Why should companies and employees be ethical? How would you add to, subtract from, or modify IBTE’s “Nine Good Reasons”?
IBTE’s list of reasons why companies should be ethical is solid, though I would strongly suggest reversing their order. I would place “It’s the Right Thing to Do” first, followed by personal pride — employee performance — customer loyalty — etc… The most solid business foundation comes from doing the right thing. Then the obvious by-product of doing the right thing is personal pride in leaders and managers. Personal pride then naturally produces an environment for employees where they can perform most effectively. And that naturally leads to customer loyalty, and so on down the line. I don’t believe a company can effectively or ethically focus outside the company (market, investors, customers) if it doesn’t have a solid, ethical core inside.
There’s one element I might add to this list. Let’s call it the “One Plus One Equals Way More Than Two” Factor. Think of the best sports team performance you’ve ever seen. What do you remember about the team and its star players? It’s as if there is a magic, supernatural force at play and it can’t be stopped any short of perfect execution. For example, watching some of the Chicago Bulls games in their glory days, it’s as if they were playing in a different gravity zone. When companies are intrinsically ethical, and then you stir in a good product or service, a market that needs it, great talent, good strategy and coaching, you create the possibility for this magical element where teams within that company perform at world championship levels. Not only will they break record performance levels (this spells deep customer loyalty, which leads to supplier trust, etc…), they will also likely form working relationships and behaviors that are contagious and set standards for other teams.
You can’t always predict it, and you definitely can’t force it. But if the right elements are placed on the right foundation, this magic and spirited dynamic feeds on itself. Ethical soundness at a company’s core breeds this magic ingredient. Who knows, it might even inspire revolutionary change — both within and outside the company.
Author of Customer.Community (Jossey-Bass, 2002)
The main reason companies should be run in an ethical manner comes down to simple organizational survival. I’ve seen it too many times: the misuse of power or misbehavior of powerful people leaves a legacy. Employees cringe in the presence of the offending person. Whole pieces of the organization hide out, trying not to be identified as prey. The consequences? A whole generation of unproductive employees, many of whom end up either leaving or forced out. The “reputation” lives on past the tenure of the offending person because it was this organization that tolerated, covered-up, or even protected the offending person for so long.
What to do? Top leaders have a responsibility to open communication channels widely in the organization so this sort of behavior is exposed before permanent damage is done not only to the employees but to the organization itself.
Some voices out there agree that being ethical is important in business. Here are some examples: The last of “Investor’s Business Daily’s 10 Secrets to Success” (IBD, April 10, 2002), says: “Be honest and dependable; take responsibility: Otherwise, numbers 1-9 won’t matter.” One of Warren Buffett’s criteria in selecting a stock is that management is straight forward and honest. If he gets the impression that management is dancing around the truth, that is a big minus.
An old Wall Street saying is that “The bulls (people who make money when the market goes up) make money, the bears (people who make money when the market goes down) make money, the chickens (people who are too scared to be in the market) stay on the sideline, and the pigs (greedy people) get slaughtered.” One of Deming’s Total Quality Management underlying principles is being ethical. If one cheats and is unethical, the TQM stuff will not work.
In the commodity trading pits, integrity is very important because literally by one nod of one’s head, million of dollars exchange hands. If you cheat and say you did not make a trade, nobody will trade with you. The pits that have a reputation of being “honest” are usually the ones that are highly liquid (lots of repeat business). Another saying related to the ethical issue is “Be nice to everyone on your way up, because you meet the same people on the way down.”
Being unethical actually can have short term gains. It has certain appeals just as evil sometimes has certain attractiveness to it. It appeals to our greed, our desire to have power, our desire to be superior. But in the long term, you’ll really pay, often in unimaginable ways.
I disagree some with IBTE’s 7th “reason to be ethical” where it says “Companies that have poor reputation have difficulty attracting and retaining top talent.” Unethical companies can and do attract top talent. But top performers who are not ethical can turn around and bite the company anytime.
Mountain View CA
I have made the choice in my life to live in an ethical way as best I can. Because of that choice, I would not want to work for a company that is not conducting itself in an ethical manner. To be happy, I must be able to feel proud of my superiors, that they are making ethical decisions and set an example for and expect their employees to do the same. Similarly I need to be able to proudly present my firm to clients or customers as an organization that they can count on to behave in an ethical way. In the long run I feel that the company and those who work there will be better for operating in this way rather than needing to spend time and energy on making continuing decisions to fit in with earlier unethical ones. And, furthermore, in the long run I believe that the customers will prefer to deal with people and companies that have treated their customers fairly, and that have conducted their business in an ethical manner.
Stewart and Patten Co., LLC, Investment Management,
San Francisco CA
In addition to the many practical business reasons for being ethical, I believe that ethical actions help create a better society in which to live and do business. Whether we occupy executive or line positions in an organization, our actions can help build such a society. Our local communities and the wider society are stakeholders in the business equation. Ethical businesses and employees are solid pillars which society can lean on for leadership and development.
President, Financial Leadership Corporation