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business, small or large, professionally.
When a firm or business organisation is established, compliance with the laws of the land in relation to issues like the shareholding arrangement, licensing, directorship, environmental issues, industry rules and regulations, etc, is of paramount importance.

Failure to comply with all applicable laws needlessly puts the business at risk and that may include paying heavy fines to regulatory authorities, or facing closure.
At the same time when a firm is established, coming up with a set of values that direct the behaviour of its employees is an intrinsic business reality which forms the basis of any firm’s ethics decorum, formal or informal.

However, in most organisations, the concepts of compliance and ethics have been used interchangeably as if the two mean the same thing.
In fact, most organisations think that when they have a compliance function in place, it means they have their ethics needs automatically covered.

This is an inherent misconception and it is the purpose of this article to show the difference between these two business fundamentals.
A fully-fledged legal department, and the ethics function is viewed mostly as a human resources function to fulfil the compliance function in most large organisations in the country.

In countries and companies that leverage business ethics as a corporate strategic tool, compliance and the ethics functions are at times combined to form the Ethics and Compliance Department.
Experience shows that where the ethics function is placed under the legal department, the tendency is to view ethics as an extension of the legal department. This tends to compromise the effectiveness of the ethics agenda in the organisation as employees prejudicially focus on the mere need to comply with the letter and not the spirit of the company ethics.

Organisations need to recognise first that there is a material distinction between ethics and compliance. Ethics is an approach to handling business and people issues, and is built around the overarching values of the firm.
It is about the company’s culture and the values that must permeate daily business conduct at every level in the organisation. Each organisation must come up with behavioural standards and codify them to provide a practical guide to staff on what behavioural standards are required of them and make them part of the way it does business.

On the other hand, compliance is a series of systems and processes that are designed to ensure conformity to applicable laws and industry rules and regulations.
The first piece of legislation that a company has to abide by at its inception is the Companies Act that provides a detailed guide on how companies should legally be run.

This distinction is important because it is possible to operate in legal compliance while still acting unethically, or in conflict with the firm’s values and principles.
Yes, it cannot be denied that ethics and compliance are in most cases co-existing.

However, ethics is intrinsic, it starts with you the person, or organisation, whereas the law is extrinsic, that is, it is imposed from outside the individual or organisation.
While the law may form the basis of a sound ethics programme, the law on its own is inherently insufficient to encourage appropriate ethical behaviour in the workplace.

Potential loopholes will always exist when the legal framework is used as a single tool to control workplace behaviour as it provides employees with the opportunity to merely comply with the letter as opposed to the spirit of the law. Ethics thus builds upon the law by reinforcing the spirit aspect of the law, and invoking a spirit of self-regulation, which will then form the basis of a sound ethics programme in the company.

Building an ethical culture in an organisation is a long-term initiative that must be linked to company values more than to law.
Yes, employees in organisations are expected to be in “compliance” with the set standards as stated in the code of conduct and/or ethics. However, this “compliance” has in most cases been the source of confusion on the difference between compliance and ethics as others have argued that “complying with set ethics standards” is itself part of the compliance function.

This scenario, however, also illustrates situations when the two concepts overlap by exhibiting that compliance and ethics are rooted in everyday workplace operations and integrated into daily job responsibilities.
In like manner, workplace discrimination laws that prohibit employment based on race, sex and other personal characteristics supports both the legal and the ethical posturing of the firm.

Here in Zimbabwe and in most countries in the world, it is obviously unethical to discriminate people seeking employment on the basis of their race or religion.
Legally, employers are expected to be in compliance with the requirements of the law such as the Labour Relations Act in our case, which clearly criminalises workplace discrimination.

Companies should know that unlike the relatively simple task of ensuring regulatory compliance, creating an ethical culture is a long-term, well sustained initiative that involves everyone in the firm from management to employees at shop-floor level with clear board oversight. Creating an ethical culture requires system wide commitment and a focus on the behaviours that make a difference in daily business practice.

Vital to the plan are committed leaders who can positively influence the conduct of employees they interact with and mentor, whether in a formal manner or through the standard they set in their own behaviour, actions and responses to workplace issues.

So, instead of just looking at compliance requirements and confusing them with ethics, firms should instead segment the two fundamentals, and evaluate the obvious success indicators that play out in the dynamics of the work environment.

These success indicators will as a matter of fact include looking at how employees react and conduct themselves when faced with ethical dilemmas, or situations that require decisions based on the company’s value systems.

• Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a corporate governance and business ethics management firm. Phone 04-293 2948, 0712 420 090, 0772 913 875, or email [email protected]