The Ethics of Professional Relationships

Elizabeth Pittelkow Kittner CFO and Managing Director, Leelyn Smith LLC
Exploring Ethics in Business & Finance Today

Ethical pressures within professional relationships, whether inside or outside the organization, rarely look unethical on the surface. In some cases, ethical pressures may be masked with words like efficiency, agreement, or trust. Even common phrases like “easy to work with” can dilute one’s ability to apply independent judgment and decision making over time.

Knowing how to respond to ethical dilemmas is sometimes straightforward, especially when a client or colleague asks for something that is clearly wrong. In those situations, the requests can be refused, and the relationship can end. However, many situations are more complex. For instance, if a leader or supervisor asks for something that feels off, or if a long-standing, profitable client pushes the ethical edges of what is acceptable, knowing how to respond may not be as clear.

WHERE ETHICAL PRESSURES SHOW UP

Whether internal colleague pressures or external client pressures, the underlying issues are similar. Ethical pressures often show up when avoiding tension feels easier than continuing the conversation. Here are a few examples of what these ethical pressures may look like.

Colleagues may apply pressure with statements like:

• “We have always done it this way.”
• “We do not want to create a bottleneck in the process.”
• “We have never had anyone push back on this approach before.”

Clients may apply pressure with statements like:

• “Is there any flexibility on how this code section is applied?”
• “What is the likelihood I will be audited if I want to take this action?”
• “Would another organization be willing to apply different thinking on this matter?”

Professional standards, including Treasury Department Circular No. 230 and guidance issued by the AICPA, emphasize independent judgment. However, independent judgment is more difficult to execute when the disagreement feels like it is more about the relationship rather than the technical application of the rules.

Pushing back can feel like undermining trust, slowing progress, or being perceived as difficult. Over time, small accommodations for either colleagues or clients can become easier to justify, and ethics could gradually erode. It is important to remember that the discomfort felt when pushing back is a signal that professional judgment is being tested.

MANAGING ETHICAL PRESSURES

Organizations that manage ethical pressures well treat them as a shared responsibility in addition to holding individuals accountable for their behaviors. Organizations can make it clear that questioning assumptions is part of exercising professional integrity and is more important than maintaining unethical relationships. Annual assessments of client and internal relationships can create a dialogue and help identify issues before they escalate. In situations where ethics are challenged, guardrails matter. When ethical pressures present themselves, professionals often sense them before they can fully articulate or communicate them. Here are questions to ask yourself when faced with situations that feel unethical:

• “Am I applying the same judgment I would apply to a similar situation?”
• “Would I reach the same conclusion if the relationship was not important?”
• “Would I be comfortable explaining my judgment to a regulator, leader, or successor?”

Whether the conversation involves a client or colleague, the right language can help inspire courage in tough situations. Organizations could provide training on how to approach ethical dilemmas. Additionally, organizations should be mindful of how their compensation and incentive structures communicate organizational values. If retention and harmony are rewarded without enough emphasis dedicated to ethical risks, ethics can get murky.

The London Interbank Offered Rate (LIBOR) manipulation scandal is an example of how relationship-driven behaviors can undercut ethics. For many years, several global banks submitted daily estimates used to set the LIBOR, a benchmark that affects trillions of dollars in financial transactions and contracts worldwide. The banks’ submissions were intended to reflect each bank’s independent assessment of its borrowing costs, but they were instead affected by peer expectations, trader relationships, and market norms. Small adjustments to estimates were viewed as favors instead of fabrications, and ethical risks were not prioritized. This unethical behavior persisted from the mid-2000s until regulators exposed it in 2012, which is an example of how easily independent judgment can erode when relationships become the most important priority.

AVOIDING GROUPTHINK BEHAVIORS

The LIBOR scandal also highlights the concept of groupthink, which can lead individuals to participate in unethical behaviors because others are and no one in the group is strongly objecting to them.

A way to safeguard against groupthink is to encourage differing opinions as part of the organization’s decision-making processes. Consider asking someone to serve as the counterarguments person to intentionally think through reasons to not take a particular course of action. Depending on the project, it could be effective to rotate the counterarguments person so others get a chance to practice and develop this skill. This rotation ensures ongoing decisions are not biased by similar thinking. It is also a powerful practice for leaders to encourage others to speak their opinions first, only sharing their opinion later to reduce their influence on others’ thinking.

When considering safeguards against groupthink, choice of language is important and can help professionals raise concerns in a way that indicates thoughtfulness instead of opposition. Phrases may include:

• “Before we make a decision, let’s pressure-test it.”
• “This idea warrants another look at the current facts.”
• “I would like a colleague to look at the situation with a fresh set of eyes.”

INTEGRITY IS THE KEY TO PRESERVING ETHICAL RELATIONSHIPS

Another important safeguard against ethical pressures for organizations to be mindful of is their follow-through once an ethical concern is raised. When professionals see that raising ethical concerns leads to discussion and review instead of retaliation, they are more likely to speak up again, which elevates the integrity of both the organization and its people.

While it is natural to want to preserve relationships with colleagues and clients, professional ethics and integrity must remain at the center because they are the foundation of healthy relationships over time.

Professional relationships work best when they are grounded in integrity and supported by healthy, respectful discussion. Those conversations should allow room for well-intentioned pushback and professional judgment, even when it slows the decisionmaking process. Colleagues and clients may not always agree with you, but when they respect you and your organization, they are more inclined to interact with you in ethical ways.