Many employees view ethics training as the workplace equivalent of meeting the in-laws. For some, it’s a source of apprehension and a distraction from more urgent matters. For others, it’s an unnecessary waste of time and just another event to be checked off a to-do list. However, more and more employers see formal education and training in ethical practices as a prerequisite for improved decision making and an essential element of corporate success.

General Motors administers an online test with ethics-related questions as part of its interview process. Nike has a vice president specifically focused on managing global corporate responsibility efforts. Johnson & Johnson has a long-standing credo to serve its customers, employees, and communities ahead of its stockholders. And more companies are requiring annual ethics training for all of their employees and expanded training for top managers.

Graduate business schools also are taking positive steps to counter the image of churning out managers well-versed in finance, corporate strategy, and the language of business but lacking the moral philosophy to deal with nuanced ethical issues. Every year Dartmouth College’s Tuck School of Business, in Hanover, N.H., for example, persuades an ex-convict to come and discuss his or her regrets with its MBA students. In addition, several top-tier business schools are considering a requirement for graduates of professional business programs to pledge their commitment to a set of duties and obligations expected of business leaders — something analogous to the physician’s Hippocratic oath.

Fraud: Victimless crime?

Unethical business practices often begin with peer pressure or a superior’s direct request for unethical behavior. Consider the case of Betty Vinson, a CPA working in WorldCom’s accounting department who routinely assisted in the preparation of financial documents. What began as a one-time request to inflate quarterly earnings by shifting operating expenditures into capital expenses became a mountain of misallocated expenses and bogus accounting entries totaling more than $3.8 billion. As a consequence, this former Sunday school teacher was sentenced in early August to five months in prison and five months of house arrest.

The military has not been immune to ethical lapses. Sexual harassment, fraud, and other unethical behaviors in recent years have resulted in the removal of several dozen flag and general officers, plus the senior enlisted advisor to one of the service chiefs. Following a jump in improper recruiting practices, the Army suspended all recruiting operations this past May and dedicated a day to retraining its 7,500 recruiters in ethical practices and the laws that govern what can and cannot be done to enlist an applicant.

Many observers see fraud as a victimless crime. Fifty percent of all criminal activity involves employees stealing from employers, and the Association of Certified Fraud Examiners recently reported that U.S. companies lose roughly $400 billion a year to internal fraud. Many of these losses are through padded travel and expense reports, one of the most common forms of employee larceny. But no crime is victimless. Ethics and values — perhaps more than any other element of corporate or individual character — directly affect reputation. And for both companies and individuals, your reputation is your most fragile asset.

What not to do

Besides recruiters, who face relentless pressure each month to meet quotas, military officers and civilian officials working in the acquisition field are particularly vulnerable to ethical lapses. Acquisition executives routinely deal with huge pressures in the process of awarding lucrative government contracts and, eventually, in negotiating their own transition to the private sector. The issue might even go beyond summoning the courage to do the “right thing.” The challenge is deciding which right thing to do when confronted with two competing priorities.

One high-visibility case involves former Boeing CFO Michael Sears and Darleen Druyun, a former corporate vice president at Boeing who recently retired from her civil service job as the No. 2 acquisition executive for the Air Force. What began as low-level discussions to secure employment at Boeing for two of Druyun’s family members grew into a major conflict of interest as Sears held direct employment discussions and at least one “nonmeeting” with Druyun before she removed herself from authority over Boeing contracts with the Air Force.

As part of her plea bargain, Druyun is serving a nine-month prison sentence after admitting she illegally favored Boeing in the contract awarding process out of gratitude for the company having given jobs to her and two family members. Sears was sentenced to four months in prison for improperly recruiting Druyun.

As a direct result of this scandal, Boeing fired Sears and Druyun in November 2003, and Phil Condit resigned as chairman and CEO of Boeing a week later. Moreover, federal investigators have faulted Boeing’s “senior management” for failing to ask “the obvious questions” or “confront the obvious legal and ethical issues” that might have prevented any illegal activity.

Industry insiders have speculated that Boeing competitors also were courting Druyun for employment after she retired from the Air Force. Her contacts and extensive acquisition experience potentially could have grown into a valuable corporate resource. What began as a right-versus-right dilemma — to recruit Druyun and successfully compete for important defense programs in the face of relentless profit pressure — mushroomed into a major corporate ethics investigation and jeopardized billions of dollars in government business for Boeing.

In his book Defining Moments (Harvard Business School Press, 1997), Joseph Badaracco, a professor of business ethics at the Harvard Business School, argues that “right-versus-right choices are best understood as defining moments.” In Badaracco’s view, defining moments involve decisions with three characteristics: They reveal, test, and shape. For both organizations and individuals, right-versus-right decisions reveal basic values, test the commitments that a person or an organization has made, and define important values for future decisions.

Armed with knowledge

Because defining moments indelibly color the character of an organization and its leaders, a number of innovative programs in business and academia help professionals make better decisions when confronted with thorny ethical questions.

The faculty at MIT’s Sloan School of Management in Cambridge, Mass., is working to integrate and emphasize the importance of ethical corporate and individual behavior throughout the academic program. According to Neal Hartman, senior lecturer in Management Communications, “there is a growing recognition of the value in business and management students examining the importance of ethical behavior as a part of their curriculum.”

MIT graduate business students focus on ethical corporate conduct and social responsibility from the onset of their academic program. Courses emphasize the importance of ethical business practices, the challenges of maintaining professional obligations and standards of conduct in a global business environment, the appropriate role of government in regulating and defining the parameters of acceptable business behavior, and the nontrivial costs to businesses associated with mandated regulation and compliance.

Hartman sees growing numbers of business students with a keen interest in balancing profitability and ethical behavior, especially with regard to corporate social responsibility. He echoes the prevailing view of many business leaders that the resulting damage from unethical behavior can easily outweigh the short-term gain.

As for leadership, military officers encounter some of the most complex challenges, and frequently these challenges are confronted in high-pressure situations early in their careers. It’s not surprising that all of the service academies have gone beyond the fundamental elements of integrity specified in the academy honor codes and initiated formal education in philosophy and ethical behavior. According to Capt. Rick Rubel, USN-Ret., distinguished military professor of ethics at the Naval Academy, the ethics and moral philosophy education program strives to equip officer candidates with an understanding of “the why behind the honor code.”

Through a series of classic readings, practical case studies, and classroom discussions led by professional military faculty, officer candidates are introduced to some of the major philosophical ideas that underpin our civilization and the lives of those who developed and refined these ideas, including Plato, Aristotle, Epictetus, Mill, and Kant. Classic moral philosophy is supplemented with contemporary readings from Adm. Jim Stockdale, USN; Dr. Martin Luther King Jr.; and other thoughtful observers of our life and times, as well as case studies specific to the profession of arms — including appropriate uses of deadly force, the importance of integrity in the command structure, and the moral dilemmas of modern warfare.

The point of this reading and discussion is to give officer candidates a framework for individual moral reasoning — “to better understand the why behind a decision and to deal with the beliefs and faiths of others when acting in a leadership role,” according to Rubel. One student who recently completed the course remarked how important it is for leaders to have the education and training necessary “to reason through ethical dilemmas as opposed to using the simple gut-check.” Another strong endorsement of the program came to Rubel’s attention from a former student now serving as a Marine company grade officer deployed to Iraq. Describing a leadership decision under hostile fire, this officer commented that “the fog of war seemed to clear” as a result of his education in ethics and moral philosophy, and he credits his preparation in this class as an important element of his success as a leader in combat.

The U.S. Military Academy also features a multi-faceted program of ethics and values education. “Military officers routinely encounter novel situations that are difficult to anticipate, and the ability to reason ethically is most important,” according to Col. Thomas Kolditz, USA, head of the Department of Behavioral Sciences and Leadership.

Accordingly, an emphasis on ethical underpinnings is integrated throughout all aspects of the academic and leadership development programs. Cadets complete a core philosophy course under the auspices of the English Department during either their freshman or sophomore year. This course has evolved since its inception in 1978 and now includes three components: logic and critical reasoning, an examination of major ethical theories, and an analysis of the competing views of just war theory. This course is taught by a mix of civilian and military faculty and is supplemented by faculty members from other academic disciplines whose specific expertise reinforces education in ethics and values. The end result of West Point’s academic program in ethics education and the reinforcement cadets receive at the company level throughout their undergraduate education is a junior officer prepared for the uncertainty, unpredictability, and intensity associated with military operations in support of the war on terrorism.

Jim Carman is a graduate of the MIT Sloan School of Management and a retired Navy Captain. He speaks and writes about career transition topics, provides career information presentations for the Navy Personnel Command, and serves as a business development advisor for a growing technology company.