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Business Ethics

Importance of Ethical Controls in Business

Controls are often policies and procedures that seek to ensure compliance in and of themselves. However, a particular system of ethical controls or “guiding rules” is needed to accommodate organizational change or situations that are not easily foreseen (for which ethical behavior is still very much needed). Policy and procedure therefore needs to be developed around a variety of actual and theoretical risks that may be faced by the enterprise. These risks may include criminally serious employee actions such as theft or fraud as well as equally unethical actions such as working within expense guidelines, turning up at work on time or making sure that computer systems are properly backed up.

The problem with broad or general ethical controls

In an ideal world, any policy or procedurally-based ethical controls would be extremely broad and general and leave people to apply them in common sense ways as different situations are encountered.

For example, we might say:

“All employees should treat each other with dignity and respect”  or  “Any potentially illegal or fraudulent behavior should be immediately reported to a senior manager.”

Unfortunately, such generalized “code” type descriptors tend to leave things too open to individual interpretation and are therefore usually poor controls in practice. As a result, an organization often needs to develop much more explicit policies and procedures (recognizing, of course, that it can’t cover everything that employees should and should not be doing).

The purpose of ethical controls

The purpose of developing procedures, secondary checks, sign-off authorities and other control systems is usually to deal with the major everyday temptations that employees seem to succumb to reasonably frequently (and as we see in the news all too often). The simple idea is that the organization knows about these challenges and by naming them (and their consequences) will be justified in making an example of an individual breaking the rules (typically through disciplinary means).

The featured video clip is a short excerpt from the ReadyToManage, Rapid Skill Builder eLearning program, Corporate Ethics: An RSB eLearning Course.

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About Dr. Jon Warner

Dr. Jon Warner is a prolific author, management consultant and executive coach with over 25 years experience. He has an MBA and a PhD in Organizational Psychology. Jon can be reached at

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One Comment

  1. AlehaApril 9, 2016 at 7:56 pm

    Creating policies that are in line with a company’s ethics is essential. As the article pointed out, these policies cannot possibly cover every situation in which an ethical situation might occur. In this instance, it is imperative that a business, in addition with creating as comprehensive policies as possible, also requires employees to participate in an ethics class or seminar. This will help ensure that any ethical gaps are covered where the policy is lacking. This will not guarantee that employee behavior will always be in line with the ethics of the company, but it will cover a business when an employee steps out unethically and also will encourage employees to consider actions in an ethical light.

About the Editor and Primary Author

Jon Warner

Jon Warner is an executive coach and management consultant and in the past has been a CEO in three very different companies. Read more

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