Mike Ford is the Managing Director and Founding Member of PBO Advisory Group.
What if you learned someone in the accounting department was, as they say, “cooking the books”? Or you overheard a company executive on the telephone sharing confidential information? Maybe a colleague confided he used the corporate card to pay for a lavish dinner for his family. What’s the right thing to do?
That’s the ethical dilemma. The choice between right and wrong can be difficult and may have a devastating fallout. When deciding how to handle an ethical dilemma in a business setting, the stakes can be high for you, your colleagues, your boss and the company.
Ethics in finance, accounting and business operations overall are important for many reasons. A company’s reputation can be made or broken by one unethical act. Consumers and investors are increasingly seeking companies that demonstrate good corporate sustainability and responsibility. Demonstrating ethical behavior can increase profitability and engagement.
So what do you do when faced with an ethical business dilemma? My friend and former colleague Wade Lindenberger, who teaches ethics and other topics at the University of California, San Diego Rady School of Management, likes to employ what he calls an “ethical GPS” to solve such dilemmas.
The Ethical GPS: Nine Steps To Find Your Way
Lindenberger’s ethical GPS is a process that allows for reflection and a thoughtful determination for how to handle an ethical dilemma. Here are the nine steps of the ethical GPS:
1. Determine whether you are facing an ethical dilemma. An ethical act is an act that is right according to your principles and standards. When you think about what is important to you, those are your values. These could be anything from honesty and integrity to accountability and loyalty. You know you have conviction for a value because you’ll feel driven to protect it, even if it brings you risk or harm.
2. Determine stakeholders. Stakeholders are the people who could be impacted by an ethical act — positive or negative. Stakeholders could be the business or the people within it. They may also be the business’s clients who could, for example, be injured by inflated invoices.
3. Determine your professional obligations. Many professionals have licenses or roles that require a high level of ethical duty. A certified public accountant has a duty to serve the public interest and uphold the public trust in the profession while also being responsible to clients, company managers, investors, creditors and outside regulatory bodies. Failure to do so could cost an accountant their license, job or both. You only need to think back to Enron to understand the importance of ethical behavior by those who hold a company’s purse strings.
4. Gather the facts. Rational decisions in ethical dilemmas are based on truth, not guesses or conjecture. Jumping to conclusions without taking the time to understand all the context and information can cause harm. Suppose you hear a company executive talking on the phone about financial information you know is confidential. Gathering the facts may mean difficult conversations — such as asking the executive about what you heard. He may tell you he was speaking to the company’s attorney in a wholly appropriate manner. Of course, he also may lie.
5. Consult with trusted advisors. While you should always be careful when discussing confidential information, your trusted advisors are the people in your life who you know to be thoughtful, who will give you quality answers and are willing to tell you you’re wrong. Sometimes, the different perspective is key to decision-making.
6. Outline your options and analyze their pros and cons. This is an important step in the decision process. Write down the options you have on how to proceed and pick the two or three that make the most sense. Identify the pros and cons of each approach.
7. Decide the best course of action. There may not be a “right” action, but don’t let inaction be the default decision. Check in with your heart and your gut about the action this process has led you to.
8. Act clearly and decisively. It’s never pleasant to have an ethical dilemma hanging over your head. You may be preparing to deliver bad news, go against superiors or damage a relationship with your action. But prolonging the process often causes more suffering, so don’t drag it out.
9. Conduct a review to establish lessons learned. After you’ve taken action on the ethical situation, look back at the process and ask yourself: Did I do everything the best way I could? What could I do better next time? Should I gather more facts? More options? Did I wait too long to act? Being ethical is a practice that improves over time, so use each situation to fine tune your process.
As Lindenberger will tell you, the ethical GPS model is a starting point for resolving ethical dilemmas. Feel free to adapt this model or use your own. Whatever process you choose to address ethical situations, Lindenberger advises that you be sure to write it down, look at it critically and revisit it periodically.