Why Setting the Tone at the Top is Crucial to Your Organization

How to position older employees for lasting success

The Sarbanes-Oxley Act of 2022 popularized the term “tone at the top.” It references the attitude of an organization’s senior leadership and those charged with governance (typically the Board of Directors) towards ethical conduct and their level of commitment to having an open, honest and ethical culture.

Integrity starts from the top and helps to ensure ethical behavior among employees. Demonstrating the importance of integrity and ethical values happens through leaders’ directives, actions, and behavior. If employees or middle level managers observe dishonesty or unethical behavior from top-level leaders, they will be less likely to support the system of internal controls act unethically or engage in fraudulent activity.

The Board of Directors may not play a direct role in day-to-day operations, but it directly influences the tone at the top when hiring its executives, especially the Chief Executive Officer. A prospective CEO should be analyzed for not only their competency but also their character and ability to communicate the organization’s ethics and value. After the hiring process is complete, the board should continue to monitor the tone set by the CEO by periodically meeting with other executives, monitoring anonymous employee hotlines, as well as reviewing the results of employee surveys.

Because CEOs are highly visible inside a company, it’s important that they not only “talk the talk” about ethical conduct but also “walk the walk.” Leaders should frequently communicate their values to everyone in the organization and also demonstrate their values through their behavior. A great way to “talk the talk” is to develop a company code of conduct that is clear and concise and helps all employees understand what is important to the organization. This code of conduct should be discussed during each employee’s onboarding but should also be periodically reviewed, edited, and recirculated.  example, many organizations’ codes of conduct needed to be updated during the COVID-19 pandemic when employees began working remotely. The management team should also communicate the tone at the top by holding staff meetings frequently and engaging in casual discussions about the organization’s ethics and values.

“Walking the walk” may mean offering rewards and recognition for those employees who are behaving in a way that is aligned with the organization’s values. For example, an organization may create a program where employees can be nominated for a reward for upholding certain values in their behavior. This not only positively reinforces desired conduct but also promotes the behavior to others within the organization.

By taking these simple steps, organizations can reduce the risk of unethical conduct by senior leaders or other employees, as well as establish a strong foundation for future leaders.

Katie Galaska can be reached at Email or 215.441.4600.

 

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