Good morning, everyone. Today we’ll begin our discussion of
business ethics. I’ll start by discussing the goals of business ethics and corporate
responsibility. Then, we’ll look into the reasons why people
are concerned about business ethics and the impact of corruption. In other
words, what can happen when companies don’t behave ethically. After that, then we’ll see how
corporations can benefit from creating more ethical work environments. And finally, as you can see, some ways that
they can go about doing that.
So, first, I’d like
to discuss what business ethics means, what it aims to do. In general, the
goal of business ethics is to give a company’s employees a sense of how to do
business responsibly. Let me say that again. Business ethics aims to give the
employees of a company a sense of how, how to do business responsibly, for all
parties involved.
Now, to do this, a company needs to consider its
responsibility to all of its stakeholders. That’s stakeholders, by the way. Don’t confuse this term with shareholders. Stakeholders are the
people and organizations that have a stake, or interest, in the actions of a
company. Stakeholders include its suppliers, employees, its shareholders, the
clients, and the outside community. A lot of people are stakeholders in a
company. So, as you can imagine, determining responsible, or ethical, behavior
in a business is no simple task. A company needs to consider the interests of
all these different stakeholders—who often have very competing, very different
interests—while at the same time, attempting to make money, to make a profit.
Is everyone with me? OK? Let’s move on.
So, developing a sense of corporate responsibility and
ethics is not such a simple thing to do. So why we . . . why are people so
concerned with business ethics? Well, I’m sure you’ve all seen the news reports
of corporate fraud lately, of white-collar
crime. I mean, gosh, it looks like business leaders today just don’t have a conscience
at all. At least not when it gets down . . . when it gets in the way of making
a profit. Like Enron, for example.
Well, the fact is that corruption—meaning, a lack of ethics
in the workplace—has a big impact on business and the economy. That’s why
business ethics are important. That’s the bottom line.
So, next, I’d like to
look at the impact of corporate corruption, how it affects everything it
touches. First, there is the obvious
impact on the stakeholders—especially the employees and shareholders who lose
their jobs, salaries, investments, when their companies experience scandals, or
worse, go bankrupt. And entire communities can be affected when, for example,
companies violate health and safety regulations. But the effects of corporate
corruption can also go well beyond the company’s immediate stakeholders.
Let me illustrate this. A survey done in 2002 found that
seventy percent of U.S. investors felt that concerns about corporate corruption
were hurting U.S. investments a lot. In other words, people are not willing to
invest their money in a company if they have any fear that the company and the
company’s executives are cheating. This lack of investment hurts not only the
company, but the whole economy. Think you got the picture? When potential . . .
when potential investors question the ethics of a company, they don’t invest in
that company, or they don’t invest at all, which hurts the whole economy. So
scandal can actually hurt the economy. Got it? Good.
In addition to these investment issues, reports of corporate
corruption have led many employees to doubt the honesty of all corporate
executives. One study found that ninety-one percent, that’s right, ninety-one
percent of employees believe that most corporate leaders only care about doing
what is best for themselves—not their employees and not the company. This is
especially important because it is those at the top, the corporate executives,
who set examples for workers and create a “corporate culture,” a corporate
environment—an atmosphere within the company—that either encourages or
discourages ethical behavior. You may doubt this, but it’s true. Experts in
corporate ethics have found that there is a strong connection between how
employees view the ethics of their leaders and their own ethical behavior.
Let’s look at the evidence that supports this. Researchers
found that forty-three percent of employees surveyed believed their supervisors
don’t set good examples of integrity. And that same percentage, forty-three
percent, felt pressure to violate their company’s ethics rules themselves. So
does everyone understand these connections? Corruption at the executive level
can have negative effects throughout a company.
OK, so it’s clear
that corruption can hurt companies, but is the opposite also true? Does
encouraging ethical work environments really help a business be profitable, be
successful? Well, the evidence shows
that, that promoting ethics in business is not only important for avoiding scandals,
but also for creating better work environments and more profitable businesses.
So there’s the answer. More profitable businesses. And
studies show that companies that are known for their honesty attract better
employees. And employees who think their companies are ethical are more satisfied
in their work, and feel more valued as workers, and are more productive at
work. All good things. Many studies also indicate that encouraging corporate
responsibility can often help a company perform better financially. Got it?
These are really important connections to understand.
OK, now we’ve
discussed the benefits of promoting business ethics. Let’s look at how that’s
done—some things that a company can do to create a more ethical environment.
So, one thing a company can do is to develop an ethics program. This should
include a written code of ethics that is communicated to all employees. In
other words, a set of written rules, or guidelines, for its employees to
follow. Also, smart companies train their employees in how to follow this code
of ethics and regularly, regularly survey their employees to evaluate how well
the company is following the code. This creates more accountability—it makes
all executives, and employees accountable, or answerable for, their behavior.
These types of programs do seem to work. A recent survey found that
employees were more likely to report unethical behavior when their company had
an ethics program in place.
OK, finally, we
can’t forget about the importance of teaching business ethics in our business
schools so that future business leaders will have a solid understanding of how
to behave responsibly before entering the corporate environment. So I hope that
you can all see how developing strong business ethics can benefit you as an
employee and perhaps a future executive.
Next time, we’ll begin to look more closely at how to make
ethical decisions at work, by looking at some case studies and actual ethics
problems. That’s it for today. Be sure to read the assignment, and be prepared
to discuss it next week. Bye-bye.
