A review of the literature reflects that a single person rarely
is responsible for unethical scandals within an organization. Poor ethical
behaviors are often the result of interaction among several individuals
that have rationalized their values. Thomas, Schermerhorn, and Dienhart
(2004) found that the 12 months following the crisis of Enron in 2001, 13
of the largest corporate bankruptcies in U.S. history were filed - each had
been involved in unethical business practices. The foci of this paper is to
review what appears to be a decline in the ethical corporate behaviors in business and provide recommendations on how organizational leaders might
be proactive in promoting ethical cultures.
The following examples show that poor corporate ethics involves more
than one individual.
- Leaders of the world's largest retailer, Wal-Mart, were cited for practices
of employee abuses and gender discrimination.
- Questions emerged in the news whether leaders of the tobacco industry
had prior knowledge of a link between the use of tobacco and lung cancer.
- Leaders at Dow Chemicals and Union Carbide made the news over the poisoned
chemical incident in Bhopal that killed thousands of India's citizens.
- Questions relating to auto safety and truth in packaging have emerged.
- CEO of Hollinger International, Conrad Black, the 3rd largest publisher
in the world along with his top assistants have been charged in stealing
$51.8 million from the organization.
- The collapse of 90-year old Arthur Andersen, one of the five largest
accounting firms in the world, was among the most profound ethical violations
in the history of American business resulted in loss of jobs and retirement
income for thousands of employees.
- When Watergate unfolded, national leaders were exposed for unethical
- News reports exposed Wall Street analysts who created phony reports,
made profits, and pushing of worthless stocks left citizens in doubts on
how to invest their money.
- Corporate executives like Kenneth Lay and Martha Stewart were charged
by the court systems for poor ethical practices.
- Leaders of pharmaceutical companies have made the news - accused of
knowingly distributing unsafe products.
- The Boeing aeronautical firm scandal resulted in several executives
resigning when allegations of bribery, insider information on military contract
- Leaders at Coke Cola were found guilty of racial discrimination and
leaders of cruise ships fined for dumping waste in the ocean.
- The educational system has not been untouched by unethical practices.
The television show, 60 Minutes, ran features relating to some schools operating
scholastic diploma mills and reporting graduate job placement of graduates,
which turned out to be false advertisements.
- During the trial of priest Paul Shanley, leaders of the religious community
acknowledged knowing of his unethical sexual misconduct since 1976. The
church leaders continued to transfer Shanley from parish to parish as an
attempt to stop the behavior.
- According to Cornehis (2004), "What was originally proclaimed to be
one or two rogue corporations and their executives enriching themselves
and their friends now has become a flood of reported ill-gotten gains and
financial irregularities" (p. 29).
There are unethical leaders from almost every professional, industry, and
type of business.
The following Fortune 1000 leaders have been in the news for unethical
- Adelphia Communications, April 2002;
- AOL Time Warner, July 2002;
- Arthur Andersen, November 2001;
- AOL Time Warner, July 2002;
- CMS Energy, May 2002;
- Duke Energy, July 2002;
- Dynegy, May 2002;
- El Paso, May 2002;
- Enron, October 2001;
- Global, February 2002;
- Halliburton, May 2002;
- Homestore.com, January 2002;
- Kmart, January 2002;
- Merck, July 2002;
- Mirant, July 2002;
- Nicor Energy, LLC, July 2002;
- Peregrine Systems, May 2002;
- Qwest Communications International, February 2002;
- Reliant Energy, May 2002;
- Tyco, May 2002;
- WorldCom, March 2002;
- Xerox, June 2000. (Patsuris, 2002)
Proactive Measures to Prevent Ethics Violations
To reshape an unethical organizational culture, leaders must employ ethical
and moral codes as a standard. Reshaping an unethical organizational culture
requires all individuals to look beyond themselves and focus on higher purposes.
The following recommendations provide a proactive stance for leaders and educators.
- Communicate clear vision. Look for warning signs within the culture
of potential unethical practices that might include harassment, discrimination,
and double standards. Communicate a zero tolerance policy on all issues
that relate to unethical practices and lead by example.
- Incorporate ethics policies into new employee orientation and
training programs. Senior leaders should openly express support for ethical
practices within the organization and each employee should sign a statement
acknowledging the policy and the value of workplace ethics and practices.
- Name an executive position, like Vice President of Ethics or
some vernacular that alerts all employees, customers, and citizens that
ethics is a valued part of the culture, to raise the visibility of ethical
performance to the same level as safety, audit, and other programs within
- Establish an ethics hotline. What allowed some of the Wall Street
scandals to occur, and unreported wrongdoings to continue in many organizations,
fear-based silence, complacency, or fear of retaliation can allow even bigger
problems. Martin Luther King once said, "A time comes when silence is betrayal."
Leaders might consider setting up a hotline where employees that fear reprisal
might alert leaders of ethical violations. The U.S. Navy has a 1-800# hotline
where individuals can call in anytime and report unethical practices that
are immediately investigated. This hotline number is widely distributed.
- Personal ethics must start at the top. Within the military, individuals
are taught to act ethically, courageously, dependably and to inspire
others to do the same. In the military, failure to report any wrongdoing
that comes to one's attention makes that individual part of the problem
and accountable for not taking corrective action. Establish such a culture
within the organization of personal responsibility for ethics.
- Leaders of business schools should ensure curricula include training
- Create a leadership training and development course that focuses
on ethics and accountability. Coke Cola Company evaluates all executives
on their ability to lead ethically in their annual performance review. Once
they identified unethical discrimination practices, leaders at Coke Cola
opened a corporate university with a focus on ethics and fairness.
- Avoid group think cultures. According to Thompson, Aranda, and
Robbins (2000), groupthink occurs in situations when team consensus is placed
above other factors in the decision-making process, such as the exercise
of sound judgment or ethical considerations. The result is a faulty decision
that may become the basis for adverse outcomes.
The crisis of poor ethics in corporate America has jeopardized public trust,
caused an erosion of organizational cultures, created human suffering, caused
unemployment, and profit losses. These ethical issues may also cause a loss
in corporate competitive standing, erosion of the American economy and standard
of living. Transformational leaders and educators should help make a proactive
change toward ensuring high ethics within the area they lead. The examples
provided illustrate how some of the largest firms in the U.S. have allowed several individuals within the culture to rationalize their values and it has ended with disastrous results. It is up to organizational leaders
to turn this around and create ethical workplace cultures.
Cornehis, J. V. (2004, March). Veblen's theory of finance capitalism and
contemporary corporate America. Journal of Economic Issues, 38(1),
Patsuris, P. (2002, 26 August). The corporate scandal sheet. Forbes.com
Work/Management. Retrieved 30 October 2004, from http://www.forbes.com/2002/07/25/accountingtracker.html
Thomas, T., Schermerhorn, J., & Dienhart, J. (2004, May). Strategic leadership
of ethical behavior in business. The Academy of Management Executive,