Ethics Important in Business

Today, more than at any time in history, entrepreneurs are discovering the answer to the question, “Are ethics important in business?” Corporate scandals of recent years, from the Savings and Loan debacle to the Enron and Arthur Anderson Scandal, have made consumers wary of big businesses. Whether it’s bad business ethics related to executive behavior, creative accounting techniques, lack of transparency, political contributions, or fraud, it all spells disaster for businesses hoping to have a long-term future.

While Enron and Arthur Anderson may have profited in the short-term, the end result was the largest corporate bankruptcy in history (at that time) and the dissolution of Arthur Anderson auditing firm. With Enron stocks plummeting from $90(USD) to $0.10 per share, stockholders were left holding the bag for a loss of $11 billion. Because of the Enron Scandal, congress passed the Sarbanes-Oxley Act in 2002. It offers stiffer criminal penalties for securities fraud, defrauding shareholders and destroying or altering records in federal investigations. Such things do not quickly fade from the public consciousness.

The resultant atmosphere of distrust among the public has caused many executives to see the wisdom of having positive corporate mission statements and a strong ethics policy. It’s no longer important just because you care how you are perceived by employees and the public – it is vitally important to your bottom line. Corporate social responsibility is a topic of debate in social forums across the land. Many believe it's fashionable and politically correct to demand and to expect that corporations have a clearly stated policy on environmental sustainability. Laws govern the way that employees are treated; however, social forums on the Internet are always abuzz with topics of corporate malfeasance. If you mistreat your employees or stockholders, you run the risk that a couple million people may know about it before nightfall, thanks to Twitter, MySpace, Facebook and citizen journalists.

The dilemma faced by business owners today is how to apply their own moral and ethical principles to problems that may arise in a business environment. It’s not always as easy to make a decision on moral grounds in matters of business as it is in your personal life. For example, when you know that you could have an extra $11 million at your disposal with just a neat accounting trick, is it moral and ethical to do so? You can spend part of the $11 million on worthy charities. Your employees can receive bonuses. Your family can live the good life. You know that someone will suffer in the end – the stockholders, the banks you’re defrauding, the credit card companies, the employees who depend upon you for their livelihoods and ultimately, you. Is the short-term gain worth it? That's an ethical question and the answers are not always so clear-cut.

When companies break anti-trust, environmental and ethical laws, they usually are required to pay a fine or penalty. If their profits from the illegal activity exceed the fine, they might think it’s cost-efficient to continue the illegal or unethical behavior. Cigarette companies, for example, spent years covering up the fact that smoking leads to various diseases. It must have seemed to them to be cost-efficient to continue covering up the facts. While they paid a large settlement fee to victims and the government in the end, did that settlement exceed their profits over all the years and continuing today? At its most basic level, ethics is knowing the difference between right and wrong and choosing to do the right thing. Still, there will always be many gray areas where the answer is a little unclear; what seems to be "the right thing" to one person may not seem that way to another.

These are all things to consider when developing your own ethics policy or mission statement. Is money more important to you than the health of consumers? Is the bottom line of your business more important than the health and welfare of your employees? Is your annual vacation, bonus or lifestyle more valuable to you than a clear conscience? The answers are for you to decide.

Many companies have responded to the current climate of mistrust among consumers by offering window dressing when it comes to business ethics. While they are committing crimes, they display a page on their website that lists all the ways in which they donate money to charities, or practice environmentally sustainable practices. In the final analysis, it is the consumer and the stockholder who hold businesses accountable. The answer to the question then, “Are ethics important in business?” is a resounding “yes." However, the way in which you respond to ethical situations will always be subjective.

Having a well-defined mission statement and ethics policy helps ensure that both you and your employees know where you stand on certain issues. It will also help both you and your employees to follow the guidelines you’ve set forth as you make decisions that will affect your business, society at large and your bottom line.

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