“A business that makes nothing but money is a poor kind of business”

Today’s post is on’Business Ethics‘ which can be defined as; Moral guidelines for proper business policies and practices regarding corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities for good behavior. Behaving ethically in business is widely regarded as good business practice. So behaving ethically is doing what is morally right.

Businesses face ethical issues and decisions almost every day – in some industries like tobacco, liquor, gambling, asbestos or cement manufacture, oil & gas and toxic emissions sectors, the issues are very significant. This leads us to believe in a probable link between business ethics and corporate social responsibility (CSR).  The two concepts look closely linked. However, CSR is about responsibility to all stakeholders and Ethics is about morally correct behavior.

How do businesses ensure that its directors, managers and employees act ethically?
A common approach is to implement a code of conduct and communicate organizational values. Values and Ethical codes are increasingly popular – However, it is not likely that we can teach anyone to be ethical. The job of teaching morality rests squarely on the shoulders of parents and one’s early social environment. By the time managers and we leaders enter the picture, it is too late to change the moral predispositions of an adult. We try but these recommendations are not always the most financially efficient and create further tensions.

In business ethics, there are ‘no lone gunmen’ – the theory that integrity failures are caused by just one person behaving badly is not tenable. UBS was fined £29.7mn  by the FSA for failures in its systems and controls that resulted in Britain’s biggest bank fraud, HSBC was fined £1.9bn  for not preventing money laundering, LIBOR fixing fines, etc,etc are all ethical crises. Integrity crises are usually the result of a gradual erosion in behaviour over time, which develop into an unethical culture, rather than one person acting on their own.

In his biography, New York’s former Mayor, Rudy Giuliani refers to what he calls the broken windows theory. Which is: a building is vandalised with a few broken windows. If the windows are not repaired, the vandals break a few more; eventually the building is broken into and squatters move in. The theory is that petty crimes, if unaddressed, create a culture which leads to larger ones. He started preventing petty crimes and vandalism. The result was turning around a city that once seemed ungovernable, particularly when it came to crime. Overall crime rates dropped by 44% to their lowest in more than a generation, and the city’s murder rate went down by 70%. 

Petty fiddling at work is a little like those broken windows. Minor discipline failures and even the leaders showing tolerance to unethical practices could escalate in to a wrong culture. Therefore, don’t wait to fix big issues, start with the small ones.

About surenraj

“Views expressed are my own”
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