Importance of Ethics in a Corporate Environment
Can Social Responsibility Lead to Increased Profitability?
Aug 15, 2009
“The corporate world is beginning to understand that ethics are important,” said Rush Kidder, president of the Institute for Global Ethics in Camden, Maine. “By every measure we look at, this is a growth industry.”
With companies like Enron, WorldCom, Martha Stewart Omnicom and Barron’s Bank, executives are becoming increasingly worried whether their corporations are ethical. Scandalous and unethical behavior has become so prevalent in the media that executives have realized the impact of ethical behavior on both themselves and their corporations. Corporate corruption, government investigations and excessive pay packages have been well chronicled lately and executives are calling upon people like Rush Kidder to address ethical issues within their companies.
Have Schools Become and Ethical Time Bomb?
Kidder argues that the world has become too complex and interconnected to tolerate unethical behavior. Investors shun companies that behave poorly and view infractions with a renewed sense of caution. He also warns executives about the sense of urgency with which they must act. A new, large scale survey shows that 64% of high school students have cheated on a school exam. “We’re building a time bomb unless we get a handle on the ethical question,” claims Kidder.
That is where people like Kidder come in. He focuses on research and shows that people around the world have the same set of perceptions about what represents ethical behavior: truth, responsibility, respect, fairness and compassion. According to Kidder, executives must speak about those values to employees. The language of public discourse has not been defined and one needs to be put in place to strengthen those ideals within a company.
A Good Ethical Approach Can Lead to Profitability
Kidder emphasizes how a good ethical approach creates a positive corporate culture that makes customers happy and ultimately makes the company more profitable. “Ethical companies are more efficient,” Kidder said. “That drops directly to the bottom line.”
Kidder’s approach on ethics is something that parallels the course reading on creating a corporate culture. Clarifying expectations is an important component of management and ethics is no exception. Spending time with their subordinates to verbalize what the company’s ethical expectations are, managers can instill ethical behavior from with the culture itself. In addition to creating an ethical forum, managers should also maintain the ethical quality, in addition to confronting any wrongdoers.
Can Social Responsibility and Profitability Coexist?
The social responsibility of a company also has its basis in ethics. The extent to which companies channel their resources toward improving society is a direct function of their ethical awareness. History shows that if left unimpeded, companies will practice the moral minimum which allows them to pursue profits, as long as no one is harmed. Kidder suggests that a pro-active ethical stance can improve profits as well as the corporate culture by attracting high level employees as well as prestige that can enhance marketability.
As ethical behavior is being more closely examined in today’s political environment, it is no surprise that investors and high level employees are flocking to companies like Google, General Electric and Alcoa, who are known to have high ethical standards. This can be demonstrated in sports world where most professional leagues will use charitable causes to help marketability and elevate the prestige of their respective league and its employees.
Source:
Dessler, Gary (2001). Management: Leading People and Organizations in the 21st Century. Upper Saddle River: Pearson Custom Publishing.
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