Ethical Culture and Sarbanes-Oxley Compliance

"Ethical culture is good for shareholders, employees, customers, and the public at large."


"You can guide your culture to profits and legal compliance all at the same time."


Related Research

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Mitigating Risks
Increasing Bottom-line Profitability

Organizational Ethics – Assessing the Risk
ENRON – the very name brings to mind the horror story of an organizational culture that encouraged cynical exploitation, lies and misrepresentation.  In this ethical disaster zone, the self-interest of a few was feeding off the welfare of shareholders, customers and “good” employees, making it unsafe to report unethical behavior.  Indeed, only a few of the many employees who saw what was happening, had the courage to “blow the whistle.”

The Sarbanes-Oxley Act (SOX) was Congress’ answer to the financial devastation from ENRON, HealthSouth, TYCO and the other corporate fraud scandals.  SOX seeks to ensure that corporations and their management comply with new, stringent standards for financial accounting and reporting.  SOX also sets a framework for ethical behavior within businesses and organizations.

Managing your risk
Your organizational culture may be putting your investment in Sarbanes-Oxley (SOX) compliance at risk – as well as increasing the likelihood of unethical, illegal behavior within your organization. While the SOX requirements for financial responsibility can be readily audited and measured,  “the control environment” -- an ethically responsible culture -- has had no such assessment tool.  It is this gap that CHANGEase can fill.

The need to assess ethical culture can no longer be avoided.  Non-compliance with SOX can be punishable by million dollar fines and up to ten years in prison for key executives, in addition to having the company permanently barred from listings on the stock exchange and its CEOs and CFOs barred from similar offices of responsibility.  According to the U.S. Sentencing Commission, an organization must demonstrate due diligence in promoting “an organizational culture that encourages ethical conduct and a commitment to compliance with the law.”

In a SOX-ethical culture, employees will behave in ethical ways in accordance with SOX requirements.  SOX requires that management provides leadership, training, rewards and other mechanisms to ensure the development of such a culture, where employees will report any unethical behavior to appropriate authorities and where those who report unethical behaviors are protected from retaliation.  Indeed SOX calls for a business culture modeled from the top  -- where CXOs and senior management are positive role models for ethical behavior all the way through the organization.  Ethical culture is good for shareholders, employees, customers, and the public at large.

How do we ensure culture integrity?  Research shows that defensive cultures can foster unethical behavior, and make it unsafe to report it.  Defensive cultures are based in the belief that survival goes to the strongest, or to the one who is best camouflaged.  In these cultures people either aggressively grab for whatever value they can, and reject anything that may threaten their success, or they passively sidestep conflict, blame, or anything that feels risky, including reporting unethical behaviors.  Constructive cultures on the other hand, encourage ethical behaviors and hold others accountable for unethical behaviors. 

Corporations and government auditors need an effective tool for measuring ethical, control-environment cultures – a tool that provides guidance for developing constructive cultures.

SOX CAP™ (Sarbanes-Oxley Culture Audit Program) developed by CHANGEase and Human Synergistics provides just such required evidence.  SOX CAP™ determines where your culture and compliance may be at risk – and how to mitigate that risk. 

Compliance Can Really Pay

Ensuring a SOX-compliant culture can drive bottom line business success – as well as conformance to legal requirements.   “Companies explicitly committed to an ethics code return shareholder value at twice the rate of other companies.  Investment reports show that 17 organizations known to be facing ethics crises have lost share price at four times the rate of the Dow Jones Industrial Average.” Indeed, business research has consistently proven that constructive organizational cultures correlate to significantly higher profitability, growth, innovation … as well as to ethics.*  You can guide your culture to profits and legal compliance all at the same time.

At last, here's something related to SOX compliance that actually drives significant business success – rather than just adding unproductive costs associated with proving compliance.  It's really very exciting to offer this kind of contribution to ethics, bottom line results, legal compliance, risk mitigation and employee engagement - all in one package and adapted to the international reach of many US-based corporations.

SOX CAP™ (Sarbanes-Oxley Culture Audit Program) includes:

  1. Assessment survey
    1. Profiling the perceived impact of management efforts to ensure a SOX compliant culture
    2. Correlating culture factors with SOX-compliance factors, to see how they interrelate and affect each other
  2. Consulting services
    1. Initial business case analysis
    2. Analysis of assessment findings 
    3. Feedback reports and facilitation
    4. Guidance on options for enhancing the culture for greater ethical and legal risk mitigation, as well as for corresponding improvements in generating better financial performance.


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* Identified in the 2004 study by Northwestern University (Forum for People Performance Management and Measurement), Evanston, IL  

© 2006 Changease Inc.