Most companies have ethics and compliance policies that get reviewed and signed annually by all employees. "Employees are charged with conducting their business affairs in accordance with the highest ethical standards," reads one such example. "Moral as well as legal obligations will be fulfilled in a manner which will reflect pride on the Company's name." Of course, that policy comes directly from Enron.  Clearly it takes more than a compliance policy or Values Statement to sustain a truly ethical workplace.
Corporate ethical failures have become painfully common, and they aren't cheap.  In the last decade, billions of dollars have been paid in fines by companies charged with ethical breaches. The most recent National Business Ethics Survey indicates progress as leaders make concerted efforts to pay holistic attention to their organization's systems. But despite progress, 41% of workers reported seeing ethical misconduct in the previous 12 months, and 10% felt organizational pressure to compromise ethical standards. Wells Fargo's recent debacle cost them $185 million in fines because 5300 employees opened up more than a million fraudulent accounts.  When all is said and done, we'll likely learn that the choices of those employees resulted from deeply systemic issues.
Despite good intentions, organizations set themselves up for ethical catastrophes by creating environments in which people feel forced to make choices they could never have imagined.  Former Federal Prosecutor Serina Vash says, "When I first began prosecuting corruption, I expected to walk into rooms and find the vilest people.  I was shocked to find ordinarily good people I could well have had coffee with that morning. And they were still good people who'd made terrible choices."
Here are five ways organizations needlessly provoke good people to make unethical choices.
It is psychologically unsafe to speak up. Despite saying things like, "I have an open door policy," some leadership actions may inhibit the courage needed to raise ethical concerns.  Creating a culture in which people freely speak up is vital to ensuring people don't collude with, or incite, misconduct.  Elizabeth Morrison of New York University, in Encouraging a Speak Up Culture, says "You have to confront the two fundamental challenges preventing employees from speaking up.  The first is the natural feeling of futility — feeling like speaking up isn't worth the effort or that on one wants to hear it.  The second is the natural fear that speaking up will lead to retribution or harsh reactions." A manager's reactions to an employee's concerns sets the tone for whether or not people will raise future issues.  If a leader reacts with even the slightest bit of annoyance, they are signaling they don't really want to hear concerns.
There is excessive pressure to reach unrealistic performance targets. Significant research from Harvard Business School suggests unfettered goal setting can encourage people to make compromising choices in order to reach targets, especially if those targets seem unrealistic. Leaders may be inviting people to cheat in two ways.  They will cut corners on the way they reach a goal, or they will lie when reporting how much of the goal they actually achieved.  Says Lisa Ordonez, Vice Dean and professor at the University of Arizona, "Goals have a strong effect of causing tunnel vision, narrowly focusing people at the expense of seeing much else around them, including the potential consequences of compromised choices made to reach goals."  Once people sense the risk of failure, they go into "loss prevention" mode, fearing the loss of job, status, or at-risk incentives. The Veterans Administration learned this lesson the hard way when trying to address the 115-day wait time in their Phoenix hospital. They set a new goal of reducing the wait to 14 days, which resulted in an alleged 24-day wait. But employees said they felt compelled to manipulate performance records to give the appearance of meeting these goals. As many as 40 veterans died waiting for care at the Phoenix center, some more than a year. Organizations must ensure people have the resources, timelines, skill and support they need to achieve targets they are given, especially ambitious stretch goals.
Conflicting goals provoke a sense of unfairness. And once a sense of injustice is provoked, the stage is set for compromise.  Maureen Ambrose, Mark Seabright, and Marshall Schminke's research on organizational injustice clearly shows a direct correlation between employees' sense of fairness and their conscious choice to