When behaving ethically is a competitive advantage

Dov Seidman, the CEO of LRN, dropped by earlier this week. He's visited before, and I haven't known what to make of what he's selling. LRN started out in 1992 as a legal research network (LRN, get it?) that law firms could outsource projects to, then got into compliance training for corporations, and now is all about training aimed at "inspiring principled performance."

Yeah, whatever--I generally prefer to leave high-minded stuff like that to my colleague Marc Gunther. But the continuing stream of alarming news out of Hewlett-Packard has started to make some of the things Seidman says ring true. If you focus on compliance with rules, he argues, you inevitably get the kind of behavior seen at HP, where the discussion about spying on board members seemed to focus entirely on what might be legal rather than what was right. The only way to prevent such missteps, Seidman says, is to have a corporate culture in which such shenanigans are frowned upon.

The funny thing is, HP used to be famous for having such a strong culture. Companies with the founders still around usually do. "Then," says Seidman, "they get lazy and start writing these dumb rules."

Seidman says culture can be a major competitive advantage for companies. Sounds reasonable. He also thinks it can be inculcated, not just developed organically. We'll see about that.

UPDATE: In the comments section below, FORTUNE's Marc Gunther has a nice post about how good employees want to work for companies with good values. Again, I'm always dubious of corporate talk about "values" and "culture" because so often it's just talk. But I absolutely agree that most people want to feel that their work has a purpose, and companies can gain an advantage by giving them that feeling.