Don’t Forget the Intangibles: Three Often Overlooked Secrets of an Ethical Culture

Introduction
When analyzing ethics and compliance programs, there is a natural tendency to focus on tangible elements such as organizational structure, policies and procedures, training and communications, and risk assessment processes. 

These elements are essential. But equally important drivers of ethical culture are intangible and often receive far less attention. Among the most frequently overlooked are three in particular: open communication, employees’ confidence that they are genuinely heard, and consistent, fair follow-through when concerns are raised. 

1. Open Communication

An organization may have a well-crafted Code of Conduct, sophisticated training, and robust risk assessments. But without open communication, the program remains largely theoretical rather than operational. 

Many major corporate scandals are preceded by a breakdown in internal communication. A major early warning sign is the appearance of phrases like: 

“Let’s keep this between us.”  

“Corporate doesn’t need to know.”  

“Don’t tell Legal—they’ll just say no.” 

When such language appears, it signals that the organization is moving in an unhealthy direction, and employees’ willingness to speak up becomes more urgent and vital. 

Malcolm Gladwell, writing about airline disasters, observed that many crashes result from communication failures rather than technical deficiencies. One pilot recognizes a critical issue but fails to communicate it clearly or forcefully enough. 

The same dynamic plays out in all types of organizations. Ethical failures often begin with an erosion of communication. When communication is healthy, problems surface early and can be addressed. When it is not healthy, small issues can escalate into serious wrongdoing. In practice, strong ethical cultures and strong communication environments are closely linked. 

Recognizing the importance of open communication does not diminish the role of other critical program elements that shape the communication culture. For example, retaliation can quickly chill communication, which highlights the importance of strong vigilance against retaliation. And training and incentives have tremendous impact on the company’s communications culture.  

In sum, ‘open communications’ is indeed of paramount importance to a company’s ethical fabric (and this is frequently overlooked), but it does not exist in a vacuum. It is impacted by other elements in the company’s ethics and compliance program; it is a part of a whole.  

2. Attention, Leaders: It Isn’t Enough to Listen—Your People Must Feel Heard

How can organizations create a culture of open communication? The subject has been extensively studied. Effective compliance program elements help reinforce this outcome.  

One critical point, however, is frequently overlooked: simply telling someone they can talk to you is not enough; employees must perceive that they are genuinely heard. (For an excellent piece on active listening, see “Harmony in Compliance: The Transformative Power of Active Listening in Ethics and Compliance, Compliance and Ethics: Ideas and Answers, January 22, 2024). 

Research on psychological safety and employee voice, including work by Amy Edmondson, shows that when employees feel heard by their immediate supervisor, trust increases. Because employees experience the organization primarily through their direct manager, that trust extends to the company, which in turn increases willingness to raise concerns, including potential wrongdoing. 

A simple role-play exercise illustrates the dynamic. A manager multitasks while an employee raises a concern. The manager answers emails, reviews papers, and works on an Excel spreadsheet, all while the employee is talking. The manager may be attempting to listen carefully,¹ but from the employee’s perspective the manager appears distracted and disengaged. The message the employee receives is unmistakable: “You are not important.” 

Even though the manager did not act unethically, the damage is real. This is so, even if the manager was, in fact, actually listening and heard every word. If the employee perceives that he was not worth listening to, then trust erodes, communication weakens, and the ethical fabric of the department is weakened. 

This is not to say that leaders must always drop everything the moment an employee wishes to talk. One simple phrase is often enough: “Give me five (minutes) and I’ll give you a hundred (percent of my attention).” When the leader then does sit down with an employee who has a concern, distractions should be set aside. Presence matters. 

Leaders are always sending signals, whether they intend to or not. Those signals can either strengthen open communication or undermine it over time. 

3. “Run Out Every Grounder”: The Importance of Consistent Follow-Through

A third key driver of ethical culture is how organizations respond to employee concerns. The principle is straightforward but challenging to implement: treat all concerns with appropriate seriousness. In baseball terms, run out every last grounder. 

When it comes to investigations, no prejudging. No assuming a claim is true or false. No dismissing frequent complainers. No shortcuts.² No favoring more senior employees. No worrying about where the facts may lead.  

Just put your head down and find out the facts. Of course, when the issue is compliance or ethics, formal investigations must be conducted by trained professionals.   

A key test of investigative adequacy is what I call the “skeptical outsider.” Imagine your investigation file being scrutinized by a regulator or a plaintiff’s attorney who has no interest in the company’s success. This person approaches the matter from a skeptical and adversarial perspective. They will probe the file not for understanding but to look for weaknesses. Key questions include whether investigators were independent, whether relevant witnesses were interviewed, and whether the inquiry was appropriately thorough and free from bias. 

If an organization can withstand such scrutiny for each and every one of its files, then it is meeting a critical standard: defensibility.³  

Investigations vary too widely to be reduced to a rigid SOP, but every investigation must be defensible. This helps maintain organizational integrity. Employees see consistent follow-through and gain confidence in the organization’s commitment to ethics. That is what builds employee trust and engagement.  

Conclusion 

Effective ethics and compliance programs rely on multiple core elements. These are formally articulated in standards such as the U.S. Sentencing Guidelines, and include core elements such as incentives, communications, and protections against retaliation.  How these elements  function in practice, however, is critical and is up to management to see that they are implemented effectively.  

Among the most vital yet often overlooked drivers of ethical culture are three intangible items: open communication, employees’ perception that they are genuinely heard (and thus valued), and “no exceptions” appropriate, fair follow-through. These factors do not exist separately from the compliance program; they are shaped by and reinforced through core program elements, including training, monitoring, discipline, and ongoing communication. 

When these intangible dynamics are strong, compliance programs function not merely as formal structures but as living systems that influence behavior and decision-making across the organization. Such cultural vitality is the hallmark of a truly effective program. 

1. We will leave aside for the moment the question of whether effective listening while multitasking is even possible. 

2. Common sense and reason govern, of course. If a named employee alleges, for instance, that the CEO is frequently emailing back and forth with aliens to conspire against the employee, the investigation need not entail a comprehensive search of the CEOs email box . . . although other courses of inquiry may be deemed appropriate. 

3. Similar to the situation with ‘open communications,’ although defensibility is arguably the most important measure of an investigation, it is not the only measure. For instance, investigations must meet the standard of fair and respectful treatment toward employees.