Creating an Ethically Strong Organization

Creating an Ethically Strong Organization CATHERINE BAILEY AND AMANDA SHANTZ
Ensuring that all employees clearly understand appropriate ways to address daily
ethical issues can prevent your company from spiraling into corporate scandal.
When German car manufacturer Volkswagen was caught
cheating on its diesel emissions testing regime a few years
ago, the subsequent scandal launched numerous lawsuits,
cost billions of dollars in fines, and severely harmed the
companys reputation. The actions and inaction of
dozens of employees at all levels, across divisions and
countries, contributed to this disaster, including the
software engineers who designed the cheating device, the
workers who installed it, the managers who approved the
fitting and testing, and the members of the senior
leadership team who either orchestrated the scam or
simply turned a blind eye. 1
Of course, VW isnt an isolated example. Consider the
costly lapses in judgment at Wells Fargo, 2 for instance,
and at Samsung Electronics. 3 Why do such scandals
continue, despite the clear moral and financial
imperatives for ethical action? And perhaps more
important what can be done to change matters?
Although some argue that people are innately inclined to
behave unethically out of self-interest, 4 our research
reveals that organizational ethics matter significantly to
most employees and managers, and that people want to
work for employers whose values and principles are
aligned with their own. This suggests that ethical
employers are likely to attract and retain ethical
employees. 5 Whats more, research has shown a link
between ethical leadership and task performance,
organizational citizenship, and other productive work
behaviors 6 companies have many compelling
reasons to address ethical failings at the earliest
opportunity. The urgency is all the greater in this digital
age, since businesses must continually make rapid, high-
stakes choices about how to handle sensitive customer
and employee data.
MITMIT SLSLOOAN MANAAN MANAGEMENGEMENT REVIEWT REVIEW
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Copyright Massachusetts Institute of Technology, 2018. All rights reserved. Reprint

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