Editor’s note: “The Angel Connection” is a regular feature in WRAL Local Tech Wire. LTW asked consultant Bill Warner to share advice for entrepreneurs seeking angel investors and/or venture capital investment. He is chairman of the Triangle Accredited Capital Forum, an angel investor network with over 100 members throughout the Southeast.

RESEARCH TRIANGLE PARK, N.C. – A distinction that is sometimes misunderstood is the difference between compliance issues and ethical issues. Compliance programs deal with external issues that have internal implications on a company (i.e. compliance with the SEC, IRS, Sarbanes-Oxley, and the law).

Ethics programs deal with internal issues that have external implications (i.e. company values and codes of personal and business conduct). A frequently unrecognized challenge for CEOs and business owners is to fully understand how they are the symbol and the source of the culture of their organizations.

CEOs Set the Example

Close scrutiny of a CEO’s personal conduct occurs every day by employees, customers and business partners. Ethical behavior by the company’s leadership will establish respectful business relationships and solidify employee loyalty. Unethical behavior will undermine the integrity of the company. If there is a difference between what a leader says and what a leader does, everyone will see it, and employees and business partners will emulate the bad behavior.

Whether it is simply through ethical behavior or by instituting a full blown ethics program, the company’s leadership must fully stand behind their actions. Establishing an ethical culture is a process, not an end, requiring the company’s leaders to demonstrate the highest standards of integrity and accountability.

Types of leaders

• Ethical leaders are committed to acting ethically and insist upon that from their organization and from their business partners. Not only are they demonstrably accountable for their actions, they are perceived that way as well. They foster a culture that emulates their own dedication to ethical behavior.

• Ethically neutral leaders are inherently committed to ethical behavior, but no one knows it. They are perceived as leaders who have done nothing ethically wrong, but their decision making process has no context of values or code of conduct.

• Unethical leaders believe that ethics is not relevant to the business world. They make pragmatic decisions, without concern for their ethical implications, which sometimes don’t stand up as ethical behavior under external scrutiny.

Foundation for ethical behavior

Executives must establish the ethical foundation for their companies, which will serve as the cultural underpinnings that guide their leadership. Ethical behavior is founded in:

• A set of values that spell out the way employees will relate to each other and the company will relate to its customers and business partners.

• A framework of principles for personal and business conduct that is unambiguous and integral to everyone’s behavior; so that unethical behavior is not an option.

• Selling ethics to others so that ethical behavior is fostered by exemplary conduct by the company’s leadership, where decisions and actions send a clear message of what is tolerated and what is not.

• Standing for what is right in everyday actions by rewarding positive ethical behavior and counseling others when a breach in ethical behavior occurs.

There’s no way around it. Ethical behavior cannot be delegated and unethical behavior cannot be tolerated. Leaders have to be conscious of what is right and what is wrong, and set the example for others by asserting their integrity and honesty. As their reputation grows, so will the respect and dedication of others.

About the author: Bill Warner is the managing partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.