The Important Distinction Between Ethics and Compliance

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

I know that I can be a stickler for details sometimes. Ask my children. Ask my wife.

So, when it comes to compliance, I repeat myself often when I remind everyone: it is ethics and compliance, not just compliance.

Let’s be honest – it is more than a mouthful to say Chief Ethics and Compliance Officer, as opposed to just Chief Compliance Officer. But as I often say, ethics is the key. Why?

Legal compliance is one thing, code of conduct compliance is another and ethical compliance is even another level above. The consideration of ethics as a fundamental value to a company elevates everyone’s performance. An ethical focus is more than just legal compliance – can we engage in the conduct without creating significant legal risks? Instead, an ethical focus turns to an important consideration: while the conduct may be legal, is it ethical? Is the conduct consistent with our corporate values and something we want to promote within the company?

These are important questions that transcend the issue of legal liability. Why are they important?

A culture of ethics is a low-cost means by which to promote legal compliance. Am I speaking out of both sides of my mouth? No. The best way to ensure legal compliance is to promote a culture of ethics.

More importantly, an ethical culture benefits a company in several significant respects: employee morale improves, employee misconduct declines, employee willingness to report any misconduct increases and overall corporate profitability and sustainability of operations increases.

These positive effects are not trivial – they can be the difference between success and failure in a competitive market. Companies have to recognize the significance of an ethical culture as a means to promote profitability and competitive advantage.

It is important to remember that an ethical culture is not very expensive. It does not require significant expenditures; it does not require significant resources.

An ethical culture depends only on commitment. It requires companies and senior leaders to maintain focus and to follow up by asking the question – what are we doing to ensure that our culture is communicated and reinforced in every aspect of our business?

Another way to think of culture is to require disciplined thinking – a company and its managers (senior, mid-level and lower-level managers) have to ask how they are communicating and reinforcing the corporate culture of ethics.  It is not as hard as everyone thinks and just requires some creative approaches to an otherwise natural question – how can we promote a culture of ethics?

Another important consideration is that promoting an ethical culture is a “feel good” task. It is a positive message and everyone reacts well to a positive message. Managers and employees want to work for an ethical organization that promotes integrity. We want to work for an organization that adheres to high standards because we all believe in our own integrity and ourselves.

A company that is ethical promotes our own feeling of self worth and we need that feeling to commit to work and self-actualization. I know this all sounds too heavy for a compliance and ethics perspective, but it is real and palpable. We all have seen and felt organizations that give us a positive feeling and reinforce the good in each of us. Ethics is nothing more than that.