As far as we’ve come, unethical behavior in business is still sadly occurring more frequently than we’d hope. Look no further than the latest with NewsCorp’s phone-hacking scandal, as James Murdoch steps down as executive chair of the organization. His father Rupert, while eschewing resignation, still spent a large portion of his time having to apologize for the incident, and the reputation of his company may be irreparably tainted. This culture of corruption took some time to be unearthed; when it was, however, the ramifications were far-reaching and caused potentially lasting damages.

It’s true that this is an extreme example of what can happen when unethical behavior becomes embedded in your company’s bottom line. But it does serve as an example of what can occur if small offenses aren’t dealt with as they occur. Unethical behavior tends to have a snowball effect; if a modest or even truly egregious violation goes unnoticed or unpunished, it sets an example for the rest of the organization. At best, you foster a toxic culture. At worst, you drive away top talent and establish a negative reputation.

An ethical model can come from three different sources in your company. The first example set is in your bylaws. Your business code of conduct should outline how it is you do business, and how it is you treat others. This includes policies on discrimination, disclosure, bribery, safety, and respect. The second lies with individual judgment, which is a product of many different factors, upbringing and previous work experience among them. Often, people will form their ethical judgment from having made a mistake and being corrected by someone who they feel cares about them. Sometimes, all it takes is a singular incident.

The final model—and one that may be most important—is an individual’s immediate manager. As the adage goes, “actions speak louder than words”; nowhere is this more true than in setting an example for ethical behavior. Rules for conduct can be in writing, but if your leader misbehaves, the code has been immediately undermined. When this bad behavior occurs at the top of the company, the consequences of such a lapse in judgment reverberate not only through the organization itself, but, as we’ve seen with NewsCorp, with the public at large.

To establish a base of integrity within your business, it’s important to start at the sources.

  • Start with ethical people. The emphasis on ethics begins with the hiring process. Job descriptions must emphasize integrity as a required quality in candidates, and it should be screened for during the interview. Moving forward, leaders should take care to establish a two-way dialogue with their employees and have someone to nudge the individual in a positive direction.
  • Refocus on the code of conduct. If these laws are informal (as they may be in a smaller business), consider writing down expectations for the company. If they are already in place, consider having refresher courses to refamiliarize your organization with what’s expected of them ethically.
  • Train your immediate managers, and establish a practice of accountability. A senior executive of a large company was promptly fired after the company discovered that the executive had leaked confidential information to a competitor (a code of conduct violation).  The organization did not hesitate to take this action, regardless of the level of the employee.   Although the company would not make a public example of this or any other employee’s bad behavior,  it did seize the moment (soon after the person’s departure) to reemphasize its ethics and integrity message and to make sure leaders understood and communicated the consequences for bad decisions. Keep specifics of unethical decisions private, but make sure leaders understand and communicate the consequences for bad decisions.

Ethics may seem an area that comprises the softer side of organizational policies, but disregarding its importance will damage your culture and your reputation. Do you agree or disagree? How important is ethics to your workplace, and how do you maintain an ethical culture?