To Which Direction Does Your Ethical Compass Point?
Glenda Ostrander, CIA, CGAP, CRMA, CGFM, CFE

In this bustling business world, it seems easy to "go with the flow" to keep the bottom line healthy and processes moving. But does that give business leaders permission to do things no matter what the cost? No, most certainly not.

As most CEOs will tell you, keeping an eye on achieving results that make boards and stakeholders happy while ensuring compliance with ethical principles that are sometimes amorphous or lofty in nature is an intricate and challenging balancing act.

Ethical Behavior Requires Holding Oneself Accountable Even in "Little Things"

So what happens when things go awry? Personal lapses in judgment often begin with rationalizing away our individual responsibility. We might even subject others to pressure or duress to commit an unethical act to absolve ourselves of wrongdoing later.

For example, a CFO may say to herself, "It's no big deal. I'll just do it this one time." Or she may place a subordinate under pressure and in an uncomfortable position to make the adjustment by saying, "John, you know that folks will breathe easier and not worry about the business climate being so gloomy if you can just make the numbers work. I'll leave it up to you. Oh, by the way, don't forget to apply for that promotion. I think you'll be in the hunt."

And so it begins, and like a cancer, unethical practices multiply and go unchecked because people fail to hold themselves and others — including superiors — accountable. Failing to uphold ethics for even "little things" creates a culture that encourages rationalization and excusing potentially criminal behavior.

Tone at the Top – Requiring Positive Affirmations

Employees notice when they are directed to cut corners or take short cuts that ordinarily would not be tolerated. Once this kind of thing takes hold, it is very hard to get back on track. 

The tone at the top of an organization is key. It starts with the board and carries through the CEO to the rest the organization. Some boards and executive committees require each member at the conclusion of meetings to positively affirm (verbally) they have not broken ― or bent ― an ethical decree or acted in a manner that could jeopardize the entity. Others may go as far as having each member state they have not said anything that could be construed as misleading or labeled a lie. Is it enough?

Commitment to strong ethics is essential in building the framework for conducting business. No one — from leadership all the way through the organization to first-line employees — should be above the requirement for training in ethical behavior.  The IIA has even decided to require annually mandatory ethics continuing education for certified internal auditors, with the hope of ensuring that those who provide assurance within their organization are held to a high standard.

What's the Impact?

Setting a strong ethical tone can have a powerful impact on the organization and its culture. This is especially evident as the organization carefully builds credibility to be a player in the business world. An ethical tone is a key ingredient in establishing a reputation for reliability, accuracy, and competency. It also goes a long way in building employee loyalty and longevity as people generally like to stay in an environment that promotes a sense of well-being and strong ethical values. 

Once established, the ethical tone can impact business in every facet of the organization's outreach. Internally, it affects how the organization carries out daily activities. Strong ethical support reinforces policies and procedures that binds things together, providing a foundation for overall successful business operations.  

Continuous Preservation

It takes diligent, continuous effort to preserve the elements of a strong ethical environment. The ideal environment is not a destination, but a journey that calls for periodic refresher training that revisits on a fundamental level why such an environment is so important in the first place. Again, an orgnanization's level of compliance with ethical principles becomes a strong focus point that insiders and outsiders alike can look to as they assess the level of success an organization can experience.

So, to which direction does your ethical compass point to?

About the Author

Glenda Ostrander, CIA, CGAP, CRMA, CGFM, CFE, is the Director of Internal Audit for Gwinnett County Public Schools. Glenda has an extensive background in auditing, whose career has spanned various state and local governments. She is an active member of The IIA and the Association of Government Accountants, where she has held various leadership positions.

Tagged with: Governance; Ethics; Fundamentals of Internal Audit; Code of Ethics; Industry; Public Sector
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