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Updated Nov 08, 2023

How Leaders Determine Workplace Ethics

Workplace ethics are vital to business success. Leaders must work hard and embody company values to foster an ethical workplace culture.

Tom Anziano headshot
Tom Anziano, Business Ownership Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Now more than ever, consumers want to support ethical companies. However, they’re savvy and can see through meaningless jargon and posturing easily. Establishing sincere, firmly entrenched workplace ethics should be a top priority for business owners. While encouraging ethical behavior requires careful planning and clear communication, the key to an ethical business culture is a leadership team that exemplifies company values. 

Defining workplace ethics

Workplace ethics are the values and principles that shape the culture of a business or organization. They’re the moral guidelines that regulate how business is conducted and decisions are made companywide. Workplace ethics tenets inform employee behavior and impact how the organization and its leadership treat employees, customers and the community. 

Businesses often have written codes of conduct, company missions or values statements that guide behavior. Organizational ethics standards should go beyond adhering to the law because legal behavior doesn’t necessarily equal ethical behavior. A business’s unwritten values can often hold more weight than any written code, so it’s crucial for organizations to foster an ethical culture from the top down. 

Did You Know?Did you know
Many companies that prioritize workplace ethics also practice corporate social responsibility, committing to accountability practices that have a positive impact on society and the environment.

Importance of workplace ethics

At times, it can seem like championing an ethical business culture is more of a public relations strategy than anything else. Whether it’s the CEO or an intern, people might think cutting corners to save time or money is the right choice. However, embracing an ethical workplace culture ― or failing to do so ― has real consequences that affect your bottom line and your company’s future. Consider the following reasons why an ethical workplace culture is crucial.

1. Employees need an ethical framework to guide decisions.

From navigating co-worker interactions to closing deals, employees are constantly faced with decisions. No matter how big or small the choice, your team requires an ethical framework to ensure their decisions align with company values. 

“We all have an innate ethic sense that lets us know the right thing to do, but we don’t always follow it,” explained Mark Pastin, an ethics consultant and author of Make an Ethical Difference: Tools for Better Action.

By implementing strong workplace ethics, you can guide your employees toward decisions that reflect your company values. However, without a robust value system in place, a minor ethical breach could balloon into a much bigger problem. If one employee gets away with unethical behavior, others might follow suit.

An unethical workplace can lead to employee dissatisfaction, resulting in lower job performance, higher employee turnover and a negatively impacted bottom line. In contrast, strong workplace ethics will create an environment where employees feel like they’re an integral part of something bigger. They will be more engaged and more likely to make ethical decisions for the good of the company. 

2. Consumers support ethical businesses.

A business’s workplace ethics also affect its potential customers. The public pays attention to corporate values and poor behavior from anyone in the organization can affect a company’s reputation. People want to feel good about the companies they buy from.

“We see a lot more people making decisions about where to invest money based on the behaviors and ethical standards of the businesses they support,” noted Robert Foehl, executive in residence for business law and ethics at Ohio University.

Foehl pointed to anecdotal evidence that people are willing to pay more to patronize a business whose behaviors align with their values. “Companies with a strong moral and ethical compass end up doing better,” Foehl explained. “[They are] stable, stronger and have less employer turnover.”

When making a purchasing decision, most consumers want sustainable products. Your company's ethical framework should incorporate a sustainable business model.

3. An ethical leadership team can impact company success. 

A strong, ethical company that attracts and retains top talent and loyal customers undoubtedly has an ethical leadership team. Ethical leaders go beyond communicating values and standards ― they also embody those values. 

“[There is] no meaningful way for a business to act ethically unless leadership does so first,” Foehl stated. “Leaders can’t just lead by example or just by talking about [ethics]. Actions plus words demonstrating the value of ethics is how leadership affects the ethics of the group.”

Ethical leadership means company owners, managers, department heads and other stakeholders all embody the business’s moral compass. 

When employees see their superiors going the extra mile to consistently make ethical choices, they will be encouraged to mirror that behavior. Knowing that the values professed in a company’s vision statement are taken seriously at the top will help reinforce those values at all levels of the company. That creates a truly ethical workplace, which benefits the company’s reputation and financial success. 

How to establish an ethical company culture

Building a company around workplace ethics can strengthen your business and help it prosper. A strong, ethical company culture retains dedicated employees, builds customer loyalty and helps recruit talent. Implementing workplace ethics goes beyond making lofty statements. It requires hard and continuous work. 

The following steps can help you foster an ethical company culture.

1. Define what your organization stands for.

Ethical decisions are often presented as straightforward, black-and-white choices where the right thing seems obvious. The truth is that we operate in gray areas most of the time and determining right and wrong can be challenging.

Andrew Selepak, an educator at the University of Florida and director of its Master of Arts in Mass Communication in Social Media program, says established values must guide choices. “Ethical dilemmas arise when you have to choose between two good choices,” Selepak explained. That means a company must have a clear vision of its values to avoid ambiguity when deciding the correct course of action. 

“The first thing a business needs to do is establish what its values are in relation to society,” Foehl advised. In other words, how a company defines sound moral principles in society will color its ethical code. 

2. Create a code of ethics for your company.

Once you’ve determined your company’s values, put them in writing. Your code of ethics should be concrete and specific, spelling out precisely what the company stands for and how employees are expected to behave. A written code should guide decision-making and explain the consequences of unethical behavior. 

According to James Bailey, professor of leadership at George Washington University, employees must take their organization’s code of ethics seriously and be able to reference it anytime. “A code not adhered to is a shell,” Bailey said.

However, according to Foehl, a code of conduct cannot possibly cover every ethical consideration in detail. While it outlines the company’s values, it’s not an instruction manual. While some aspects of a code of ethics may be aspirational, the document should serve as a strong enough moral framework to let employees feel confident they’re making decisions that align with the company’s values. 

Did You Know?Did you know
Your code of ethics can be part of or a supplement to your employee handbook, along with policies on attendance, workplace security and conduct.

3. Demonstrate values from the top.

Good leaders don’t just establish ethical standards in a business; they must also demonstrate them. Having company values in writing can help establish an ethical culture, but leading by example will ensure those values become integral to your company’s identity.

“The ethical standards of a company are top-down and bottom-up and the employer sets the example,” Selepak explained. “If the employer does not act ethically, that trickles down to the bottom of the organization.”

Employees often follow the lead of their superiors, so behaving in ways that match the company’s stated ethical intentions will help reinforce the code of ethics. It also helps demonstrate ethical behavior that goes beyond what is written in company policy. 

4. Educate your employees about ethics from day one.

According to Bailey, there’s no better time than new employee onboarding for educating team members about the company’s code of ethics. Ethics training can be a formal part of the onboarding process as well as an informal aspect of day-to-day interactions. For example, managers can tell stories about decisions that stemmed from the business’s code of ethics to connect with new employees.

The interview process is also a great way to introduce a business’s ethical standards and ensure you’re hiring for a cultural fit. Additionally, being upfront about company values in a job description can help attract candidates who prioritize working for an ethical company.

Continuous employee training is necessary to maintain an ethical company culture. Give employees multiple opportunities to revisit company policy and discuss scenarios where they might be confronted with unethical behavior.

5. Keep employees engaged in and connected to the workplace.

No matter the industry, company culture matters to employees. People want to work for ― and feel part of ― a business that champions their values. When employees feel personally connected to their workplace, they’re less likely to partake in unethical behavior, such as employee fraud.

Ensuring employees feel valued and engaged is key to maintaining an ethical workplace. There are many excellent ways to boost employee engagement, but any effort to make employees feel like they’re part of a top-notch team will help keep them loyal to your business and its goals.  

6. Hold team members accountable for unethical behavior.

For an ethical company culture to thrive, values and morals must be upheld. The code of ethics should clearly state the consequences of unethical behavior and managers must enforce the appropriate disciplinary action policies.

Letting some employees get away with an ethics breach undermines your organization’s values. People will see “ethics codes” and “value statements” as empty words with little impact on the reality of company culture. The lack of consequences could even encourage unethical behavior.

However, leaders should also make an effort to reward exemplary employees who go beyond to embody the company’s ethical culture. This sends a strong message that workplace ethics are not just a set of rules but are championed and celebrated.

7. Foster open communication among your team.

When ethics and values are part of the daily conversation, they become an essential element of a company’s DNA. Leaders must strive to make ethics a part of every business decision and constantly communicate company values to keep them top of mind for employees. 

But communication is a two-way street. Leaders must create an environment where employees are comfortable discussing ethical concerns with colleagues and leaders. According to Pastin, open communication can encourage empathy, which fosters more ethical action. “Most ethical issues that arise in the work environment can be solved if raised in a timely manner,” Pastin noted. “The problem is that many people avoid speaking in terms of ethical concerns. Welcome disagreement and controversy in the office to foster a more ethical work environment.”

Encourage effective employee communication to reinforce an ethical business culture, increase employee engagement and create more positive outcomes.

8. Safeguard employees who speak up about ethical concerns.

According to Gallup, only 40 percent of workers speak up when they see unethical behavior. Employees may go along with something they think is unethical because they fear the consequences of raising the issue.

Business leaders must work to create an environment where employees feel they can safely report ethics issues. To create this environment, you must have systems to protect whistleblowers from retribution from the company or co-workers.  

Work with human resources to develop a standard reporting procedure. Employees should know they can make anonymous reports to protect their identity. The company must communicate employees’ legal rights to raise concerns under federal and state labor laws.

9. Be transparent with the public about company operations.

According to Selepak, transparency with the public about company operations is essential to establishing a code of ethics. Consumers will find value in your openness and honesty about what your company stands for and how it conducts business.

“Since we know people are influenced by the media they see, you want to be truthful in your company messaging,” Selepak advised. While potential customers are drawn to brands with strong ethical cultures, they will be turned off by businesses that lie or try to sweep problems under the rug. 

Unethical behavior can tarnish a company’s image and affect sales, so hiding that behavior might seem the best way to protect your business. However, Selepak advises making the information available to the public. While you don’t have to dwell on mistakes, owning up to them will make you seem more trustworthy in the public’s eyes.

Additionally, social media presents new transparency challenges. Negative customer reviews and troubling online comments can affect your company’s image, but deleting those comments could be perceived as unethical and dishonest. In these situations, Selepak advises evaluating the comments or posts according to your company’s standards. For example, is the post spam, racist or homophobic? Comments that violate these standards could be ethically removed, while critical comments that don’t violate your standards should remain visible.

10. Be consistent about upholding company values and ethics.

Consistency is crucial to fostering an ethical culture and keeping ethics at the heart of your company. Specifically, you must be consistent in communicating and upholding your company values. Whether it’s someone from the C-suite or the mailroom, people must face the same consequences or rewards for their actions.

Consistency applies to your overall operations as well. If your operations violate your code of ethics, you must be upfront and honest. Acknowledge the problem and set out clear steps to correct any damage and to make improvements for the future. 

Did You Know?Did you know
Leaders should strive to improve their self-awareness to ensure they embody the values they want their employees to embrace.

Dealing with unethical behavior 

At some point, most employers will be confronted with an employee behaving unethically. Dealing with this behavior can reinforce or erode a company’s ethical culture. Build your employees’ confidence in your leadership and company by planning how to deal with ethics violations.

Here are some tips to successfully deal with unethical behavior in the workplace:

  • Follow set procedures: A code of ethics should outline how unethical behavior will be dealt with. It should also outline the steps leadership must follow when an issue arises. Written policies hold leaders accountable and guarantee all employees will be treated equally.
  • Investigate complaints: When unethical behavior is reported, employers should thoroughly investigate before taking action. It is essential to monitor the accused employee to ensure unethical behavior is occurring.
  • Gather evidence: As you conduct your investigation, collect as much evidence as you can. You want to avoid legal hassles and wrongful termination lawsuits, so document everything related to a potential ethics breach. Ensure documentation is detailed and dated.
  • Enforce policy impartially: Once you’ve conducted your investigation and determined unethical behavior has occurred, you must follow your disciplinary action policy justly and impartially. Although some infractions are more serious than others, the consequences must be consistent no matter who has broken the rules.
  • Correct unethical behavior: Although some violations are severe enough to warrant firing an employee, many times, the person will face sanctions but remain with your company. You must do more than punish unethical employees. You should focus on re-educating them to uphold company values through continuous training or working with a peer mentor.

Workplace ethics starts with leadership

Leaders set the tone in all aspects of a workplace, including its ethical culture. Business leaders play a critical role in defining company values, communicating them to employees and dealing with violations. But even more importantly, they must personify those values, setting an example for everyone in the company. 

Ethical leadership is vital to creating a company with strong workplace ethics. Employees and the public take notice of leaders who foster an ethical environment. When you live up to the values you profess, your company will be sure to prosper.

Tami Meyer contributed to this article. Source interviews were conducted for a previous version of this article.

Tom Anziano headshot
Tom Anziano, Business Ownership Insider and Senior Writer
Thomas Anziano is an advertising and marketing professional who has worked in the U.S. and Germany. He has also taught Business Writing in English to university students in Madrid, Spain. He holds a degree in Marketing and Spanish.
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