Before we can discuss what it means to create an ethical climate and how this might be achieved I believe it is important to clarify what we mean by “ethics.” My brand of Ethics includes several fundamental components. The first is that when we refer to the discipline of ethics we find it is grounded in a fundamental existential question: How ought we to live? This question challenges us to consider the type of choices we make as living is fundamentally about making choices. Everything we do (or do not do) is as a result of a choice. We cannot not make choices and the choices we make, will most often determine the future choices we have to make. Ethics is therefore a living question. The ethical question lives within us always asking us to consider whether the choices we are making are helping us to live the life we truly want to live.

The second fundamental component of ethics is that it is both prescriptive and reflective. Ethics as a discipline prescribes principles intended to guide our moral choices. There are many ethical principles available to us. The ethical task is to determine which principle is the most apt for the situation and will lead us to select the best moral choice of action. Determining the right principle takes reflection and deliberation. It requires a competency in discernment that only comes with frequent practice in reflection and deliberation.

The third fundamental component of ethics is that it concerns our moral reasoning regarding the choices we make. Ethics invites us to examine the intellectual effort that went into deciding what to do. Here we consider which factors we took into account and which factors we ignored or possibly forgot about in deciding our path of action. It asks us to think about how we prioritized our concerns and how we decided which ethical principle/s to inform us and which to ignore.

The fourth and final fundamental component of ethics is the reflection on why things are they way they are and how, as social circumstances evolve, how value conflicts should be understood and mediated. This reflection includes asking questions as to whether known and used ethical principles are relevant or irrelevant to the times in which people are living. Do principles require alteration or revision? The issue of slavery provides a good example. The idea that people should be treated equally goes back 2500 years. The problem with this principle was that it only applied to “equal” people, i.e., only equal people were to be treated equally. In other words those not considered “equal,” women, children and slaves did not fall within the ambit of this principle. Thankfully our approach to equality has largely changed since the days of endorsed slavery.

Another example is the new understanding that ethics is not only about relationships between people but also between other living things. We now recognize that animals have certain moral rights and we are now concerned with our relationship to the environment and with the earth itself.


What we notice about ethics is that it is complex, continually questioning and analyzing, and as circumstances change, and our social consciousness alters, always evolving. Ethics is a living question! To be ethical therefore requires actively and consciously living the ethical question.

This approach to ethics brings with it certain critical implications when it comes to creating an ethical climate. Quite clearly this approach demands an environment in which living the ethical question is actively encouraged. It also means there needs to be a climate that fosters mutual exploration and where there is time and space for this exploration. Open questioning also requires an environment that is not judgmental and which encourages a certain amount of humility and self-doubt. In this environment people pay tribute to the genuine human struggle that attention to ethics entails and they recognize that it is in the muck of that struggle that often the gold is found.


Now that we have defined ethics and explored some of the implications for creating an ethical climate, let us consider the systemic factors that come to play in any organization. A grasp of systems theory is essential if one wants to develop an ethical climate. Leader/s (which includes senior management) of any organization must understand that all organizations are systems, and that systems always exhibit certain dynamics. Let us see what system theory can teach us about developing a healthy ethical climate.

What is a system? A system is a regularly interacting and interdependent group of items or people that form a unified whole. A system is always embedded in other systems; so we always have a combination of systems and sub-systems. A nation is a system and Corporate America is a sub-system. A company is both a sub-system of Corporate America and a system in its own right where its board is a sub-system of the company.

Systems import all kinds of elements from the other systems of which they are part. For example if the larger system is feeling insecure and experiencing fear, the sub-systems will import these emotions into their environments and they will be insecure and fearful too. If the larger system is at war, the sub-systems will become warlike too. If the company as a whole behaves as a corporate bully, its divisions and departments will also mirror this kind of behavior. Similarly if the company as a whole lacks rigor, has no checks and balances and behaves recklessly, the Board of Directors, as a sub-system, will be no different.

In order to be healthy, systems need to be open to external forces and thus be open to and responsive to change. Systems are therefore by necessity dynamic. This makes them complex to understand and to manage. This complexity is exacerbated by the fact that systems resist change as change always implies giving up something for something else. This giving up is experienced as loss. Usually this loss relates to a sense of identity and self-worth. A very common example of change and loss is the pace of changing technology. Organizations have to keep pace with rapidly changing technology in order to remain competitive. This means they are continually giving up old practices and embracing new ones. These changes have implications across the organization. The image of the company needs to be honed in tune with the changes; the corporate culture will change as work practices change, and employees will require continuous retraining. Continuous, rapid change demands that the system is called to continuously renew itself. This is no easy task!

All systems have both explicit and implicit goals both of which relate in some way to survival. Change threatens survival and hence systems (people) resist. This resistance can take many forms. Often, fear and insecurity within the system provides the seedbed for unethical behavior. Calm, well-balanced systems usually experience less insecurity and fear and thus are less likely to develop a culture that encourages misconduct. Misconduct is invariably a sign of distress.

Systems self-select, in other words some people are drawn to some systems rather than others. People do not pick systems, the systems pick them. A good system appoints good leaders not the other way around. A thoughtful leader of an organization asks him or herself why he or she is part of a particular system. What is it that has attracted him or her to that system and what can he or she learn from this information?

Systems assign people roles; both formal, overt, and technical roles, as well as informal, emotional and covert roles. These roles help the system achieve it goals. The kinds of roles assigned reflect the nature of the system, i.e. its culture, its concerns, its pre-occupations, its strengths, weaknesses, its hopes, its fantasies and its fears. A thorough study of the roles taken up in the organization provides important information about the culture and climate of that organization. For example if there are many or predominant roles that reflect positions of anger and fear, the system is struggling with something as a whole. It is not just the fault of difficult people misbehaving!


Now let us add the perspective of group dynamics to systems theory.

Any group is a system and all systems are groups and comprise sub-groups. The Board of Directors, for example is a group as well as its own system.

Where there is a group we have group dynamics. Group dynamics center on keeping the members of the group in line and in role in the service of the survival of the group. As I have already mentioned systems need to change to survive, but due to fear they resist. This resistance is played out by certain roles in the group who have been recruited to assist the system to return to the status quo. This resistance is usually manifested in all kinds of dysfunctional behavior, some of which might be ethical misconduct.

Group dynamics are always about leadership, authority, and power. This means that members of the group are always supporting or resisting leadership; aligning or challenging authority; and positioning themselves in various power coalitions. These activities are an inherent part of all group processes and need to be understood as such. Trying to suppress these activities is impossible as they are the lifeblood of groups. Suppression simply adds to group distress and more covert dysfunctional behaviors. Recognizing the necessity of these behaviors can lead to channeling the energies into more productive work.

Groups are both creative and coercive; they harness creative energy and can destruct this at the same time. The same goes for moral energy. Group pressure to conform; to surrender to the group mind; not to stick out; to be loyal and so on is one of the prime causes of both continuous and rampant dishonesty within organizations. The power of the group to keep people silent and to dissuade them from taking the moral high road and challenge the survival of the system is enormous! We only have to look at Enron, WORLDCOM, Tyco and the like to see evidence of this powerful phenomenon.

So what conclusions can we draw from our discussions regarding systems and groups? To develop a healthy ethical environment requires an understanding of systems theory and group dynamics. It means understanding that systems and groups are always primarily concerned with survival. Poor attention to this fact in a world of challenging and fearful change will result in insufficient attention to the distress of the system and its sub-systems or groups. Distress and fear leads to inappropriate and often unethical behavior.

Another important aspect about systems theory and group dynamics is that one cannot address the behavior of the individual apart from the group. Individual behavior is always to some extent a reflection of group dynamics. This does not totally exonerate the individual, as he or she must carry some responsibility for being recruited by the group to act in a particular way. But to seek true causation and address the problem one needs to evaluate what is going on both at the system and group level. The ethics and morals of the company are always both a system and group problem!


We all know that ethics begins at the top. But what does this really mean? In this short talk I have tried to provide some of the answers.

The top of the organization is considered to be the CEO and his or her senior management team and certainly the Board of Directors. The Board is in one of the highest positions of corporate governance in the organization. As such it should provide high level checks and balances on the behavior of the CEO and his or her management team.

The Board is a sub-system of the organization. As such it exhibits system behavior and certainly group dynamics. The Board is the mirror image of the company.

Good companies select good Boards.

Who typically sits on Boards? These are usually people who are experts in some field. They have some status in the community. They have money or know someone who does. They have egos! If we look at the Board as a system, the stakes are high! It will be a challenge to create an environment of humility, non-judgment, open questioning and an appropriate element of self-doubt into this system. Who on the Board is likely to challenge a fellow expert? Who on the Board is going to admit they do not really understand what is going on or they do not have sufficient time to do due diligence as a Board member? Who is prepared to be vulnerable to the projections of others in this system? Who will help the Board as a system seeking survival and a return to the status quo in the face of challenge to be “above board?”

Clearly these are difficult and challenging questions. If good systems select good Boards and bad systems select bad Boards how can one make changes where they are required?

For one the CEO and Board need to embrace the challenges of living the ethical question. They need to realize that ethics is a quest. It is a pursuit of excellence that can begin at any level and simply engaging in that pursuit will improve the moral compass of the entire system.

Next the CEO and the Board must consciously work together to grasp the organization as a system and the group dynamics that are part of that system. They need to help the organization deal with change and the fears that change brings. Together they need to engender a passion for the product or service that the organization makes or distributes as people seldom harm what they truly love.

Further the CEO, with the help of the Board needs to take the time and the energy to create a climate of real trust given the high stakes within the Board system. Trust comes with a non-judgmental space for open questioning and reflection where people can express appropriate self-doubt.

Finally the CEO with the assistance of the Board needs to understand their organization as a place of imperfection from which they can together advance to greater prosperity and ethical awareness, for it is in the struggle of the human condition, in the searching and striving, in the muck, one often finds the real gold.

Annabel Beerel, MBA, Ph.D.

November 8, 2006

HCS readers are invited to view other articles about SNHU or business ethics at our extensive, permanent archives under the Business Ethics section at the URL or the Christos and Mary Papoutsy Distinguished Chair in Business Ethics at Southern New Hampshire University at

The purpose of the distinguished chair in ethics is to promote and enhance students and community members awareness of ethics in personal and professional settings through teaching, community lectures and conferences. These events will foster understanding and assist in the application of lessons taught by current and classical ethicists to 21st-century settings.The chair serves as the cornerstone for an integrated university program in business ethics that encompasses the undergraduate and graduate levels. For more information about these events or about the ethics chair, contact Jane Yerrington at SNHU (603-668-2211 x2488) or visit the webpages of the ethics chair at

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