Take 5: Let’s Get Ethical

Ethical behavior in organizations depends on a healthy dynamic among individual self-awareness, company culture, and leadership judgment, each reinforcing the other through accountability. When any link in those connections weakens, the damage propagates across all of them.  

Below, Kellogg faculty offer actionable, research-backed advice about how to build and support an ethical culture at work. 

1. Promote humility and reflection 

There’s evidence that ethical companies perform better in the market and have happier employees, says Maryam Kouchaki, a professor of management and organizations who studies decision-making and ethics. She offers several recommendations for organizational leaders who want to achieve this high standard.  

First, ethics must be incorporated at every level of company culture. From hiring to training to performance reviews, ethical leadership has been shown to decrease deviance and increase positive behavior among employees. Building an ethical culture doesn’t just mean telling employees what not to do. Companies can offer awards for employees who demonstrate integrity or create gratitude boards where employees can anonymously praise and thank one another. These measures can foster an environment where positive, prosocial behavior, rather than cutthroat competition, predominates.  

Next, leaders should promote humility and encourage reflection. Organizations can broaden their ethics training to include information on the types of situations where people are most likely to go astray. They can also create spaces for teams to think back on a project or experience, like during “postmortem” meetings. “This gives an opportunity to learn from successes as well as failures,” Kouchaki says. Leaders should equip employees with the tools to evaluate their own performance, countering the frequent assumption that “I’d never do that.”  

Leaders can also model and promote ethical behavior by giving back to their community through volunteering and service opportunities for their employees, which research links to reduced selfishness and greater social responsibility.  

2. In codes of conduct, language matters 

Most companies assume that a code of conduct that lays out rules for ethical behavior is a sufficient safeguard. If you state the expectations, the employees will follow them. However, the way those rules are worded may matter just as much as the rules themselves. 

In a separate article, Kouchaki and her colleagues performed multiple studies to assess the potential influence of a code of conduct’s phrasing on people’s behavior. They found that codes of conduct with communal language—such as “we” and “us”—seemed to be linked to more rule breaking, likely because such language unintentionally signals to employees that infractions will be met with understanding rather than consequences. The study shows “how challenging and complex it is to try to guide people to be good people,” Kouchaki says. “It’s not just the presence of the code of conduct that matters. It’s your culture.” So if a firm uses warm and communal language, they should also make it clear that violations will be punished—and follow through with those penalties, she says. 

“What helps is to be very clear about expectations and enforcing those,” she says. “You don’t want to just look warm. You want to look warm and moral. That’s the best combination.” 

 3. Ethics starts with the self  

No matter what kind of organization-level interventions a company implements, some components of ethical behavior will boil down to individuals and their choices. 

Rima Touré-Tillery, an associate professor of marketing, researched how people with a less clearly defined “self-concept”—their understanding of the beliefs and traits that define who they are—are more likely to engage in unethical behavior. This stems from moral disengagement, where people psychologically distance themselves from their own actions, loosening their internal boundaries between right and wrong. 

Touré-Tillery observed this pattern across a variety of studies. Participants who were less clear about their self-concept clarity were less likely to act morally in hypothetical scenarios (e.g., returning a worn shirt for a refund) and less likely to donate a small bonus to charity. Moreover, participants who were primed to feel an unclear sense of self were more likely to cheat and falsely report coin-flip results when a financial incentive was on the line.  

However, Touré-Tillery also found that the effect is reversible. For instance, having participants sign a simple honor pledge before a task reduced the gap in honesty between people with low and high self-concept clarity.  

Knowing oneself can be difficult—especially during times of upheaval. But interventions in schools and workplaces that help people reflect on their values, goals, and meaning in their work could help. “It could go a long way in reducing incidences of unethical behavior and moral transgressions,” Touré-Tillery says. 

4. Ethical branding can attract customers 

The ever-expanding selection of eco-friendly, fair-trade, and locally made products indicates that people want to feel that the products they buy support their ethics and values. But some research studies have found the opposite to be true and claimed that the “ethical consumer” is a myth. 

Jacob Teeny, an associate professor of marketing, waded into this debate by studying if morality actually influences what people buy. To do so, Teeny developed an “attitude-level approach” that separates whether a consumer’s positive feelings towards a product are rooted in morality versus utility.  

Across several experiments, consumers who saw their preference for products such as fair-trade coffee or eco-friendly house cleaners as morally grounded were more likely to say they’d purchase that product. The takeaway: morality does shape purchasing decisions, but not uniformly. It comes down to the individual consumer moralizing a specific product. 

For companies, this means there is ample opportunity to market products around consumers’ sense of right and wrong to improve their sales. And this dynamic may produce positive results for society as well. 

“There is a hunger for consumers to be able to support their morality,” Teeny says. “And so positioning products in ways that are relevant to a consumer’s sense of morality has the potential to be an effective form of motivating consumer behavior. And sure, maybe it’s motivated by greed, but if it’s also getting these corporations to act more morally, then it’s a win–win.” 

5. Transparency isn’t a fail-proof fix 

Transparency is supposed to keep people honest. Audited meeting minutes, monitored trading platforms, and documented hiring processes all rest on the assumption that scrutiny forces good behavior. But a study from Nemanja Antic, an associate professor of managerial economics and decision sciences, suggests that assumption doesn’t always hold.  

Using a game-theory model of two decision-makers sharing information under public observation, the research found that it’s possible to reach a desired outcome while still maintaining plausible deniability about what was really known at the time.  

The trick isn’t deception so much as it is careful restraint. By trading information back and forth in a deliberate order, and stopping just before full disclosure, parties can leave enough ambiguity that an outside observer can never quite prove they acted against the public interest. As a manager, says Antic, you must show that “given all of the available information you had at the time, you made a decision that was palatable to the public.” A vague phrase instead of a specific figure, for instance, can do the work of protecting a decision without ever crossing into an outright lie.  

The ethical implications seem to split into two sides. For people communicating in good faith—business leaders who wish to discuss a possible acquisition without their words later being taken out of context by antitrust regulators, for example—this kind of strategic vagueness offers protection.  

But for regulators and the public, the transparency requirements are a loophole. If the people involved control how and when the information is shared, the result may be that nothing at all changes.  

“It perhaps shows why some of these policies don’t result in actual change,” says Antic.