The Paradoxical Pairing of Ethics and Compliance

The Paradoxical Pairing of Ethics and Compliance

I attended a webinar about ethics the other day. Specifically, it was about how to build and measure an ethical culture in your organization. I liked the concept.

About half-way through the webinar, though, I noticed how frequently the facilitator kept talking about E&C in organizational settings. E&C, of course, is shorthand for “Ethics and Compliance.” Being an axiologist, I sensed something askew here. As I pondered about this repeated pairing of ethics with compliance, it occurred to me that those two words make strange bedfellows.    

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Nonetheless, they are often spoken of in just this way, as if ethics and compliance are one and the same. Certainly, in common organizational lingo, they are so frequently combined in thought and action that this abbreviation of E&C seldom needs to be defined in organizational development circles. We simply know what E&C stands for and we implicitly accept the unquestioned coupling of these two concepts.

A similar verbal pairing also occurs in higher education. At the college where I taught for eight years, our MBA program offered a course in “Business Law and Ethics” with the implicit assumption, of course, that those two are one and the same.

Our habit of mentally pairing these concepts, whether ethics with compliance or ethics with law, masks an axiological distinction that needs to be made. Rather than speaking of these as one and the same, it seems to me that we ought to conceptualize them like opposite ends of a  teeter-totter in a children’s playground. Being strong in one lessens the need for the other. If ethics are strong, we can go “light” on compliance. If an organization’s focus on compliance is strong, this may be an indication that its ethical foundations are weak. 

In The Structure of Value, (p. 311) Hartman defined ethics as intrinsic valuation applied to people. And he defined law as systemic value applied to groups of people. That is, ethics is intrinsic valuation of intrinsic objects and law is systemic valuation of extrinsic objects—(people in groups defined by their roles or the role of the group). In axiological shorthand, we would write:  II > ES. In Hartman’s world, ethics is an axiologically richer domain than is law, including compliance to that law. 

So why, then, do we talk so blithely about E&C? Why don’t we talk, instead, about E not C? Or E > C? 

If an organization’s culture has a strong ethical foundation, people don’t need to focus much of their attention on rules, regulations, and policies. Nor do they need to devote much effort to enforce or measure compliance with them. On the other hand, if an organization has lots of rules, regulations, and policies, and its leaders lead through measuring and enforcing compliance, then this would be an indication to me of an unethical culture. 

I once worked for an organization that had about 300 employees. We also had written policies covering 54 different matters--everything from requesting and reporting of travel expenses to the criteria that determine eligibility for paid time off. These policies averaged 10-20 pages each. That’s more than 700 written pages prescribing how are expected to act in many different situations in minute detail. We even had a written Policy on Policies. What do you think the level of trust was among members of that organization? 

What if a truly ethical culture could be defined as an organization that has little need to focus on compliance? What if the success of an axiologically-sound approach to organization development could be measured, in part at least, by a reduction in the number of  policies, rules, and regulations in place and by a reduction in attention paid to compliance issues? 

Because people are not perfect and neither are organizations, there will always need to remain some baseline dependence on rules, regulations, policies, and people’s compliance with those. But, what if we could reduce them dramatically? One good place to start would be to de-couple the terms Ethics and Compliance. Let’s stop talking about E&C as if they are one and the same!

I believe that doing so would comprise part of what Hartman advocated as a people-first organization—an organization where people matter. 

Hartman wasn’t the only person to advocate what I am describing here. Turn-around  expert John S. Whitney entitled his (1996)  book The Economics of Trust: Liberating Profits & Restoring Corporate Vitality  to reflect his experience that trust, which invites a minimization of attention on rules, policies, regulations, and compliance, is the appropriate—and most efficient--mindset by which to lead a company through a turnaround.   Retired executives Bill Nobles and Paul Staley advocate that leaders do the same by pursuing what they term Freedom-Based Management(Questioning Corporate Hierarchy, 2017). Freedom-based management, to these authors, is about “building a culture that enables and encourages fully empowered employees to produce awesome business success” (unpublished manuscript).  Such a culture is made possible by trust in the goodwill and intentions of employees, by reducing to a minimum the controls, inspections, and oversight mechanisms that so frequently prevail in modern organizations.

Build a company through principles based on trust, freedom, and ethics and you can greatly reduce the time, money, energy, and attention otherwise devoted to rules, regulations, policies, and compliance. That’s what an axiologically sound approach to leadership means.

Clearly, to lead an organization in this way requires a lot more than can be accomplished, alone, by the E&C Department, or E&C team. But there can be a place to start. Words do matter. So, let’s re-think this pairing of ethics with compliance and ethics with law. Only by de-coupling them in our minds can we begin to de-couple them in practice.  

Just ask yourself, which type of organization would you want to work for? One with a strong ethical culture that does not need much reliance upon compliance, or one with such a strong focus on compliance to rules, regulations, and policies that there is little attention paid to ethics?  I know which one I’d choose.  How about you? 

By Clifford G. Hurst, PhD

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