What is the ethical issue?

Companies can experience a gap between having a business ethics programme in place and its absorption by employees. In considering ways of closing this gap, a number of organisations are no longer relying on negative deterrents but are developing positive incentives to encourage high ethical standards throughout their business.

Some organisations consider the only reward necessary to incentivise ethical behaviour in an organisation is to assure employees they ‘are doing the right thing; seeing this as a sufficient reward in itself. Yet many companies recognise that this still allows ethical lapses to continue, and find a more active approach is an effective way to sustain high ethical standards, through more tangible incentives. 

The nature of incentives can vary from business to business. They boil down to two principal methods: sanctions and rewards. The first, sanctions, is the threat of disciplinary action when any part of the code of ethics (or equivalent) is breached. This action can often manifest itself in termination of employment. Contrastingly, rewards are the provision of some form of inducement to behave ethically, be it monetary or non-financial, that can positively influence continued ethical behaviour. Rewards may be linked to annual appraisals. Employers need to consider which of these two approaches benefits the employees and the organisation the most.

The issue that arises for employers through incentivising, is ensuring that the process is fair and open. Organisations need to demonstrate to employees that taking into account ethical values in both their decision-making and their relations with principal stakeholders can reap rewards. Yet these rewards need to be measured and clearly justified, so as not to face backlash from other employees, stakeholders or even the public. Incentives can create divides between employees, so outlining why they have been distributed can encourage wider ethical behaviour.

 

IBE Guidance

A summary of good practice
  • Incentivising allows organisations to demonstrate to employees how an ethics policy applies to their day-to-day business life, thus embedding ethical behaviour further into daily practices. A survey by Deloitte indicated that senior management and immediate supervisors taking a positive approach to encouraging ethical standards was an important factor in the promotion of ethical practice in the workplace. Positive reinforcement of ethical behaviour through some kind of reward is seen by many companies as worthwhile.
  • There are also key indicators and attributes of an effective incentive scheme. Incentives need to be seen as fair by recipients and others in the organisation, and directly related to the company's core values. Incentives also need to be easily understood by employees, and incentives should be proportionate in size to the achievements being recognised.

 

Further resources

Publication type: Survey

Attitudes of the British Public to Business Ethics 2024

17 June 2024

IBE news

Trust in politicians, business and media to act ethically is lowest in four years: IBE writes to major parties

17 June 2024

Publication type: Survey

IBE Survey - Ethical Risks 2024

19 February 2024

IBE news

Fraud fears rise due to tightening economic conditions

19 February 2024

Blog

What are the ethical risk factors business leaders are most concerned about in 2024?

19 February 2024

Blog

Paying to be good?

The IBE’s Associate Director, Professor Chris Cowton, discusses a new question on CEO pay that was included in our recent public attitudes survey.

20 July 2023

Blog

Fair enough?

Deputy Director, Rachael Saunders outlines some of the key findings from the 2023 Attitudes of the British Public to Business Ethics survey.

13 July 2023

IBE news

Fewer Britons believe businesses operating ethically: new poll

11 July 2023

Publication type: Survey

Attitudes of the British Public to Business Ethics 2023

11 July 2023

Webinar

If You’re So Ethical, Why Are You So Highly Paid? recording

Catch up on our latest webinar with Professor Alexander (‘Sandy’) Pepper.

16 December 2022

Publication type: Survey

Attitudes of the British Public to Business Ethics 2021

Britain’s businesses could behave better - the 2021 results of the IBE's annual survey of the attitudes of the British public to business ethics.

17 January 2022

Blog

Decisions, decisions…

Read the latest blog by Mark Chambers, IBE's Associate Director (Governance).

11 March 2021

Blog

Attitudes. Ethics. Trust.

In this blog, Guendalina Donde, IBE's Head of Research, discusses the results of the 2020 Attitudes of the British Public to Business Ethics survey.

13 January 2021

Publication type: Survey

Attitudes of the British Public to Business Ethics 2020

The 2020 results of the IBE's annual survey of the attitudes of the British public to business ethics.

30 December 2020

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2019

The 2019 results of the IBE's annual survey of the attitudes of the British public to business ethics.

17 December 2019

Publication type: Other

A Year In Review: Ethical Concerns and Lapses 2018

Read the IBE's annual analysis of business ethics news stories from the last year - which were the sectors and issues most in the news in 2018?

30 January 2019

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2018

The 2018 results of the IBE's annual survey of the attitudes of the British public to business ethics

13 December 2018

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2017

The 2017 results of the IBE's annual survey of the attitudes of the British public to business ethics

12 December 2017

Publication type: Board briefing

Fair or Unfair: getting to grips with executive pay

This Board Briefing offers both practical advice on how remuneration committees can address the challenge and some pointers to possible reform centred around the need to be clear about the value of what is being awarded and the pace at which remuneration is earned. Fairness and simplicity are the two themes which run through this publication.

10 February 2016

Publication type: Research report

Fairness in the workplace: Staffing and employment contracts

This IBE Briefing considers ethical issues related to staffing arrangements and employment contracts. Specifically, it looks at the potential ethical implications of the ‘casualisation’ of the workplace, including zero hours, agency contracts, part-time workers and transfers under TUPE.

30 April 2015

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