Every day, managers and business owners make business decisions based on what they believe to be right and wrong. Through their actions, they demonstrate to their employees what is and is not acceptable behavior and shape the moral standard of the organization. Personal and professional ethics are important cornerstones of an organization and shape its ultimate contributions to society in the form of corporate social responsibility.
Building Business Ethics
Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Business ethics implicitly regulates behavior that lies beyond governmental control. Business ethics refers to contemporary standards or sets of values that govern the actions and behavior of individuals in the business organization and the actions of the business itself. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. Corporations and professional organizations, particularly licensing boards, will usually have a written “Code of Ethics” that governs standards of professional conduct expected of all in the field.
Individual and Corporate Ethics
As the definition of business ethics above suggests, business ethics is a broad term that applies to the behavior of the individuals who work at a business as well as the actions of the business itself. There is a narrower term, “corporate ethics,” that is used for this second area of the actions of a business. Corporate ethics express the values of an organization to its internal and external stakeholders. Corporate ethics has become such an important concern that companies such as Covalence EthicalQuote have cropped up to monitor the ethical behavior of businesses. These private firms track the world’s largest companies in areas such as corporate social responsibility, ethics, and sustainability, and then provide ratings, news, and data to investors and the general public. Web sites such as EthicalConsumer.org promote “ethical consumerism” to help consumers act in the marketplace in ways that are consistent with their ethics. Year after year, companies such as Nestle, Bayer, and Monsanto grace the top of the “worst of the worst” lists.
But it’s not all grim news or tattling when it comes to business ethics. For example, the Scottsdale, Arizona-based Ethisphere Institute—an organization focused on gauging ethical business practices—publishes a list of the “World’s Most Ethical Companies” on an annual basis. The overall goal of Ethisphere’s rankings is to reward organizations with good practices and offer a model—and actionable advice—on how corporate entities should conduct themselves, says chief marketing and strategy officer, Tia Smallwood. “The papers are filled with scandals and companies that made judgment errors, that made policy errors or that don’t have good practices in place to handle things like non-retaliation or transparency or open reporting, or have had a crisis and handled it poorly,” she said. “But there a lot of companies that are really trying to do things the right way.”1Strauss, Karsten. “The World’s Most Ethical Companies 2016.” Forbes. March 09, 2016. Accessed February 27, 2019.
Notable call-outs from the 2019 honorees are the eight firms that have been included every year of the list’s existence:
- Ecolab Inc.
- Fluor Corporation
- International Paper Company
- Kao Corporation
- Milliken & Company
- Texas Instruments
In business, sometimes ethics comes down to deciding whether or not to tell the truth. Admitting an error, disclosing material facts, or sending a customer to a competitor are all decisions that business people make based on issues of honesty and integrity. Because honesty and integrity are often used in the same breath, many people believe that they are one and the same. However, they are decidedly different, and each is important in its own way. As Professor Stephen L. Carter of Yale Law School points out in his book Integrity, “one cannot have integrity without being honest, but one can be honest and yet lack integrity.”
Integrity means adherence to principles. It’s a three-step process: choosing the right course of conduct; acting consistently with the choice—even when it’s inconvenient or unprofitable to do so; openly declaring where one stands. Accordingly, integrity is equated with moral reflection, steadfastness to commitments, and trustworthiness.
The major difference between honesty and integrity is that one may be entirely honest without engaging in the thought and reflection that integrity demands. The honest person may truthfully tell what he or she believes without the advance determination of whether it’s right or wrong. Sometimes the difference is subtle.
Companies that value honesty and integrity can expect to see those values permeate their company culture. In such a climate, coworkers trust one another, employees view management with less suspicion, and customers spread the word about the company’s ethical behavior. Honest companies also don’t have to worry about getting into trouble with the IRS or the media on account of ethical wrongdoing. Even though a company may have to give up short-term gains in order to maintain an atmosphere of honesty and integrity, in the long run it will come out ahead.