What is the Tone at the Top?

The tone at the top defines the level of commitment by management and the board of directors to having an open, honest, and ethically-correct corporate culture. When the top-level group within a business behaves in this manner, mid-level managers and the employees below them are more likely to exhibit the same behavior.

The tone at the top is a key element of an organization's system of controls, for proper support from the top provides a robust foundation for controls. Conversely, if employees see dishonesty and unethical behavior at the top of the organization, they will be much less likely to support the system of controls, and will be more likely to engage in fraudulent activities. In short, employees pay close attention to the actions of their supervisors, and will tend to mimic their behavior.

How to Improve the Tone at the Top

There are several options available for improving the tone at the top. First, set up a system that encourages employees to report any instances of misconduct. This process should be safe for the reporting parties, so that there are no repercussions. For example, a business could set up an anonymous tip line that is operated by an independent third party. Whoever receives these calls should have direct access to the firm’s audit committee, which can act on any information provided. Second, the board of directors and management team should routinely promote the tone at the top. This means having a well-publicized code of conduct that is reinforced through a variety of formal and informal meetings with the staff. Finally, the board of directors and management team should publicly reward anyone in the organization who has shown a high level of integrity in their dealings within the company and with outsiders. These options can assist in creating a positive tone at the top for any organization.