A preventative maintenance approach to ethics: ethical compliance is not just an issue for external review. Financial executives must look inward to identify ethical 'red flags' and ensure their own integrity is not compromised.

Financial executives recognize the importance of understanding and adhering to the ethical codes governing their organizations. Beyond simply following acknowledged rules and policies, though, they also need to self-monitor non-governed behaviors that can all too easily lead to ethics violations.

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This is because, despite our usual assumptions, violations are usually rooted in personal matters having nothing to do with the perpetrator's knowledge of the law, relevant ethics codes or level of professional competence. Instead, they stem from conflicts between established ethical mandates and an individual's personal wishes or values

Consequently, financial executives can persistently benefit from stepping back and taking a cold, hard look at their personal guiding values. Self-directed questions such as, "Do I really value honesty over all?" and "Do I place my own personal interests at the top of the list of priorities governing my business objectives?" can help pinpoint personal values or priorities where one's judgment might be most susceptible to compromise. This exercise is central to a preventive maintenance approach to ethical practice. The goal here is to reduce risk as much--or more--than maintaining our usual focus on after-the-fact detection and correction.

Auditing Our Own Behavior

Whether or not we are conscious of it, our behavior is governed entirely by our personal wishes and values. In other words, every choice we make is based on answering the question, "What is the most important thing for me to do right now?" Although this may seem obvious, few people actually take the time to consciously examine their personal values, since they presume that ethical practices will somehow flow simply from knowing the rules.

Experience tells financial executives that any sign of a weak corporate ethical posture requires tighter control activities, risk assessment, monitoring and thoroughness of both follow-up and review. The lack of an explicit, coherent organizational ethics program, for example, would be as blatant a red flag for potential ethics problems as one might ever encounter. Self-evaluations, however, need to be every bit as thorough as corporate reviews, since ethics violations typically begin as individual acts, regardless of whether by omission or commission.

Ramping up attention to ethics "red flags" in suspicious climates is perhaps second nature for effective financial executives. Screening for one's own personal ethics red flags, however, needs to be as focused, thorough and ongoing a process, regardless of the corporate or audit climate. Failure to do so represents a systematic reduction in self-monitoring that can be an open invitation to cross ethical boundaries.

Reasons for Unethical Behavior

The language used to defend wrong-doing is typically couched in professional jargon or legalese. However, examination of the actual thinking behind ethics lapses shows that the underpinnings of most violations fall within a short list of relatively benign or even positive-sounding personal wishes. That short list may include some of these statements:

"I just want to get ahead in life."

"I just want more time for ______."

"I just want to be liked/respected/left alone by ______."

"I just want to be a good breadwinner/employee/colleague/partner."

Few people would find concern in any of these statements, and most of us would have reason to worry if we didn't want some or all of them.

Thankfully, each of these statements can motivate one in more positive ways than negative. At the same time, however, these wishes can easily serve as a catalyst for unethical practices, and executives need to learn to spot negative pressures resulting from them. For example, any of these could make one fail to respond to the inappropriate actions of others, to misrepresent oneself in any number of ways, etc.

Maintaining one's ethics requires constant critical thinking about the motivation behind decisions; failing to remain conscious of our decision-making processes can result in blindly moving into unethical territory. For this reason, executives need to pay close and constant attention to their own red flags for ethical violations.

The easiest red flags to spot are rationalizations created to justify our behavior. Consequently, pay attention anytime you find yourself thinking:

* "This is such a small indiscretion; who will notice?"

* "This [questionable act] really won't hurt anybody."

* "I don't feel comfortable doing this, but if this is what it takes to get ahead (via money/work/promotion/prestige), I should probably do it."

* "Everybody else does it, so why shouldn't I?"

* "I hope ______ doesn't find out about this."

* "Because ______ is in charge and he/she told me to do this, I have no choice but to comply."

* "I need to do this so I don't fail/disappoint ______."

* "If I do this, at least I can get ______ off my back."

None of these, of course, indicates definitively that some type of violation has occurred. However, upon noticing any of these rationalizations in oneself or others, a preventive maintenance approach requires immediate examination of the behavior and risks for crossing the boundaries of ethical behavior.

When finding ourselves to any degree involved in questionable behavior, we often feel too confused, embarrassed or frightened to share our problem with someone else. Most financial executives, after all, are responsible for preventing or helping to detect possible ethics lapses, not creating them. However, it is during times of ethical uncertainty that we most need the insight and support of others.

Executives need to develop a list of consultants to whom they can turn upon encountering an ethical challenge. Of course, conflicts can arise not only from professional matters, but from issues related to areas such as physical or mental health, substance abuse, religious or spiritual conflicts and relationship difficulties. Therefore, don't rely exclusively on colleagues for help; guidance can also be sought from legal advisors, business associates, financial advisors, religious or spiritual advisors, medical providers, etc.

Anyone who can provide informed, clear, direct feedback and facilitate critical thinking about personal or professional concerns represents an effective consultant. Remember, most ethics problems have their foundation in matters outside of the job, so be sure to use every consultation resource at your disposal (off the job as well as on) to reduce your risk.

It is important for both you and your consultant to document the nature of any ethics-related consultations and any recommendations made by the consultant. Should your judgment ever be questioned, it can be extremely helpful to be able to show that you were both self-aware enough to recognize a problem and professional enough to seek competent, expert consultation.

On the Right Path

Ethics violations come in all shapes and sizes. What someone considers a "small" ethical violation may prove highly damaging. For example, knowingly tolerating "a little" inaccuracy in financial reporting, telling what we deem a "white" lie, engaging in "a little" substance use on the job, etc., can result in significant consequences for both you and your company.

Remember, despite the current stereotypes, most ethics violations--even the most egregious ones--are not caused by "closet corporate psychopaths." Instead, they are committed by otherwise good people who know exactly what constitutes appropriate behavior but are drawn into progressive indiscretions.

Just because someone perceives himself or herself to be a "good person" or understands the established policies, this shouldn't serve as a reason to be any less thorough in self-evaluation. None of us is as objective about ourselves as we might imagine. Each of us has the potential to be swayed in our judgment by the stresses and pressures of life. Paying attention to those stresses--on the job and off--and acting immediately to deal with them is frequently what makes the difference between maintaining appropriate professional behavior and failing to do the right thing.

Christopher Bauer, Ph.D, heads Bauer Ethics Seminars, based in Nashville, Tenn., and helps companies improve their ethics self-monitoring skills. Information on his programs can be found at www.bauerethicsseminars.com.