INSIGHT: GCs—Are You Working for an Ethical Company?

“We are committed to doing business the right way.”

How many times have you heard that? Too often I hear those words from an executive whose company is facing an embarrassing public scandal. Uttered long after it’s too late, this phrase seems feckless and ineffectual. For many companies, ethics and responsible behavior is something to be gestured at, a talking point trotted out after something has gone wrong.

You don’t become an ethical company because of such public pronouncements. It requires a concerted focus and alignment of values across the company, from the management team on down. And while setting clear rules certainly matters, you can’t simply throw policies and compliance specialists at the problem.

Ethical companies are not made overnight but are the result of corporate culture and careful, values-driven, long-term leadership choices.

Poor and unethical decisions can result in situations ranging from the employee walkouts Google faced in 2018 over claims it mishandled sexual misconduct by executives, to the myriad conflicts disclosed in 2019 in WeWork’s S-1 that ultimately scuttled its IPO and led to the ouster of its CEO, to the indictment and upcoming trial of Theranos’s founder and CEO Elizabeth Holmes on wire fraud and conspiracy charges.

Here are some ways to tell if you are working at an ethical company.

1. Culture Is Tangible and Visible, Not Just Words

Do leaders invest real time and energy in culture? Company culture is the single best engine for sustained and ethical performance, and should be a focusing point for all activities and choices. Culture is an easy thing to claim, but companies that are truly committed to fostering a positive values-driven environment spend real time and money on it.

2. Compliance Is Everyone’s Job

General counsel are often given the unenviable job of “chief compliance officer.” While my team certainly has a big role to play, I make sure other leaders and teams feel ownership over compliance.

If your company has an isolated and unsupported compliance team, that should be a red flag. The best companies have self-policing cultures, where ordinary employees and managers look for, and root out, behavior that doesn’t align to the community standard. Compliance should be viewed as a resource for the business, not an island to avoid.

3. Culture Guides Hiring Decisions

How committed is your company to getting the right people in—and the wrong people out? How much of the process and scrutiny ensures that candidates meet not just the skills and experience bars, but also the cultural criteria of the organization? If your company is living up to its cultural values, it should be finding people who live up to them, and getting those who don’t out of the organization.

4. Management Makes Hard Choices for Ethical Reasons

Have you seen any leader at your company turn down an attractive deal or back away from a compelling opportunity for ethical reasons? If you haven’t, then it may be worth examining how committed they really are to ethical operations.

Has your company looked the other way over the transgressions of a superstar? Red flag. As a GC, I expect everyone on my team—and the entire company—to realize that the standard isn’t, “Is it legal?”, or “Can we get away with it?” It should be: “Is this the right thing to do?”

Every business hits moments where there is the easy path and the hard path—the real measure of an organization is how often they choose the hard path.

5. Leaders Don’t Cloak Bad Behavior Under ‘Local Culture’

For global companies, waiving responsibility for ethical violations in overseas markets by claiming “that’s how it’s done there,” is easy. It’s also cynical, lazy, and wrong. Ethical principles don’t lose meaning across borders; you either do business a certain way or you don’t.

6. Management Protects Whistleblowers

Every company should have mechanisms for employees to alert management to negative practices. Are your employees totally comfortable with your reporting systems? What happens with the information reported? How is a whistleblower treated?

Many recent surveys reveal deep distrust by employees in their reporting systems, turning what should be an asset into a liability. Good companies take these reports seriously and protect those who make them. If your organization ignores or marginalizes them, it is a sign of a dangerous ”see no evil, speak no evil” environment.

7. Openness, Transparency Are Real

Too much concern with controlling information is another sign that the company may not be values-driven. Good companies aren’t afraid of engaging employees in a healthy debate about the strategy, purpose, and performance of the company. Compliance, legal, audit teams are welcomed inside “the business,” and vice-versa, because in ethical companies, busted silos enable superior performance, shared commitment, and consistent culture.

General counsel and their teams play an important role in sustaining an ethical culture, as well as diagnosing and treating the problems that can erode a company from the inside. But they cannot be the ethics police. If that occurs, it gives tacit license for others to be the ethics criminals.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Matthew K. Fawcett is senior vice president, general counsel, and secretary for NetApp. He is responsible for all legal affairs worldwide, including governance and securities law compliance, intellectual property matters, contracts, and mergers and acquisitions. Fawcett led the transformation of NetApp’s legal department into a globally-recognized, high-performance organization with a unique commitment to innovation and is both a frequent speaker and author on the topics of innovation in the legal industry and leadership and management issues.