Ligia Maura Costa, Full Professor at FGV-EAESP, Brazil, continues from her previous article on the paradoxical benefits of corruption scandals with a feature on the legitimacy of business ethics.
Why may “good companies” go off the fences? What drives upstanding corporate managers over the edge? These questions are more opportune than ever and are quite fascinating and worrisome. The role of companies, managers and business people in general have become more complex over recent years with a shareholders’ maximizing-profit approach no longer acceptable by society and societal cynicism regarding the political environment, economic issues and more specifically business, creating a challenge for companies to currently face. Moreover, a strong sense of ethics, integrated into a corporate social responsibility approach, is demanded of business people in order to respond to the expectations of today’s society. General working conditions, profitability and status no longer define a good company, with the generally agreed observation that a company’s ethical approach is more than likely to be taken into consideration in the new paradigm of a “good company”.
Are Business Ethics at a Crossroads?
Ethics is commonly understood as standards of “good” or “correct” behaviors. Broadly speaking, the concept of business ethics is defined as a system of laws, rules and guidelines on which companies and business people base their operations and working approach in an unbiased, legal and moral manner. It could be argued that these rough parametres can have different meanings for different people. However, there is no disagreement among mainstream scholars that ethics in business is knowing what is “right” or “wrong” and more important, “doing what is right”. In a nutshell, business ethics represents the integrity and the well-being of the whole organization. That said, two simple questions may easily be answered:
- Should companies change product requirements for suppliers without adjusting production deadlines and prices, pushing suppliers to breach labor standards in order to deliver?
- And should companies lie to consumers about products’ quality?
The answer to both questions, in principle, is very easy: of course not. Forced labor is unethical, besides being illegal. And misleading consumers is unethical, above and beyond being illegal. Unfortunately, in the real world the answer is not that easy to predict. If it were an easy answer, why do many companies and business people go for the “wrong” behavior? For example, anyone who knew about Volkswagen software was able to predict that chances of losing were increasingly high in the long run. Volkswagen’s cheating was odd in nature, in fact. Moreover, another recent example of an organization not honoring its ethics commitment is the case of FIFA. The suspended president Blatter said that it was “humiliating” that FIFA’s ethics committee – created during his presidency – could bar him from the office (Dunbar, 2015). Ethics in business cannot be just talk.
Codes of Ethics: How to Create, Implement and Improve?
Ethical dilemmas faced by companies and business people are complex, generate innumerous issues, and may not always have a clear guideline. A code of ethics is a helpful tool to guide ethical rules of operations for companies. However, many disagree that codes have some value at all, arguing that ethics in business cannot be perceived by organizations as a fragmented matter that can be set apart depending on the circumstances. Neither, can it be considered as the doctrine of altruism. In fact, codes of ethics are not influential in determining people’s behavior in the workplace, except if their values are fully implemented and regularly improved. As Brenner points out, “all organizations have ethics programs, but most do not know that they do” (1992: 392). Codes are not enough if intended only to ensure that policies comply with legal aspects. Employees have to perceive that code of ethics statements are driven downwards from the top to bottom of the enterprise. Indeed, there is no doubt that ethical considerations have to come from top management. Employees cannot see codes as “words on the wall”, or company propaganda with no relation at all with day-by-day business. It is crucial to set the example in order to further engage employees to act in accordance with codes’ policies and procedures. Ethics shall pervade the whole structure of the organization that means not only from top to bottom but also in all departments, from legal to human resources, from accounting to marketing, from operations to logistics, etc. As many managerial decisions reach the boundaries of the company, an important part of creating a business ethics environment evolves stakeholders. The perspective of external groups affected by corporate decisions helps to have a better understanding of their priorities and feature an ethical managerial decision process.
The 2015 World’s Most Ethical Companies from the Ethisphere Institute is in its ninth edition. The ranking emphasizes how companies internally implement ethics issues or their codes of ethics. Are ethics actually integrated into the company’s values, structure and management? Is business ethics just talk, “words on the wall”, or is it really incorporated into the business are just some of the questions that are taken into account in this ranking. As less than 800 companies have applied for the Ethisphere award, the list of “most ethical companies” cannot be considered as a conclusive one. Many highly ethical companies are most probably not present on the list. However, it provides us with an interesting survey that may help us to understand some of the critical aspects related to business ethics.
A company has to be responsible towards society and their responsibility to society must go far beyond the production of goods and supply of services generating profits to shareholders. This assumption is based on the idea that companies have more constituencies to serve than shareholders, with the main concept of corporate social responsibility being embedded in an ethical notion. In today’s world, it is vital to ensure positive impact on the society for both a company’s reputation and indeed business success. The integration of ethics and corporate responsibility may be a challenge. However, what is essential is not necessary easy to achieve.
- Brenner, Steven N. Ethics programs and their dimensions. Journal of Business Ethics, v. 11, n. 5-6, pp. 391-399, 1992.
- Dunbar, Graham. Seep Blatter seeks to avoid lifetime ban as he faces ethics committee. CBC Sports, Soccer, December 17, 2015. Available at: http://www.cbc.ca/sports/soccer/blatter-heard-in-front-fifa-ethics-committee-1.3369546. Access on December 17, 2015.
- Bazerman, Max H.; Tenbrunsel, Ann E. Blind spots: why we fail to do what’s right and what to do about it. Princeton: Princeton University Press, 2011.
- 2015 World’s Most Ethical Companies. Ethisphere Institute. Available at: http://web.ethisphere.com/worlds-most-ethical/wme-honorees/. Access on: December 17, 2015.
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