Lots of people at General Motors knew about the faulty ignition switch. But nothing happened to change the situation. Enron had a concerned whistleblower, but she couldn't change the course of the company before it was too late.
For many people, that's proof companies are too fixated on profit so ethics – at best – takes second place or that corporate suites are filled with unethical people. But Mark Pastin, who has spent 35 years as an ethical consultant to companies and is president of the Council of Ethical Organizations, a non-profit that promotes ethical conduct by businesses, doesn't buy that argument.
He believes most corporate leaders are ethical, but can be tripped up by organizational rigidities and simple, if dangerous, mistakes. At GM, for example, the organizational culture was so dominated by line of command that the information about wrongdoing couldn't percolate to the top. And that's common: "Line of command is the enemy of ethics in organizations," he says in an interview.
With GM, he notes that many people paid a price – including the price of their life – because the faulty ignition switches weren't replaced. Enron was a successful organization but the most prominent whistleblower, Sherron Watkins, was isolated, and Enron imploded. "There's somebody who knows it but the organization doesn't know it and the leadership can't change direction," he says.
When he goes into organizations he tries to change the culture so whistleblowers are honoured. Whistleblowers, he tells top executives, can illuminate an organizational blind spot. But it's not easy to change the culture because whistleblowers step outside the line of command and the hierarchy doesn't tolerate such offenders. "It's instinctive, almost tribal. People just don't trust someone who steps outside the line of command," he notes. "But to prevent ethical mistakes you must empower the whistleblower so they can withstand attack from the line of command."
Beyond that, in a recent article on ChiefExecutive.net, he outlined five mistakes to be alert to:
Assuming a business practice is acceptable because it's common practice
Just because everyone else is doing something doesn't make it right. That excuse won't stand up in the court of public opinion or a real court. The practices BP PLC was following in the Gulf of Mexico when the Deepwater Horizon oil spill occurred were common, notably using subcontractors and not policing them properly. "Everyone did it but the one who got caught paid a significant price," he says in the interview.
Instead, you must evaluate what you're doing on its own merits. Does it stand up ethically? Remember that when practices are unethical somebody is likely to get caught – and you don't want that to be you.
Confusing legal advice with ethical advice
When facing a troubling situation, executives will routinely turn to legal counsel. And that's fine: You need a reading of whether you are afoul of the law. But even if what you're doing is perfectly legal, that's not the end of it – the activity might well not be ethical. And if caught, the response "it was legal" may help you in court but not with the array of stakeholders a company is beholden to. "I'm not sure if what BP did was illegal. But it was wrong," he declares.
Trusting the managers potentially implicated in an ethical issue to investigate it
It is important to show managers that you trust them. But it's more important to protect the reputation of your company. "To some extent you can't trust your managers. If they made an ethical mistake, they will try to cover it up," he warns. Always establish an independent investigation when concerns have been raised. And believe the report that is produced, rather than falling back on loyalty to the people you promoted and have worked alongside who were investigated.
Fixing a problem without owning the problem's history
Often organizations will say that as soon as they heard of an ethical problem they fixed it. But that's not enough. Imagine a physician or hospital that was overbilling the provincial health authorities and fixed the system for the future but kept mum about the past, letting the overpayments it received stand. In today's electronic fishbowl age, that would likely come out and it wouldn't look pretty. When you address an ethical situation, you must not only fix the problem for the future but also dig back to the roots.
Judging the information you receive by the person from whom you receive it
Often whistleblowers aren't very likeable. They may be motivated by their anger with someone. They may seem obsessed with the issue they have discovered, and consumed by black-and-white thinking. But it's vital you get over their personality and instead judge the information they provide. You also need to shove aside the usual prescription by bosses to subordinates: Don't bring me problems; bring me solutions to the problems you find. Whistleblowers are usually too low in the organization to provide solutions. But you need to listen to their problems.
Overall, be alert to the dangers of line of command, group think, and following traditional practices without judging their ethical merits.
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column, Balance. E-mail harvey@harveyschachter.com
Harvey Schachter