Haven’t you heard? Time’s up, friends. Time’s up for men who prey on women. Time’s up for golden parachutes in the age of austerity. And time’s up for profits over people.
So you run a corrupt business. It might not even be Wells Fargo- or Volkswagen-caliber corruption. But even minor acts of dishonesty can ruin your reputation, your livelihood and the public’s trust in you. Does it feel like stooping to shady business practices is necessary for keeping up in a competitive world? It isn’t. In fact, if anything, doing business ethically in 2018 and beyond is an obvious way to set yourself apart.
Don’t take our word for it, though. The Institute for Business Ethics, in a report titled “Does Business Ethics Pay?“, concluded that business owners who hold themselves to high moral standards realize significant financial benefits. So what do you have to lose by cleaning up your act?
Making a Case for Profitable Business Ethics
There’s not a lot of shareholder value in the phrase “behave correctly because it’s the correct thing to do.” Many of us pretend reality and morality are open to interpretation. But are they? Humankind already has a universal maxim worth rearranging our lives around — and it’s called the golden rule. Don’t do anything to anybody else that you wouldn’t want done to you. And do not prioritize the needs of the few over the needs of the many.
In that IBE report we referenced above, compiling — and regularly referencing — an internal code of ethics delivered financial benefits that were substantially more concrete and less subjective than you’re probably expecting. The companies studied by the researchers were divided into two groups — those with a code of ethics, and who referenced that code in their annual reports, and those without such a code. Here’s what they measured:
- MVA (Market Value Added)
- EVA (Economic Value Added)
- P/E (Price-to-Earnings Ratio)
- ROCE (Return on Capital Employed)
Based on these metrics, companies who took business seriously on a cultural level consistently outperformed their less ethical peers. They realized a better return on their investments and they contributed more value to the larger economy. As for Return On Capital Employed, the “success gap” between ethical and unethical companies only grew wider between the years 1997 and 2001.
In other words, it literally pays for companies to stay as explicit as possible about their commitment to cultural ethics. It’s nobody’s responsibility but yours to right the ship once you know what’s going on. Here are three big ideas to help you do so.
Remember What Really Trickles Down
Some forms of fraud are less overt than others. And sometimes it comes from surprising places. Consider the problem with Wells-Fargo’s impossible expectations for their employees, which resulted in the opening of millions of fake accounts in their clients’ names. All in the name of chasing higher profitability at the continuing expense of their collective integrity. And now the secret’s out.
This is a breach of trust so huge it should qualify as treason. But since it doesn’t, it has to suffice merely as a morality tale. So what does it mean for you and the rest of the business community?
It means slow down and remember what matters. What we’re looking at here is unethical behavior made possible by the dream of never-ending economic growth and unstoppable productivity. And even the most aggressive capitalists know such promises are either impossible or unsustainable over the long term. Setting goals for companies and teams is laudable, but it shouldn’t come at the expense of honesty. Wealth doesn’t usually trickle down, but reasons for behaving poorly — or ethically — definitely do.
Set ambitious but reasonable goals. Ask your employees who do the work whether the expectations set by owners and shareholders are realistic — or whether they’re so ambitious they can’t help but inspire dishonesty among the rank-and-file for meeting those benchmarks.
Recommit Yourself to Your Community
It’s easy for the business community to think of itself as a private little fiefdom that doesn’t have to play by the same rules as the rest of society. And even when some of our high-powered business moguls do involve themselves with charitable giving and community enrichment, their efforts reek of token philanthropy.
Jeff Bezos “can’t imagine” what else to do with his “Amazon winnings” other than privatizing space travel. But basic math says he could end world hunger single-handedly, for five years in a row, and still end up the richest mammal on the planet.
Don’t be a Bezos.
If more of the business world actively engaged with the community and helped people meet urgent needs, we wouldn’t need people such as Bezos to launder their money through “Foundations” bearing their own name, or whatever else they get up to.
Part of the advantage of that “explicit commitment” to company ethics we mentioned above is making your company and your employees more visible in the immediate part of the world you call home. You should donate your time and money to food drives and other forms of outreach. Even something as simple as sponsoring a local symphony, theater group or sports team can make a big impact.
Staying community-minded as a business owner means having priorities beyond profitability. It means balancing commercial success with the undeniable responsibilities which accompany that success. And being seen doing good works in the world is great for business, it turns out.
Revisit the Criteria for Advancement in Your Company
Part of the reason why America is a mess right now is because it hasn’t been a true meritocracy in many decades if it ever was. We’ve been elevating all of the wrong sorts of people, for all of the wrong reasons, ever since this country was a loose affiliation of colonies. Clearly, bad behavior trickles down — but it also “scales up” when we place our faith in the wrong kind of leaders.
What sort of people does your company promote? Is it based 100 percent on seniority? On merit? Is advancement reserved for those who protect the status quo at all costs and who prioritize aggressive growth above all else?
The criteria your company uses to judge an employee’s readiness for advancement, and fitness for a leadership position, is one of the clearest ethical signals you can include in your all-important company code of values we keep harping about. Companies’ advancement processes and criteria need to stay as objective and fair as they are transparent.
No Business Is Too Small
It’s up to our communities, including our businesses, to revisit and reimagine the criteria by which we elevate people to power and responsibility. And since tomorrow’s senators and mayors can come from just about anywhere, no business is too small to make a meaningful impact on the caliber of our future leaders.
Kate is a health and political journalist. You can subscribe to her blog, So Well, So Woman, to read more of her work and receive a free subscriber gift! https://sowellsowoman.com/about/subscribe/