Open a newspaper lately, and there is yet another tale of a corporate whistle-blower: there's Sherron Watkins, the vice president who pointed the finger at the shaky accounting practices at Enron, and Coleen Rowley, the FBI whistle-blower who criticized the agency for missing the warning signs for Sept. 11.

Other well-known whistle-blowers like Jeffrey Wiegand, the former tobacco company executive who spoke out about the industry's knowledge of nicotine addiction, have become folk heroes thanks to Hollywood.

Want to avoid your company's culture and business practices becoming the fodder for tomorrow's glaring newspaper headlines or the latest Hollywood star vehicle? Then consider working to create a more ethical corporate culture - one in which managers listen to their internal critics before problems escalate into external scandals, said Michael Josephson of the Josephson Institute of Ethics in Marina Del Ray, Calif.

Of course, human nature being what it is, negative information is rarely well received, but managers should keep in mind that in the end, openness and trust generally result in rewards for the bottom line.

"Often, whistle-blowing, even internally, comes out as criticizing," Josephson said. "It takes a tremendous amount of energy to train managers to receive negative feedback without wanting to retaliate."

"Large organizations have a great capacity for self-deception," added John C. Knapp, Ph.D., the president of the Southern Institute for Business and Professional Ethics in Atlanta, Georgia.

Knapp recalled planning an employee survey for a large health care organization. When he asked 30 senior managers about whether to include questions about the company's ethical record, the managers were certain the employees' answers would be positive, Knapp said: "They said, 'We're the most ethical company in the business. We have a hard-earned reputation.'"

The results of surveying 2,500 employees shocked the managers. Forty percent said they had felt pressure to make ethical compromises. Eighty percent had not reported ethical lapses by co-workers. The major blow was that only 20 percent of employees agreed with the statement: "Our CEO is committed to ethical business practices."

"The CEO was devastated," Knapp recalled. But, in reality, the CEO's communication to employees had never mentioned ethics. The company had gone public only two years before and much of its message to employees was about creating shareholder value. "The employees thought that was all the CEO cared about," he said.

To turn things around, the CEO personally attended every ethics training session. He began to communicate more about ethics to employees and gave speeches about the survey experience at industry events. By the next benchmarking survey, the number of employees who agreed with his commitment to ethics had doubled.

In general, employees fail to come forward because they doubt their concerns will really be heard, or worse, that they might be retaliated against, demoted or fired. Plus, whistle-blowers in our corporate society are still too often labeled "tattletales," ethics experts say.

To further complicate matters, potential whistle-blowers should also abide by a set of ethics - and decide, for example, whether they are reporting misdeeds for the public good, or complaining out of anger at a manager. In most cases, employees should try to work internally to fix a problem before becoming "official" whistle-blowers who report the misdeeds in public.

To ensure that trust and open communication are a clear part of the corporate culture, managers can show employees that they can be entrusted with negative information and that they will take appropriate action to solve ethical problems as they arise.

One way to help establish that kind of openness is to keep employees informed of bad news about the company as well as good news.

A large U.S. defense contractor, for example, issues an ethics report every two years to its employees. The report identifies the number of calls to the company's ethics hotline, what kinds of questions were raised, solutions that were created, and the number of people terminated for serious ethics violations.

"Employees see that data and find out that no one is being crucified for reporting misconduct," said Frank Navran, principal consultant with the Ethics Resource Center in Washington, D.C. "Evil-doers are being punished and the good guys are not. When you put data in the light like that, confidence grows," Navran said.

Having strong ethical standards is good for business, too.

"In the short run, the difference in business might not be that noticeable. But, in the long run, a business that is cutting corners is not going to last," said John Wilcox, vice president for the mission of Manhattan College, home of the Center for Professional Ethics.

"If the CEO goes home every night saying, 'At least I wasn't indicted today.' What does that say about the credibility of the organization?" Wilcox asked.

The Great Place to Work Institute in San Francisco does the rankings of the annual 100 best U.S. companies list for Fortune magazine. The institute examines many aspects of a company - everything from labor relations to product quality and community interactions - and then ranks the companies' trustworthiness based on their findings in those areas.

"The 100 best are distinct in that they have strong ethical standards that inform everything they do," said Amy Lyman, the Institute's president. Perhaps it's not so surprising that the stock of the companies on the list have consistently outperformed the S&P 500 for the past four years.

One 1999 research report published in the Academy of Management Executive journal (a compilation of four years of studies) showed a strong correlation between ethical, skillful management and competitive advantage.

"There is absolutely no question from the data I've seen - and there has been tons of academic and industry research - that there is a strong association between good people practices and great performance," Lyman said.

http://greatplacetowork.org/
http://www.josephsoninstitute.org/
http://www.manhattan.edu/special/prethics/
http://www.southerninstitute.org/
http://www.ethics.org/

As any ethicist will tell you, ethics and values aren't something your business can add on, like installing new software programs. A company that is seriously considering a stronger ethical stance needs to look at the entire culture they've already created.

"You just can't go and create an ethics policy independent of the culture of the organization," said Amy Lyman, president of the Great Place to Work Institute in San Francisco. "The fundamental element is having top leaders that are trustworthy…and developing managers who understand the importance of being trustworthy."

Here are some steps that the most ethical of companies adhere to:

• Keep the lines of communication open.
Open communication results from a corporate culture in which negative points of views are encouraged along with the positive. "Encourage people to tell you things you need to know, even if it makes you uncomfortable. If you do that, you end up preventing whistle-blowing," said John Knapp, president of the Southern Institute for Business and Ethics. Many companies set up hotlines for anonymous reports, others create open door policies where employees can go to any manager or supervisor to make a report, not necessarily their own manager.

• Have a structure in place for reporting complaints.
"Or all that communication amounts to just empty rhetoric," says Michael Josephson, of the Josephson Institute of Ethics. "The company must ultimately have a structure." Employees should know how complaints are reported and investigated, how the reporting person is protected and valued, and what kind of resolutions are made. In some companies, a complainant is never informed about the outcome. "You've got to resolve the problem and talk to people…Otherwise, no one trusts the system."

• Make sure your product quality is up to par.
Whether your business manufactures a product or provides a service, the most ethical companies have a standard to which they strictly adhere. They track customer complaints, product defects, and injuries on the assembly line — all aimed at the goal of providing a certain standard of quality.

• Consider how the company acts externally as well as internally.
You may have a great company that really respects its employees and listens to internal concerns. Yet, the company still needs to consider its external actions as well: "Ethical practices have to be everywhere," Lyman said. "It's hard to be ethical when you are polluting the environment or exploiting child labor." Lyman noted one Swedish company that does triple bottom line reporting, considering its social and environmental impacts along with its finances every year.