
Punishments not seen as fair.
Consistent message.
Incentives in line.
Consistent and fair
enforcement and
punishments.
Internal processes known
and respected.
Rules apply to everyone.
What Managers Can Do to Encourage
Ethics in Business
1. Hire experienced people for ethically sensitive positions.
2. Recruit some non-technical people.
3. Recruit people who have multiple personal goals.
4. Stress that maximizing profits is constrained by other
goals.
5. Encourage employees to be self-assured and broadly loyal.
6. Structure jobs so that unethical behavior is discouraged.
7. Increase contact between employees and those they might
injure.
8. Support mechanisms for investigating and reporting
unethical behavior.
9. Enforce the rules consistently; apply moderate penalties for
violations.
10. Build ethical actions into performance evaluation criteria
and compensation incentives.