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.

• Author: Bauer, Christopher
• Position: Ethics

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.

[ILLUSTRATION OMITTED]

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...