How leaders can make ethical choices when the rules fall short

We live in a time when our expectations for ethical business practices are no longer predictable. Global regulation, along with ideas around standards like ESG, are in flux—and building debate around what the standards should be for leaders and managers. 

“Some governments are tightening oversight, while others are relaxing enforcement,” write ethics leaders at the World Economic Forum. Companies may focus on strictly following the law, thinking that it doesn’t make sense to go beyond regulatory expectations. But being compliant doesn’t mean you’re being ethical.

There are three common signals that your company is headed towards a flawed business practice—decisions that may be lawful, but operate in an ethical gray zone. But learning to spot the signals can help any leader or manager steer their work towards ethical choices and keep their company culture strong in the process.

Risk 1: Relying too much on hard compliance 

Research finds that relying on regulations to determine your policies and procedures can result in ethical blindspots, or situations where people might think if there is not a rule for something, that it’s permissible. After years of shifting towards values and culture-based compliance, leadership might be heading the opposite direction.

If we want to avoid using the law as our only index of ethicality, it’s important to double down on corporate values and help employees to understand the reasons behind the law. For example, in Europe, there has been a recent reduction of due diligence requirements around ESG, like ensuring ethical working conditions in factory production lines. Yet companies still face the risks of being complicit in human rights abuses. 

By instead tying corporate rules to values, such as protecting vulnerable communities, leaders can demonstrate that “doing what’s right” is not subject to regulatory ebbs and flows. 

The fix: A number of organizations have moved from a code of conduct to a code of ethics. These demonstrate that values, not just rules, should guide decision making. These codes also demonstrate to employees the long-term vision of a company, regardless of legal frameworks that can shift dramatically over time. 

“Legal compliance is important—but not sufficient for building trust,” says Klaus Moosmayer, co-chair of the WEF Global Future Council on Good Governance. “Companies should actively involve employees and external stakeholders when designing codes and include practical ethical dilemma situations. This will make the code truly meaningful, and it will become the ethical constitution of the company.”  

Risk 2: Failing to map the ethical consequences of decisions in advance

In a fast-paced business environment, leaders are not intuitively slowing down to think about the complex consequences of their decisions. With such short-term framing,  even well-meaning executives may send signals to get work done without thinking too hard about the ethical and long-term consequences.

This creates distrust among employees, where people might hesitate to ask if their workplace’s appetite for risk has increased. It’s critical for leaders and their teams to deliberately think about the ethical shadow that their decisions cast well in advance.  

The fix: In order to foster an environment where teams can think about complex ethical consequences, leaders and managers need to be intentional in creating a safe space for diverse thinking and counterintuitive perspectives. 

One practice that Anna has seen work is the seven-second rule. This meeting rule, where attendees need to pause for seven seconds before responding to colleagues, allows a safe space between comments—reducing the chances of people speaking over one another—and where there can be room for healthy disagreement. It’s especially helpful with multi-cultural teams, where ways of communicating and the perception of ethical consequences might differ. 

Dominating narratives without allowing for healthy friction can result in people remaining silent. As an icebreaker, Richard advises his clients to select one person attending a meeting to state, “I’m the one who is going to ask the difficult questions,” which signals to everyone that it’s going to be a safe space to disagree. Where we have space and courage to disagree amid dilemmas, leaders can convene meetings with divergent views to explore the ethical consequences of the choices they can face. 

Risk 3: Having the wrong perception of your own ethics 

People overestimate how ethical they are willing to act. With those biases, employees are inclined to consider their decisions as ethically sound—and fail to recognize when they might be wading into the gray area. This dynamic of overestimating our own ethics can happen on a grand scale in organizations.

Relying too heavily on well-intentioned conduct training can reinforce these biases and blind spots. For some employees, earning a certificate or passing a training test might lead to thinking that  “they’re all set.” Yet research shows how testing out of training doesn’t necessarily ensure that one will make ethical decisions. 

The fix: Training should reassure employees that being ethical is not a one-and-done exercise, but something that you actively need to practice. 

Ethical dilemma workshops are a great way to help leaders and their teams to better understand and appreciate the consequences their decisions create. A good way of setting up an ethical dilemma workshop is to offer a case from the news where there might have been an ethical failure, or to anonymize a case that occurred internally, then have participants analyze how the wrong decision was made and debate how they would respond differently.

Most employees think they are ethical, and they’ll easily spot unethical behavior and speak up about it. But after these workshops, many realize that ethical blindspots are real; and that courage and practice is needed if we want our value-based decision making to be our actual decision making.  And as research demonstrates, this practice is critical to live out our values in reality. 

By being aware of the risks and the strategies to mitigate them, organizations can articulate and execute corporate ethical expectations, regardless of regulatory shifts. And by doing so, they ensure that ethical decision-making is at the heart of the organization.