The Biggest Ethical Mistakes Made by CEOs and How to Avoid Them

I was recently asked about the biggest ethical mistakes CEOs make. In 35 years as an ethics consultant, I have seen some doozies. After all, you only hire an ethics consultant if you face an ethical dilemma. And once an ethical mistake occurs, it is extremely hard to set things right with the public and media, who already may believe that companies routinely engage in unethical conduct. The truth is that most of these mistakes are entirely avoidable—if you are on the lookout for them. Here are the top 5 ethical mistakes I've seen made by CEOs.

Mistake #4: Fixing a problem going forward without owning the problem’s history. This would be like GM fixing its ignition problem going forward without owning the problem in cars currently on the road. This never works, but it is very tempting to CEOs who don’t want a past problem dragging their organization down. How often have you heard a CEO or company say, “As soon as we learned of the problem, we fixed it.” That is simply not good enough. You need to show that the organization recognizes the harm caused by an unethical practice and is taking steps to rectify past harm, while avoiding repeating the same action again. Everyone will be asking, “What about everything leading up to the present?” So you have to be ready to answer this question.

“Fixing a problem without owning the problem’s history is not good enough.”

Mistake #5: Judging the information you receive by the person from whom you receive it. I know of no ethical fiasco that did not present clearer warning signs. Somehow these signs were ignored—and not without reason. The information that enables you to prevent an ethical crisis often comes from individuals who are afraid of taking any risks, whine about everything, and have a chip on their shoulder. I have just described one type of whistleblower. Whistleblowers are more protected and rewarded under current law than many CEOs realize. This is especially true of the defense, financial services, and healthcare sectors where whistleblowers are not only protected, but can sometimes even receive bounties in the tens of millions of dollars. Sharp CEOs ignore the source of troubling information and evaluate the information without bias. An ethical leader is always asking, “What if this information, although from a questionable source, is true? Would I gamble the future of my organization on it not being true?”

All of these ethical mistakes can be avoided if you are on the lookout for them. The most important way to avoid ethical mistakes is by paying attention to information you would rather ignore or believe to be untrue. Ethical mistakes tend not to go away. The longer you know of an unethical action without reacting to it, the worse the consequences of eventually admitting the mistake for the organization—and its leader. CEOs know that such mistakes, even if not involving illegal activities, can destroy the reputation of an organization. And they know that ignoring or covering up such a mistake simply compounds the consequences of mistakes.

Ethical leadership is not just about having and acting on sound values; it is about confronting the facts no matter how uncomfortable it may be to do so.


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