Managers of companies have probably heard the old saying that business ethics is a contradiction. This is because, often, the business world is seen as a savage enterprise motivated by the desire to be ahead regardless of cost, even if it requires cutting corners on ethical standards.
However, that mindset is outdated, according to Harvard Business School visiting professor J. S. Nelson in her latest work, Business Ethics: What Everyone should know, published in April. Nelson is a Villanova University law and business faculty member and co-author of the book. He wrote it along with Cornell University professor Lynn A. Stout who passed away in 2018 when the book was being written.
Nowadays, ethical behaviour is an essential concern for business leaders. Nelson says that they know that customers are attracted to honest businesses and avoid companies that violate ethical boundaries. In navigating in a constantly changing market, and ethically sound approach is the most reliable compass she suggests.
“The world is changing around businesses,” Nelson declares. “There is more pressure to make profits, and at the same time to respond to environmental, social, and governance issues.”
She also says that ethical customer behaviour and a positive workplace aren’t just trendy talking points for businesses. They’ve become essential for the success of any business. According to the authors, “Organizations and societies with high ethical standards tend to flourish, while those with weak ethics often fail.”
“You have to live it.’
Ethics for Business Ethics has been written in a question-and-answer format accessible to everyone, from CEOs to business school students. It covers a broad range of topics, ranging from the fundamentals of ethical behaviour and legal obligations to the development of ethical practices and the importance of whistleblowers.
A central message is gleaned from the book: ethical methods don’t happen by themselves, and everyone in a business is required to continually improve these practices.
“People are not always comfortable talking about ethics,” Nelson declares. “Some have dismissed ethics by saying, ‘I don’t need to think about those issuesto think about them. However, making ethical decisions has to be a conscious decision. It is essential to do the work. It is essential to practice your life … cultivating ethical behavior in our businesses can be among the most crucial actions we can take.”
The surveys show that a lot of work is still to be done. Nelson and Stout say that unprofessional conduct results from “ethical traps” of opportunity motivation, rationalization, and opportunity, which are typically identified through the measurement that include at minimum five different types of violations: disclosing information to workers, discrimination, health and safety violations and theft.
In the world, 20% of employees claim they’re under pressure to break the rules. In the US, the percentage is even higher, around 22 per cent. Managers are accountable for 60 per cent of misdeeds and almost a quarter emanating from the top managers.
The ethical slide is a slippery slope to avoid
Nelson refers to his recent Theranos trial, where Theranos’ CEO and founder Elizabeth Holmes was convicted of fraud against investors in January. One of the indicators that pointed to an ethical flaw in Theranos is that “people started asking questions, and they got fired,” Nelson states.
In the 2016 fraudulent account scandal, bank officials were forced to open 3.4 million false accounts to satisfy company quotas. It is a prime instance of what Nelson refers to as “the ethical slide” into illicit or shady acts.
“People who stay in that kind of system, they get used to it,” she adds. “Either it doesn’t happen to the person who commits wrongdoing, or you’re compensated. Then, bad behavior increases. If it’s occurring across the entire company, you’ll eventually end up with the majority of your time is spent managing crises.”
Promoting a “speak-up” culture
While establishing a good ethical standard might sound like a daunting task, Nelson says it isn’t difficult. For instance, Costco’s code of ethics is based upon a few simple principles, including obeying the laws. Care for our employees and members. Respect our suppliers. We also encourage internal managers to ensure the same ethical standards.
It is similar to the Hershey chocolate company’s Code of Conduct. It includes an inquiry that employees of corporate companies should be asking their employees: “Would I feel okay if everyone knew about it?” Hershey also has a clear anti-retaliation rule designed to ensure whistleblowers feel safe regarding reporting unethical or illegal practices.
Nelson claims that the morals of large corporations such as Costco and Hershey begin with the development of what she refers to as “a speak-up culture,” which encourages employees and lower-level managers to voice concerns.
With investors and customers becoming more aware than ever of ethical business practices, ethical companies will enjoy an advantage in the market, Nelson says.
“You are more innovative. Customers are seeking to find you. An ethically sound reputation is appealing,” she says. Not just that, “those companies are more stable and less unstable. They aren’t subject to massive ethical crises. They’re well-managed,
Furthermore, Nelson says in this competitive labour market, workers want to work for ethical businesses. They’ll look for them and are willing to spend less money, encourage forward with innovation, and are more committed to their firms. “Ethics are an enormous competitive advantage in every way,” she states. “Savvy companies understand this, and invest in their ethics to do so many other things.”
