You find out that a very senior member of your staff has been less-than-forthright regarding some perks she received from a vendor whose contract is under review. Do you:

• Speak with her privately to hear her side of the story, then let her go with a strong warning;
  
  
• Dismiss the issue without a second thought; freebies are a normal part of doing business in your industry;
  
  
• Immediately fire her and prepare a press release in case the media gets wind of the situation.

Everyone's reading about it

Recently, the topic of business ethics - or lack thereof - has made front-page headlines thanks to high-profile cases involving well-known companies and individuals. The reality is that presidents, front line workers, managers, and board members face ethical business decisions similar to the one above every single day. Many companies are learning the hard way that foregoing a formal code of ethics leads to the "sorry, I just work here, it's not my problem" mentality, which in turn destroys morale, spirit, and performance.

On the flip side, many companies are establishing a clear-cut code of ethics and infusing it into all aspects of their operations. With a well-supported code of business ethics running through the veins of the organization, every piece of the business sees results. Employee loyalty increases, questionable behavior decreases, and competitive positions improve. Management gets more confident, employee relations get warmer, and customer relationships become more solid than ever.

In addition to adopting a code of ethics, many companies are embracing the concept of good corporate stewardship, such as donating to charities and partnering with responsible vendors. Both set the foundation for a culture in which employees feel protected and honored, which ultimately inspires people to give their best to the company. And both contribute to your company's image: who you are, what you stand for, whom you align with, why you stay in business, and where you set your standards.

Whose responsibility is corporate responsibility?

It's no longer enough to hope that employees will always act within the law or within the expected moral boundaries. As we've seen, people often claim they weren't even aware of the law or those expected moral boundaries because nobody offered the information until they'd crossed the line.

As we've also seen, company leaders are increasingly being held responsible for this ignorance. The courts and the public are saying loud and clear that it's primarily a leader's job to foster a culture of ethical behavior by setting a good example, hiring a principled management team, and setting up training programs for all employees.

How to live up to that responsibility

Consider following these steps to begin developing a formal code of ethics for your company:

1. Assign a committee to assess the lay of the land in terms of your current policies, practices, culture, industry standards and legal considerations.
   
   
2. Examine documents that may live in your employee handbook, business plan, annual report or marketing materials. Compare what you preach to what you practice and what you want to practice: where are the gaps? Employing SWOT (Strengths and Weaknesses, Opportunities and Threats) analysis could help you manage this process and ensure effective results.
   
   
3. Once you've finished that analysis, review your current employees' and hiring principles as they relate to your code of ethics. Determine what kind of training employees need to get them up to speed on the new code and how graduates of the training should be measured. Also develop a continuing education program to ensure continuity as your company grows.

Sharpening the world of blurry lines

It'd be nice if the answer to every ethical situation were clear-cut. But since we live in a "grey" world, the faster companies implement and integrate codes of ethics the better. Creating an environment that encourages ethical behavior eases anxiety and gives people a sense of pride in their workplace. All of these add up to better customer service, improved teamwork, and a more ambitious workforce.