At a lecture on ethics I attended a few years back, the speaker asked the parents in the audience to think honestly about an answer to this question: Would they rather have their kids cheat on a few tests in high school and get into Stanford, or not cheat and get into a lesser school.

I always think about that question when I hear speakers drone on about "tone at the top," a phrase I'm finding particularly overused these days.

Don't get me wrong: Tone at the top is absolutely critical to an ethical workforce, sound governance, fraud deterrence, operational discipline, long-term sustainability, a positive control environment, and a clean close shave.

But "top" is relative.

When I started working at The Boston Globe's electronic publishing subsidiary in the early '90s, I reported to a vice president on the print side of the business, which was located a couple of miles down the road. But the Globe had been purchased by The New York Times Company the year before I started, so it wasn't long before we all reported to a "NYT Digital" unit in Times Square.

Ultimately, everyone rolled up to the CEO of The New York Times Company, but, with all due respect to Arthur Sulzberger Sr., I had no idea what he looked like, let alone what tone he set. And I certainly didn't know whether the company's board was setting the right tone.

For the record, they probably wouldn't have been thrilled with our behavior up in Boston. No, we were not behaving unethically or falsifying numbers (this was an Internet subsidiary in 1994—we had no numbers). We were just having far too much fun for The Old Gray Lady, and there was no effective process through which the company's "tone" could make the trip up the coast—and down the chain of command—to our subsidiary.

In retrospect, the Times' CEO—or anyone from New York, for that matter—probably should have been making regular visits to our office; in my five years at the company, I recall only one visit from a corporate officer (for the record, it was from now-chairman Arthur Sulzberger Jr., whose visit was much shorter than I expected).

In Senate testimony in 2002, TIAA-CREF Chairman and CEO John Biggs stated that "in reality, I believe most corporations have the right 'tone at the top.'" And it's not a coincidence that all the ethics studies that come across my desk seem to demonstrate that directors and officers believe—like Biggs noted—that their tone is appropriate and that their workforce is ethical.

But ultimately, it doesn't matter what the CEO and chairman think; it matters what the employees think.

William McDonough, chairman of the Public Company Accounting Oversight Board, has noted on numerous occasions that, when conducting inspections of accounting firms, his inspectors will check to make sure that the "tone at the top" is reaching the rank and file in the firms.

"Our inspectors will talk to the managers, but they will also talk to the least experienced members of the audit teams to find out if the message is reaching them," McDonough noted. "We will look at how often and how well the message is delivered."

That's a critical test, and it's one that all public companies should take, not just auditors.

It's like the question posed to parents about whether they'd prefer their kids to cheat or not: The parents' answer is less important than what their kids think the answer will be.

The column solely reflects the views of its author, and should not be regarded as legal advice. It is for general information and discussion only, and is not a full analysis of the matters presented.

If you'd like to react or respond, we urge you to write a letter to the editor.

Topics