When we think about ethical management, it’s easy to assume that managers will naturally do the right thing in the midst of an ethical dilemma. But the reality is far more complex.

Take Boeing, for example. Boeing has faced significant ethical management failures in recent years, particularly surrounding the 737 MAX crisis. The company prioritized cost-cutting and speed over safety, as revealed in a 2019 New York Times story. Investigations exposed a hostile work environment where employees had filed nearly a dozen whistleblower claims and safety complaints with federal regulators — describing mission-critical issues that were ignored and pressure to not report violations. Boeing's ethical lapses, driven by profit motives and leadership failures, have eroded public trust and led to regulatory crackdowns, lawsuits, and financial penalties.

So what's the takeaway here? It's simple, really: a strong ethical culture doesn’t emerge by itself. Instead, organizations must set clear behavioral expectations and reinforce them through training, performance evaluations, and accountability measures.

The importance of clear ethical expectations

One of the biggest mistakes companies make is assuming that a “tone at the top” is enough. While leadership plays a crucial role in promoting ethical behavior, managers at all levels influence company culture. If managers don’t actively model and reinforce ethical behavior, employees will take cues from their actions — good or bad.

To establish a strong ethical foundation, organizations must:

  • Set explicit expectations for ethical behavior
  • Provide practical, scenario-based training
  • Align performance reviews and compensation with ethical standards
  • Enforce accountability at all levels

1. Turn ethics into action with training

A well-intentioned manager may want to act ethically, but may not know how to handle certain ethical dilemmas. That’s why ethical management training needs to be practical and actionable.

An effective course on ethical management should:

  1. Focus exclusively on ethical management: Ethics training should not be an afterthought in broader compliance programs. It requires dedicated time and attention.
  2. Use real-world examples: Abstract concepts won’t stick. Ethical management training should include real scenarios, preferably drawn from the company’s history or industry case studies.
  3. Model ethical behaviors: Managers need to see ethical decision-making in action, whether through interactive role-playing, case study discussions, or mentorship programs.

By making ethical management training engaging and relevant, organizations can ensure their middle managers are equipped to handle real-life ethical dilemmas.

2. Connect ethical behavior to performance reviews and incentives

Setting expectations is only half the battle — companies should also consider rewarding ethical behavior and penalizing ethical failures. In March 2023, the Department of Justice (DOJ) updated its Evaluation of Corporate Compliance Programs (ECCP) to underscore that ethics should be a measurable part of performance evaluations and compensation structures.

Here’s how organizations can align incentives with ethical management:

  • Include ethical considerations in performance reviews: Managers should be evaluated not only on business outcomes but also on how they achieve those outcomes.
  • Tie bonuses and promotions to ethical leadership: Recognizing and rewarding ethical behavior signals that integrity matters.
  • Use clawbacks for misconduct: The DOJ has strongly encouraged companies to recoup compensation from executives and managers involved in misconduct. This approach ensures that ethical lapses have real consequences.

By embedding ethics into performance management, companies reinforce that ethical leadership is just as important as hitting revenue targets.

3. Promote accountability at all levels

A company’s ethical culture is only as strong as its weakest link. When executives and managers model ethical behavior, employees are more likely to follow suit. Conversely, when managers engage in unethical behavior, it creates a ripple effect that normalizes misconduct throughout the organization.

To ensure accountability:

  • Hold the C-suite accountable: Boards of Directors must ensure that executives are evaluated on ethical leadership, not just financial results.
  • Encourage a ‘speak-up’ culture: Employees should feel safe reporting unethical behavior without fear of retaliation.
  • Enforce consequences consistently: Ethical violations should be addressed at all levels, regardless of an individual’s position in the company.

The bottom line

Ethical management isn’t just about compliance, it’s about building a company that employees, customers, and stakeholders can trust. By setting clear ethical expectations, providing robust training, aligning incentives with integrity, and enforcing accountability, organizations can create a culture where ethical behavior isn’t just encouraged but expected.

When ethics become a core part of a company’s DNA, the result is not only legal compliance but also a more engaged workforce, stronger reputation, and long-term success. The best companies don’t just talk about ethics—they live by them.