HR’s Role in Building an Ethical Company

Human resource departments play a significant role in enforcing ethical policies at companies, but it comes with challenges.


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What are some ethical concerns companies face, and how can HR help?

Companies should avoid at all costs the 3 B’s: Bad Business Behavior. Remember the front-page allegations against Wells Fargo for opening fake customer accounts, or the price gouging antics of Mylan Pharmaceuticals? Then there were allegations involving Enron’s financial cover-up, Arthur Andersen’s book-cooking, Hewlett Packard’s spy operations, and Fox News’ sex scandals.

Although these enterprises were charged with different modes of misconduct, the allegations against them have one thing in common: a lack of business ethics, or a lack of a moral Code of Conduct.

A Code of Conduct is a set of rules that companies officially adopt, pledge to follow, and hold everyone within or connected to their enterprise accountable for upholding.

Ethical organizations follow a Code of Conduct that is intolerant of all behavior and activities considered harmful, unlawful, immoral, irresponsible, dangerous, or unfair.

Enter HR

The public fallout of corporate scandals can have a long-lasting, demoralizing effect on organizations of any size. Also, company wrongdoings don’t just affect a disgraced CEO or high-level executive. Employees often feel the brunt of a scandal, which can be a massive layoff or — in the case of Enron — a company shut-down and a loss of their retirement savings.

Corporate misconduct puts human capital management (HCM) and talent attraction and retention at risk. Therefore, this places HR leaders squarely at the center of building an ethical organization. Taking on the role of “chief ethics officer” is a natural transition for HR professionals, who already usually oversee:

  • Drafting workplace policies
  • Keeping organizations in compliance with employment laws and regulations
  • Investigating alleged offenses
  • Correcting behavior through enforcement measures

HR professionals might feel like the “workplace police” at times. However, what they can be instead are the standard bearers of fairness and integrity for their organization and its stakeholders. Upholding a code of conduct can influence employees, directors, C-suite members, management, customers, and vendors.

An organization that tolerates misconduct harbors a toxic work environment that needs overhauling into an ethical enterprise.

What are some challenges?

A Code of Conduct applies to a range of workplace issues, from corporate theft, data breaches, and intellectual property disclosures to workplace bullying, discrimination, harassment, and general human rights violations. An organization that tolerates misconduct harbors a toxic work environment that needs overhauling into an ethical enterprise.

Business ethics might be more critical now than ever, considering companies’ challenges in attracting and retaining talent in a tight labor market.

False resumes and applications

One challenge of ethically hiring candidates is the sizable percentage of job applicants — 36% — who lie about and exaggerate their credentials and skills on resumes and application forms, according to a ResumeLab survey.

Another striking part of the poll results is that 93% of respondents in the survey said they knew a person who lied on their resume. The survey also revealed that only 30% of people who lied got caught — meaning the majority of people may get away with lying.

Reputation and branding

Company ratings present another ethical concern for businesses. Today’s job seekers aren’t just searching for positions that interest them, they’re also looking at employers’ online ratings before applying. A 2017 survey by CareerArc found that only 1 in 5 job seekers considered working for an employer with a 1-star rating — the lowest ranking on a 5-point scale.

In fact, a company that survives a public scandal must not only restore its reputation, but also revise or rebuild its brand, which says as much about its image as its reputation.

A 2017 survey by CareerArc found that only 1 in 5 job seekers considered working for an employer with a 1-star rating — the lowest ranking on a 5-point scale.

“When people think of brand, they often think about logos, advertising, etc.,” Catherine Davie, LegalZoom’s VP of brand strategy, told Workest. “But those are simply outputs to a much larger idea — an organization’s brand identity. [Brand] articulates what an organization does, what it stands for, how it behaves, and what it looks and sounds like. And it starts internally.”

Davie added that HR leaders have a critical role in brand building because of their great influence on a company’s culture. “HR leaders have the unique position of keeping an organization’s behavior and identity in check, whether it’s in onboarding/offboarding, business strategy, employee engagement, professional development, and more.”

However, she advises HR to include stakeholders in the brand-building process, so that it comes from the “people who are living and breathing it every day.”

Data breaches

A Code of Conduct is essential in an increasingly digitized workplace. HR, as the collector and chief maintainer of employees’ personal information, must guard against breaches. Failure to protect this data could undo whatever gains HR has made in worker retention and trust.

Consider the results of a 2019 survey by HR Metrics & Analytics Summit: When a poll asked employees whether they trusted their employer to protect their data, the majority (52%) said yes, but a large number — 48% — said no.

Toxic leadership

Ethics also can be the antidote to the proverbial “toxic boss syndrome.” Errant supervisors and managers can stress out, burn out, and drive out valued employees. The consequences for the workforce often are chronic health problems, increased absenteeism, and high turnover.

For employers, leaders who lack ethics can cause higher healthcare costs, productivity losses, and even lawsuits from aggrieved workers.

Where HR can start incorporating ethics

HR can’t make the ethical transformation alone; buy-in from all stakeholders, starting with the CEO on down, is a critical first step before drafting ethical policies.

However, HR managers can get a head start on the process by:

  • Checking information on resumes and application forms for discrepancies
  • Periodically monitoring online rating and social media sites to see how former employees, customers, and the public perceive their company
  • Following up on harmful online reviews and soliciting formal and informal feedback from employees, customers, and vendors
  • Teaming up with marketers and public relations experts to rebuild or overhaul their company’s brand
  • Working with IT professionals to minimize the risk of data breaches

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