Every day in the news or on social media, we see evidence of corruption, fraud, malfeasance or downright deception. We see regular examples where a business or a government body appears to have violated the rules or standards of behaviour generally accepted by society. Cases of uncontrolled acid mine drainage, child labour, gender discrimination or environmental destruction are all too familiar to us.
Business ethics is concerned with identifying the moral principles to evaluate the behaviour of an organisation. Unethical behaviour is not usually a result of the actions of one person but results when a team of people find it acceptable to go against the accepted norms of society. At its core ethical behaviour is behaviour that has a beneficial effect on the greater society or arises from a sense of duty. Unethical behaviour may benefit an organisation in the short term, but the accumulated long-term effects are always negative.
The long-term sustainability of any organisation must pay attention to its social, environmental and economic impact. This is known generally as the triple bottom line. Our lives are determined by organisations: the food we eat, the services we consume, and the policies of our government should all be ethically determined to ensure a functioning society that addresses the needs of all.
There are four types of ethical problems in organisations:
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Staffing
Ethical problems can manifest as the inequitable and unjust treatment of current and potential employees. It may be evidenced by treating people unfairly because of their gender, sexuality, skin colour, religion, ethnic background or some other arbitrary criterion.
2. Conflicts of interest.
This occurs when individuals or organisations are given special treatment because of some personal relationship with a person or a group deciding the allocation of a contract. A company may be awarded a lucrative contract because a bribe was paid to the management team and not because of the quality of its proposal.
3. Customer confidence
Organisations may show a lack of respect for customers or a lack of concern for public safety. Goods may be poorly finished, or contain a harmful substance, or advertising may be misleading.
4. Use of corporate assets
Unethical behaviour can range from stealing company stationery to using a company vehicle for personal leisure activities.
How unethical behaviour arises
Most ethical lapses in an organisation are not the result of one person acting independently. They usually arise from the prevalent group dynamics in the organisation, as well as the moral maturity of persons in leadership roles.
A strong charismatic leader may influence others to collaborate in unethical behaviour or decision making. The team goes along with this because they don’t want to lose the favour of the leader. This may be supported where there is a history in the organisation where whistle-blowers have been punished for raising ethical matters. In other cases, a series of small ethical breaches can add up to a massive ethical failure. Breaking the rules becomes an accepted way in which the organisation works and takes decisions.
Broadly speaking organisations take three approaches into account when setting their ethical compass.
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Social obligation:
The organisation does only what is required to be legally compliant. This is the bare minimum. Morally irresponsible behaviour may be condoned if it does not break the law.
2. Social responsiveness.
The organisation responds to influence from different stakeholder groups. This is usually a result of market pressures. This creates a conflict of interest: do we appease the highly vocal stakeholder, or do we act in a morally defensible way?
3. Social responsibility:
The organisation wishes to proactively improve society. They take the needs of the environment, society and good governance into account.
Ethical dilemmas
There are many instances of ethical dilemmas. There are relatively straightforward cases: selling a drug illegally or embezzling client funds from a trust account. But then there are more complex ones.
Should you delay paying your key suppliers when you have a cash shortfall? Should you write down the value of your inventory to avoid tax in the current financial year? Should you approve a product for sale that does not meet regulatory quality specifications? [Roof truss timbers, pharmaceutical products, processed food products]
How to make sound ethical decisions
- Establish a company culture of transparent ethical behaviour. Communicate this repeatedly to staff, customers and suppliers.
- When an ethical problem arises, gather the facts. A good place to start is to follow the money!
- What is the problem and what are the potential solutions?
- Identify the various internal and external stakeholders involved.
- Define the ethical issues. Who is getting an advantage and is this fair? Identify the obligations and rights of those potentially affected.
The Sunlight Principle
When resolving ethical conundrums, apply the sunlight principle. It goes like this: If you decide on a particular course of action, would you be embarrassed if it all came out at some date in the future? If there is the slightest bit of doubt – don’t do it.
The Digital Consequences Principle
All your emails, texts, photos and documents are in the Cloud. They will be there forever. As we have seen in recent, well-publicised cases, the material can be uncovered and made public at awkward times. It’s much better to avoid any risk of this nature and be squeaky clean.
Why ethical behaviour is important
In the long-term ethical behaviour is the key to sustainable development. When you are faced with an ethical dilemma in which the immoral choice looks appealing, ask yourself three questions.
- What will happen when the action is discovered?
The behaviour of organisations is under constant scrutiny by stakeholders: customers, suppliers, employees, competitors, regulators, environmental groups and the general public. Social media gives stakeholders the means to make their concerns very public, reaching a global audience. And when that happens the results can be catastrophic.
- Is it in the long-term interests of the organisation?
The public memory of fraud, poor quality and ineffective service builds up over time. Customers and investors vote with their feet. And when the regulatory authorities intervene there are disastrous consequences.
- Will people want to work for an unethical organisation?
An organisation that has a reputation for being unethical is going to find it very difficult to attract top-level employees. And what is more, valuable ethical employees may follow their conscience and seek employment elsewhere.
Behaving ethically is key to the long-term sustainability of any business. When organisations focus on the triple bottom line, the social, environmental and economic impact provides the basis for sound stakeholder relationships and will sustain an organisation into the future.
