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Ethics as a building block of economic growth: Global insights and Indian Country models

An effective institutional framework to encourage and manage ethical behavior is a crucial aspect of good governance.

July 1, 2010


Article Highlights

  • Standards essential for good governance

  • Navajos establish reputable ethics management

  • Linked to transparency, predictability, and accountability

Ethics as a building block of economic growth: Global insights and Indian Country models

Over the last few decades, the movement by Native nations in the United States to rebuild complete systems of self-determined government has been impressive, and it continues at a remarkable pace. This article builds on work the Federal Reserve Bank of Minneapolis has been engaged in with partners across Indian Country to help provide tools to enhance and develop tribal governance and commercial law. It discusses another crucial aspect of good governance: an effective institutional framework to encourage and manage ethical behavior in both the public and private sectors. It offers insights about ethics management gleaned from studies from developing countries and highlights some model ethics infrastructure enhancements from Indian Country.

The case for ethics management

Hardly a day goes by without news of persons in business or the public sector who are embroiled in scandals over alleged ethics violations, sometimes rising to the level of criminal activity (i.e., corruption). Whether single incidents or longstanding practices, unethical behaviors erode trust in leaders and the institutions they represent.

Trust is at the heart of good governance, and good governance, in both the corporate and public sectors, promotes sustainable business growth. In the absence of good governance, unethical behavior can flourish. The problem is circular; if unchecked, unethical behavior undermines the rule of law, thereby further weakening legal and administrative institutions. The cost of poor ethics management goes beyond padded payrolls or monies siphoned into personal expense accounts. A lack of reliable, transparent, and consistent governance is a powerful disincentive to invest or otherwise do business.

Numerous studies by international development organizations have concluded that even though corrupt practices may offer short-term economic benefits, there is a direct correlation between unchecked corruption and stifled development over the long term. Conversely, studies of markets worldwide indicate that transparent political institutions, sound laws, independent dispute resolution forums, honest bureaucrats, and strong separation of politics from business foster healthy economies. Among economic development researchers and practitioners, there is a concerted effort to raise awareness of the global importance of effective public and corporate ethics systems in instilling the market confidence necessary to encourage and sustain capital investment and business development.1/

In tribal jurisdictions, as elsewhere, public servants continually face situations that raise ethical dilemmas. For example, should they give preference in hiring or contracting to relatives? Deny business-related land lease applications submitted by political opponents? Or misuse or misappropriate monies or property in tough financial times? Many tribes have adopted ethics codes or rules of conduct pertaining to these and other matters, but they vary in how detailed they are, whether they are rules or guidelines, whom the standards apply to, what entities have oversight, what the penalties for violations are, and how the penalties are determined and enforced. While some tribal ethics systems are well developed and well managed, others are quite limited. Some interesting models have emerged in Indian Country, however, for developing effective and culturally appropriate ethics management systems.

Commissions, councils, and constitutional reforms

The Navajo Nation, which straddles the borders of Arizona, Utah, and New Mexico and is the largest tribal jurisdiction in both population and land area, has developed an extensive ethics management infrastructure. The tribe's Ethics and Rules Office and Committee implement the tribe's Ethics in Government law and are entrusted with assuring accountability among elected officials and tribal employees. The Committee and Office have a dedicated web site that posts press releases, advisory opinions, official rulings, instructions for filing complaints, and explanations of how the investigative and hearings processes work. In April 2009, the Office hosted its second three-day ethics conference, which attracted more than 200 attendees. Topics included ethics law, regulations and standards of conduct for elected officials and staff, and information for filing complaints. The event featured presenters from several of the tribe's divisions, which include a white collar crime unit, an Auditor General, and offices dedicated to resource enforcement, government development, personnel management, labor relations, retirement services, finance, elections administration, and business regulation. In addition, the Navajo Nation has a separate judicial conduct commission to enhance public confidence in its courts by providing fair, impartial, and expeditious forums for grievances against tribal judges.2/

Other tribes have established similar offices or commissions. Many have been or are in the context of constitutional reform. For example, the Blackfeet Nation in Montana has undertaken a significant constitutional reform initiative. In one recent development, the reform committee reached a consensus to recommend adoption of a four-branch form of government. This would include a cultural branch made up of an ethics committee that will oversee all tribal government systems in order to maintain ethical standards, ensure due process, and assure that unethical behavior by tribal employees is appropriately addressed.3/

One model tribal initiative demonstrates that ethics management is not just for adults. In 2002, the Honoring Nations program of The Harvard Project on American Indian Economic Development presented an award to the Akimel O'odham/Pee-Posh Youth Council of the Gila River Indian Community in Arizona. The Youth Council, among its many recognized accomplishments, had established a Code of Ethics that strictly forbids alcohol and drug use, gang participation, and inappropriate behavior. Although violations are reported to be rare, members who fail to comply face swift and stern sanctions from their peers. The code establishes a high bar, and by it the Youth Council shows that its members can live exemplary lives. The adult community took notice, and moved to replicate the code within the tribal government.4/

Working in tandem

These are but a few of the many good examples of ethics systems in Indian Country. Increasingly, effective tribal ethics management is being addressed at conferences, in workshops, and as part of tribal college curricula. Leaders are recognizing that reputation and trust are critical underpinnings of good governance. A depoliticized ethics management regime that helps answer the complex ethical questions arising in the day-to-day realities of the workplace will foster an environment that is trusted and conducive to economic development.

A formalized ethics regime ensures that all stakeholders know and understand the rules and expectations. In addition to containing written rules that reflect important cultural values, good ethics systems typically include well-publicized and trusted reporting mechanisms, incentives for compliance, protections against retaliation and false or frivolous claims, independent or otherwise trusted investigation processes, impartially applied sanctions, consistent enforcement, and stakeholder training and awareness. Each is crucial; together, they promote an environment of transparency, predictability, and accountability that, in tandem with other efforts to develop sound governing institutions, will enhance and encourage investment and growth.

Ethics as a work in progress

Building an effective ethics management system is an ongoing effort, not a one-time project. Even in countries with well-developed economies and government institutions, ethics management systems undergo frequent revisions. For example, at the federal, state, and local government levels in the United States, ethics reform is a continuous process. The current generation of federal ethics measures includes the Ethics Reform Act of 1989; the Honest and Open Government Act of 2007; various presidential memoranda on pay freezes, transparency, and open government; and a recent Executive Order on Presidential Records. In addition, all states have ethics commissions or oversight agencies and have laws requiring local governments to enforce ethics laws and regulations. In the business sector, the widespread impact of corruption and unethical practices in recent years has led to the enactment of far-reaching federal laws to curb such abuses. One prominent example is the Sarbanes-Oxley Act of 2002, enacted in response to several major accounting scandals involving Enron, Tyco International, Adelphia, Peregrine Systems, and WorldCom.

A note on corruption

There is a distinction drawn between ethics breaches and corruption. While all acts of corruption are unethical, not all unethical acts are considered corruption. Corruption refers to ethics breaches that, due to their context and severity, warrant intervention of the criminal justice system. While anticorruption measures are outside the scope of this article, studies of the effects of corruption and other unethical practices inform the discussion it contains. For example, according to a 2008 United Nations Development Programme report titled Mainstreaming Anti-Corruption in Development: Anti-Corruption Practice Note, evidence from across the globe shows that corruption hurts the poor disproportionately; hinders economic development; reduces social services; diverts investment in infrastructure; and fosters uncertainty, unpredictability, and disrespect for governing institutions and authority.


1/ See, for example, Proceedings of the OECD [Organisation for Economic Co-operation and Development] Symposium on Ethics in the Public Sector: Challenges and Opportunities for OECD Countries, November 3–4, 1997. Available at

2/ For more on the Ethics and Rules Office and Committee, see

3/ For more on this development, see the March 22, 2010, press release on the Blog Page at

4/ To read more, search under "Gila River Indian Community" at