The Trouble With Business Ethics

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Wal-Mart itself set up its global ethics office in 2004 and prides itself on having one of the strictest ethics codes in the industry. Its employees aren't allowed to accept even a drink from their suppliers.

Pressures on Family Life

Still, strict ethics codes can be a catch-22 for workers. "Employees who read codes of conduct have an obligation to report misconduct whether big or small," says Mark Schwartz, assistant professor of corporate governance, law & ethics at Atkinson's School of Administrative Studies at York University. "However, if you do report violations there are serious consequences."

The most famous American whistleblower, Jeffrey Wigand, had to fight a smear campaign by the company, and lawsuits after he chose to go on national television to expose how Brown & Williamson Tobacco was hiding research on the highly addictive nature of tobacco. In the days after that, Wigand lost his privacy and the intense scrutiny and pressure wrecked his marriage and family.

That could be the reason why many employees turn a blind eye to violations. A recent survey conducted by LRN, an ethics research and consulting firm, found that 73% of full-time American employees reported encountering ethical lapses on the job. However, the survey also found that of that 73%, only "one in three, or 36%, said that they have reported an incident they believed to be unethical or questionable to management." Most, or 58%, of these respondents said they didn't report it because they were not directly involved in an incident. Fourteen percent said they lacked confidence in how their employer would handle it.

Send a Message to Employees

Some employees would rather leave a company than report ethical lapses, points out Lindsay Thompson, assistant professor of leadership ethics at the Carey Business School at Johns Hopkins University. "Students who take the course sometimes find ethical issues that come to consciousness during class, and they change their jobs because they are certain that they will not get support from their employers," says Thompson.

Still in some cases, companies that have failed a government investigation might be required by law to beef up ethics and will transform themselves on paper. "In fact, a vast majority of companies don't take ethics seriously. Shoring up ethics is part of risk management, or an insurance policy," says Schwartz of York University. But there are companies that really care and want to send a strong message to employees and to investors. For instance, after the Dennis Kozlowski excesses at Tyco International (TYC), the company's new CEO, Edward Breen, effectively fired the entire board of directors, replacing them with more independent members.

Boeing (BA) also tightened its ethics rules, after the ouster of CEO Phil Condit for misconduct. The test of how it would apply those rules came less than two years later. A Boeing employee saw possible ethics lapses in new CEO Harry Stonecipher's amorous e-mail exchanges with a female executive. Despite the possibility of being fired, the anonymous employee reported it to the board of directors. Stonecipher lost his job in the days following that, and the board of directors clearly followed the guidelines of its post-Condit code of ethics. "It's not an employee's place to determine the significance of an ethics violation, and in this case, the board really stood up to their principles," says Schwartz.

Protecting Whistleblowers

Ethics experts are united in their view that that any company that takes its ethics seriously has the obligation to protect the identity of whistleblowers. "Some companies think they are set up to protect whistleblowers—but then you have to rely on the leadership and character of individual managers and business units to implement them," says Thompson of Johns Hopkins.

In Lowry's case, Wal-Mart says that she received anonymity and confidentiality in the Ethics Office complaint process. The company says in a statement: "It was through the subsequent 'open door' process that Lowry granted permission to her supervisor to tell Williams since Lowry accessed a document in Williams' e-mail." However, Lowry says that she was never told that she had the choice not to grant permission to reveal her identity to Williams.

After she requested a transfer, Lowry moved to a temporary position at Wal-Mart. "All I want is another job," she says. "I've been made to feel like I'd done something wrong. But nothing's been done to those who violated Wal-Mart's confidentiality policy. They're not worried about whether they will have a job, come tomorrow."

Business Exchange related topics:
Business Ethics
Wal-Mart
Corporate Social Responsibility

Gogoi is a contributing writer for BusinessWeek.com.