Beyond Good and Bad: Building Good-Faith Ethics Programs

While half of business managers admit they wouldn’t hire a known whistleblower, ethics programs continue pretending everyone celebrates speaking up. This authenticity gap is destroying compliance credibility from within. The traditional compliance playbook—zero tolerance policies, rules-based frameworks, and reactive enforcement—is increasingly ineffective in today’s complex business environment. This webinar with Alison Taylor, author of “Higher Ground” and professor at NYU’s Stern School of Business, explores how ethics and compliance professionals can shift from binary, judgment-driven approaches to authentic, principles-based programs that genuinely engage employees and create sustainable organizational cultures.

This episode of The Ethicsverse examines the fundamental transformation required in corporate ethics and compliance programs to move beyond performative “compliance theater” toward authentic, good faith approaches that drive meaningful organizational impact. The discussion explores how zero tolerance messaging, while well-intentioned, often creates unintended consequences including employee isolation, reduced reporting, and erosion of trust when enforcement proves inconsistent—particularly at leadership levels. The speakers investigate how regulatory divergence across global markets necessitates pivoting toward principles-based frameworks that can adapt across jurisdictions while maintaining cultural consistency. Key insights include the strategic importance of acknowledging organizational imperfections to build credibility, implementing proportionate risk-based approaches rather than uniform rule proliferation, and leveraging behavioral science to understand how employees actually make ethical decisions under commercial pressure.

Featuring:

• Alison Taylor, Clinical Associate Professor, NYU Stern School of Business
• Nick Gallo, Chief Servant & Co-CEO, Ethico

Zero Tolerance Messaging Creates Unintended Barriers to Speaking Up

• Zero tolerance policies for issues like corruption can inadvertently isolate frontline employees facing real-world pressures such as extortion or facilitation payments, preventing organizations from understanding the actual commercial challenges their workforce encounters and discouraging early escalation of concerns.
• The credibility gap created when over 50% of employees who speak up experience retaliation despite zero tolerance policies causes workers to question all organizational commitments, creating implicit resistance to compliance initiatives across the board.
• Authentic messaging that acknowledges retaliation as an organizational reality while committing to reduction rather than claiming complete eradication builds trust and psychological safety that encourages employees to report concerns as partners rather than subjects.

Leadership Accountability Failures Poison Organizational Culture

• Research analyzing hundreds of business ethics papers reveals that violations predominantly involve leaders who operate as if rules don’t apply to them, creating toxic perceptions of unfairness that undermine organizational culture since humans are highly attuned to detecting hypocrisy and double standards.
• The contradiction between policies prohibiting behaviors and the observable tolerance for those same behaviors at senior levels—evidenced by record CEO terminations for ethical violations alongside reluctance among half of managers to hire whistleblowers—fundamentally destroys program credibility.
• Genuine accountability requires explicit commitment that principles apply universally regardless of position, with visible consequences across the organization and recognition that senior leaders should face stricter standards given their disproportionate cultural influence.

Regulatory Divergence Demands Principles-Based Flexibility Over Rules Proliferation

• The shift from relatively aligned international compliance standards toward significant divergence across privacy, ESG, human rights, and other domains makes consistent rule-based compliance across jurisdictions impossible without creating overwhelming complexity.
• Extensive policy frameworks attempting to address every scenario across every market become so voluminous that employees cannot absorb them, leading to “rule-checking” behavior rather than principled judgment when facing novel situations.
• Effective alternatives emphasize fewer rules with clearer principles and explicit prioritization hierarchies—like Costco’s approach stating “obey the law” as first priority—enabling employees to navigate ambiguity using organizational values rather than searching for specific prohibitions.

Proportionate Risk-Based Approaches Outperform Uniform Compliance Theatrics

• Organizations that respond to isolated violations with company-wide training for thousands of employees when only small subsets face actual risk—such as expense training for entire workforces when only 100 hold corporate cards—waste resources while signaling that compliance is performative rather than strategic.
• Proportionate approaches require meaningful risk assessment to target interventions like corruption training for sales teams or money laundering education for relevant functions, demonstrating business understanding and respecting employee time rather than treating everyone identically.
• Risk-based compliance extends beyond efficiency to employee engagement by encouraging workers to use judgment and escalate novel concerns rather than assuming policies exist for everything and either searching endlessly or proceeding without guidance.

Authentic Transparency About Failures Builds Credibility More Than Success Stories

• Organizations communicating only compliance achievements generate employee skepticism since workers directly observe imperfections, creating perceptions of inauthentic “ethics washing” that undermines trust in all communications from the function.
•  sustainability reporting models open with plain language acknowledging what they achieved, what failed, and why—including competing priorities and resource constraints—creating a paradoxical effect where transparency about imperfection makes all other claims believable.
• Compliance programs should openly discuss measurement struggles, unresolved leadership accountability challenges, and resource allocation trade-offs rather than presenting polished facades, particularly to engage Gen Z employees who are sensitive to hypocrisy and respond better as problem-solving partners.

Culture Measurement Provides Early Warning Systems for Ethics Failures

• Research on companies experiencing ethics scandals demonstrates that cultural problems appear in employee sentiment about leadership, roles, and incentives well before violations surface publicly, making culture measurement a critical early warning system rather than soft work.
• Effective measurement examines whether employees trust managers, observe realistic mixes of positive and negative behaviors avoiding both complacency and resignation, and feel empowered to escalate concerns—with research showing speak-up behavior depends on this balance.
• Culture assessment must occur at team or department level rather than only organization-wide because different functions face different ethical pressures, and effective programs ensure no single function becomes systematically disempowered when natural tensions arise between operational and commercial objectives.

Values-Driven Motivation Outperforms Rules-Based Enforcement

• Every human holds values deeply regardless of alignment with organizational codes, representing powerful intrinsic motivation that programs should harness rather than override with external rule-based enforcement that switches off this potent force.
• Principles-based approaches connecting to universal values like fairness enable employees to navigate gray areas using internal guidance rather than searching for explicit permission, which is crucial since most ethical dilemmas occur in ambiguous situations no policy manual can anticipate.
• Elevating values and principles above procedure in program design means shifting from compliance to ethics, enabling employees to bring intrinsic motivation and moral reasoning to work rather than mechanically following instructions without engaging conscience or intelligence.

Retaliation Management Requires Acknowledging Reality Over Aspirational Claims

• The gap between zero tolerance retaliation policies and reality—where over 50% of employees who speak up experience hard consequences like termination or soft consequences like being passed over for promotion—destroys trust in all compliance communications.
• Retaliation occurs at individual manager level regardless of corporate policy because approximately half of managers view whistleblowers as problematic employees rather than courageous truth-tellers, making uniform enforcement functionally impossible without acknowledging this challenge.
• Effective approaches assume retaliation problems exist, communicate openly about elimination difficulty, and focus on reduction strategies while addressing legitimate manager concerns about difficult employees rather than simply mandating behavior change.

Employee Engagement Transforms Compliance From Cost Center to Value Creator

• Ethics and compliance requires engaging employees throughout the organization who serve as risk sensors, dilemma-solving innovators, and the actors whose daily decisions determine program success, with fear of retaliation being the primary engagement barrier requiring strategic priority.
• Treating employees as partners means inviting them to solve difficult problems rather than pretending the function has everything figured out, particularly valuable with Gen Z employees who respond positively to input requests on genuinely challenging questions like measuring ethical leadership.
• Enterprise value creation potential comes from leveraging employee touchpoints throughout the lifecycle to crowdsource risk intelligence, direct limited resources toward highest-impact interventions, and genuinely de-risk organizations rather than creating impressive-looking but ineffective paper programs.

Small Organizations Require Leadership Modeling While Large Organizations Need Structural Processes

• In smaller organizations where personal relationships predominate and employees directly observe senior leadership regularly, interventions should focus on ensuring leaders model desired behavior since their signals about what gets rewarded and what constitutes success primarily determine ethical culture.
• Organizations with tens of thousands of employees need structured processes and explicit guidance particularly at middle management where most employees interface with authority, requiring systematic approaches ensuring consistency across diverse cultures, geographies, and business units.
• Growth stage and global presence should determine the balance between leadership exemplars and standardized processes, with the goal of creating consistent employee experiences across managers while maintaining principles-based flexibility for local commercial realities and cultural contexts.

Conclusion