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Surviving a Business Ethics Crisis

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As a life-long ethics consultant, I have been in the middle of many ethics crises. You don't hire an ethics consultant if everything is hunky dory. I have learned that ethics crises are different, and often more severe, than other corporate crises. An ethics crisis is about who you are as an organization, and not just about specific actions that have gone wrong.

An ethics crisis is a crisis in which an organization is judged to have done something wrong due to poor ethics. Many business crises -- whether it is the BP oil spill or the GM ignition switch -- escalate into ethics crises. What turns a business crisis into an ethics crisis is often an initial unwillingness to accept responsibility for the wrong actions. The public will judge this unwillingness to accept responsibility as a sign of poor ethics. Most organizations eventually figure out that they won't escape responsibility by denying it, but by then their credibility is shot.

Ethics crises are almost unavoidable for the simple reason that organizations are made up of people. Some of them will do unethical things in the organization's name. If these actions have a significant impact, you have an ethics crisis. But even if ethics crises are not completely avoidable, the following steps will help you limit their damage.

Recognize it as an ethics crisis.

The biggest mistake made in an ethics crisis is not recognizing that it is an ethics crisis. Executives tend to overestimate the protection offered by the organization's reputation and its legal defences, and they often reason that the organization will not be held accountable for what someone did contrary to the organization's direction or policy. This is untrue. The sooner you own any crisis, the less newsworthy it is. Early acknowledgement of an ethics crisis is particularly effective in showing that the wrong action is not characteristic of the organization.

Investigate quickly, objectively and thoroughly.

In an ethics crisis, you need to know what happened, who did what and who knew about it. An investigation into an ethics crisis cannot follow the usual internal investigation protocol since those running the investigation may be implicated in the crisis or in covering it up. You need an independent investigation. Even if you conduct the investigation under legal privilege, anticipate that the investigation may become public and that you may eventually be required to share the investigation with regulatory or enforcement authorities.

Consider the impact on your employees.

A big risk in an ethics crisis is that your own employees will conclude that unethical conduct is the norm in the organization or at its highest levels, and adjust their behaviour accordingly. In an ethics crisis, employees often learn about the crisis from the media. Organizations tend not to communicate openly with their employees about such matters, leaving employees to believe what others are saying. You risk an unplanned change in corporate culture unless you credibly communicate the organization's position to its employees.

Assume that the government will become involved.

When an organization does something viewed as unethical, the public wants someone to do something about it. And that someone is likely to be "the government." Most organizations are open to some level of government oversight. When the government comes knocking, you can expect to hand over most everything you know about the crisis. Why? Even though some of the material may be covered by legal privilege, the government will find you uncooperative if you "hide" information. Your reasoning about the crisis needs be premised on when the government finds out rather than whether the government finds out.

Find the root cause.

It is not enough to know what happened; you need to know why it happened. Most organizations can survive a single ethics crisis. But if the same conduct is repeated, even if by different individuals, this will fix the negative impression of the organization in cement. Organizations tend to want to keep changes to a minimum, as big changes seem to be a further admission of culpability. But you need to be sure that you have changed personnel and systems sufficiently that the same conduct does not recur.

These steps will not only help an organization weather an ethics crisis; they will help it weather the crisis well.

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