An ethical workplace culture has to start at the top

Determining the purpose, values and expected behaviours of an organisation is essential, but it will only work if senior managers and board members lead by example, says Ian Peters

There’s a scene in US political drama The West Wing in which the vice president rails against the president’s stubborn refusal to change tack. “What do you call a leader with no followers?” he asks bemused White House staffers. “Just a guy out taking a walk.”

In business, as in politics, success is dependent on getting buy-in. Buy-in from your customers. Buy-in from your staff. We’re less likely to repeatedly spend money with a company that takes our custom for granted or consistently provides poor service, and we’re likely to start looking at jobs websites if our employer fails to value us or if we feel the workplace is a toxic one.

We want to work for and buy from businesses with a culture that we believe is appropriate and ethical – organisations we can tell are doing the right thing for the right reasons. That culture can only come from the top, through senior management and the board. To paraphrase a real-life American president, that’s where the buck stops.

An ethical culture isn’t a ‘nice to have’ – it’s what can help deliver growth and profitability. The Qualtrics XM Institute’s 2022 global consumer survey found that 60 per cent of customers would spend more money with a business if treated better – a hallmark of a positive ethical culture.

Getting it right can deliver a competitive advantage and commercial benefits. Yet the evidence suggests many businesses are getting it wrong – either because the culture isn’t right, or because there’s a failure to communicate effectively with staff and consumers.

The Qualtrics Institute also found that 62 per cent of customers believe businesses could and must care more about them. At the Institute of Business Ethics, our British attitudes surveys have found that less than half of Britons believe businesses are behaving ethically and there is continued concern over corporate tax avoidance.

The evidence also suggests business culture and whether it’s ethical is an issue on the workforce side. Gallup’s recent State of the Global Workforce report found that 59 per cent of staff are ‘quiet quitting’, meaning they feel disconnected from their employer. Nearly a fifth are ‘loud quitting’, which means there’s been a fundamental breakdown in trust between a business and the employee.

The data indicates there are continuing issues with business culture: whether it is ethical or whether companies are failing to effectively communicate what their culture is. So how can organisations develop and embed an ethical culture?

Responsibility must lie with senior management and the board. They are the ones who must determine the purpose, values and expected behaviours of the organisation. The good news is that more big businesses seem to be understanding the importance of this first step. Our research earlier in the year found an increase in the number of FTSE 100 companies with publicly available codes of ethics and improvements in the quality of these all-important documents. But there is room for improvement – less than half of FTSE 250 firms have an accessible code of ethics and, of the FTSE 100 companies that do, only one in two includes written protections for staff raising concerns about ethical behaviour and practice.

But codifying purpose, values and behaviour is just one part of the equation in creating and embedding an ethical culture, and is worth little without effective implementation. The risk for any organisation is that maintaining an ethical culture becomes a compliance issue – a tick-box exercise where lip service is paid to expected behaviours. Such a situation will inevitably occur when the responsibility for maintaining an ethical culture is deferred by senior management and the board to other members of the organisation.

Senior managers and the board must exemplify the behaviours expected by the workforce. They must embed the ethical culture of the business in recruitment, decisions about pay and procurement – ensuring contractors and suppliers meet the same or similar values. They are the ones who can insist upon the induction of new colleagues and continual training of staff. And they are the ones who can ensure there are appropriate consequences when employees do not meet expected standards of ethical behaviour.

The final piece of the puzzle is benchmarking. Companies must challenge themselves to honestly assess if they are meeting the purpose and values set out in a code of ethics – and act if they’re not. 

Having and demonstrating an ethical culture can provide tremendous competitive advantage. But it takes work to get the continual buy-in from staff and customers, which can only come from the board and senior management. Otherwise, you’re not a leader, you’re just someone out for a walk.

Ian Peters is director of the Institute of Business Ethics