Ethical leadership involves leaders not only doing what is right, but also doing so in a way that encourages others to follow suit. This tone from the top makes a profound difference in establishing and maintaining a culture of integrity within an organization (ECI, home page).

How right the Ethics & Compliance Initiative (ECI) is when it makes that statement, as found on its home page under “Featured Research: Every Leader Sets a Tone.” Almost two years ago, ECI (then the Ethics Resource Center) published the results of its Ethical Leadership study, summarized in a January 2015 Ethical Advocate blog post.

The results and conclusions drawn from that study have been reinforced by a recent PricewaterhouseCoopers (PwC) survey and study titled PwC State of Compliance Study 2016: Laying a Strategic Foundation for Strong Compliance Risk Management.

 

As regards “tone at the top,” it states:

 

An organization has established effective tone at the top when senior leadership demonstrates personal and organizational commitment to compliance and the compliance and ethics program, and this commitment permeates all levels of management.

Most senior executives, it is reasonable to assume, would agree with both ECI and PwC. Yet, according to the PwC survey results, there is an unfortunate perception gap (and sometimes a reality gap) between what leaders believe and say, and how they are viewed by employees.

According to PwC’s State of Compliance web page, 98% of senior leadership says they are committed to compliance and ethics. However over half of survey respondents (55%) indicated that their senior leaders provide only ad hoc oversight of the compliance and ethics program, or that they delegate most oversight activities.

This disconnect, according to the report, appears to impact employee perception of their leaders’ role in organization compliance and ethics programs. For example, only 16% of survey respondents believe that employees view the CEO as the compliance and ethics champion at their organizations. Such a response indicates that leaders, however much they personally believe in the value of compliance and ethics, may not be doing enough to ensure their commitment influences behavior throughout the ranks.

The study highlights measurement and communication as important related issues.

Over half of the organizations represented in the survey do not assess tone at the top, and even those that do tend not to include senior leadership compliance and ethics performance metrics as part of the assessment. The use of such ethics-related assessments and metrics would help organizations hold leaders accountable for their own behavior, but also demonstrate to all employees that leaders take their responsibilities seriously.

On a positive note, a large majority of senior leaders formally communicate the importance of an ethical culture, but just over half do so as often as quarterly. Frequent day-to-day communication about compliance and ethics—arguably, a very effective way to embed ethical values throughout the organization—is lacking. According to the study, only 26% of senior leaders speak about compliance and ethics as part of everyday.

How can senior leaders improve communication and thus widespread recognition of the compliance and ethics tone at the top? PwC’s sample executive scorecard (found in the study) identifies the following approaches:

1. Incorporate compliance and ethics messaging into broad communications to employees and in day-to-day interactions with employees
2. Regularly remind employees of the importance of ethical and compliant behavior, raising concerns, and the company’s non-retaliation policy
3. Model the Company values and demonstrate ethical and compliant behavior in everyday decision making and when enforcing disciplinary measures

Leaders who make the effort to assess “tone at the top” and step up ongoing communications about their ethics-related values should be able to close the perception gaps and influence almost all employees to do what is right.

Ethical Advocate provides ethics and compliance training and consultation to organizational leaders and provides anonymous and confidential ethics hotline systems.

References:

ECI: Ethics & Compliance Initiative. “Featured Research: Every Leader Sets a Tone,” (see home page). http://www.ethics.org/home

PwC. PwC State of Compliance Study 2016: Laying a Strategic Foundation for Strong Compliance Risk Management, September 2016. https://www.pwc.com/us/en/risk-assurance/state-of-compliance-study/assets/state-of-compliance-study-2016.pdf

PwC. State of Compliance Study 2016 (web page; summary). http://www.pwc.com/us/stateofcompliance