Why are so many companies taking ethics so seriously these days?

The obvious answer is to stay out or get out of trouble.

After all, lots of bad things happen when an ethics-based scandal hits.

They start with substantial legal, accounting, PR, and consulting costs. But these are nothing compared to the costs associated with damages to reputation, customer relations, internal morale, difficulties recruiting new employees, and increased scrutiny and cynicism of regulators.

Then there is the enormous diversion of the company’s top leaders. Instead of tending to business, the CEO and other key executives often are consumed with strategizing defenses and responses to accusations of wrongdoing.

Finally, there’s the possibility of huge fines, prolonged litigation with major verdicts, debarment from future business, and even long prison sentences.

So, though I prefer to emphasize all the good things resulting from a sustainable ethical business culture, when I consult with corporations in the midst of or recovering from an ethics scandal, I know the immediate and pressing incentive is to avoid or minimize the likelihood of real or perceived improprieties.

Thus, ethics has become a critical risk-management strategy.

The problem is that the traditional focus on legal compliance -- written ethics codes or standards of conduct and mandatory ethics training -- has proved to be wholly inadequate. There’s simply no evidence that these efforts significantly deter wrongdoing or bad judgment.

A deeper and wider approach is needed, and this requires a move from a rules-based compliance mentality to a values-based ethical culture.

In essence, a truly effective ethics initiative must teach, enforce, advocate, and model (we use the acronym “T.E.A.M.”) core ethical values in recruiting, hiring, training, compensation, promotion, and discipline. It’s more difficult than codes and courses, but in the end, it’s a lot cheaper.

This is Michael Josephson reminding you that character counts.