The key characteristics of ethical business culture



The business case for ethical culture and operations is clear – increased customer loyalty. There’s also evidence that employees feel a greater stake in company conformity and success when the business is run ethically. Organisational culture is key to the success of an ethically-driven organisation, but what parts of the culture, and why? HR directors need to know where to direct resources.

In this article we review the key characteristics of businesses striving for ethical operations as put forward by Alexandre Ardichvili, James A. Mitchell and Douglas Jondle (2009).

Stakeholder balance

Businesses tend to subscribe to one of two viewpoints; whether their goal delivering maximum shareholder value or balancing the needs of multiple stakeholders. Ethical businesses do the latter. Stakeholders often include employees, customers and the local community, but bear in mind the definition can be broad. In 2012 Bolivia passed a proposition to give the Earth ‘rights,’ to encourage organisations to be aware of how their actions affect the environment.

Mission and Vision Driven

Ethical businesses are commonly driven by something more concrete than profit, often in the form of a mission statement or charter of values. When these values are championed by management and valued by employees, the workforce becomes a community united by common goals rather than simply co-existing to pursue profit. This can yield significant benefits for employee engagement and a better relationship with the public. It can also help get the business through trying times.

Process Integrity

Organisational culture is the product of thousands of different processes that take place on a daily basis. These processes can be healthy or corrupt, depending on a variety of factors unique to the process. For example, ‘healthy’ competition is defined by humility, shared commitment to success, equal treatment by management and fair distribution of spoils. Unhealthy competition is completely different, defined by misaligned goals, superiority and unequal treatment of the better performers. HR directors must regularly review the integrity of internal processes and protect them with sufficient oversight and transparency.

Leadership Effectiveness

Ethical role models must be in place to solidify ethics as a cornerstone of company culture. Building an ethical business is driven by a ‘top-down’ approach – policies on, for example, eco-friendly initiatives must be introduced and reinforced by management. The success of a ‘green champions’ policy is dependent on the personality and beliefs of the people involved. Some are apprehensive to ‘tell colleagues what to do.’ Also, green champions can leave. The impetus must come from management because then it’s a codified, enforceable policy rather than passed on verbally by employees.

Long-term perspective

Companies with a long-term view are often seen as more ethical. This long-term view should not only relate to profit but also the company’s place in the community and the world. Self-reflection is a key part of this characteristic; businesses must ask questions, openly and transparently, about their overall direction. These questions must be opened to employees so they feel part of the company’s long-term vision. Thinking in the long-term also allows businesses to more effectively plan for future developments and help ensure longevity.

Not surprisingly, there’s significant overlap between these characteristics. Taking a long-term view will inevitably require balancing the needs of multiple stakeholders, while maintaining process integrity will need strong direction from management. Ultimately, HR directors must develop a harmonious policy that works to create change in all these areas.


By: Jamie Lawrence