A Discussion of Business Ethics.

From time to time the press takes an interest in Business Ethics. Usually this involves a discussion about business practices where right versus wrong figure prominently: more prominently than the usual concerns of profit and loss or share value. Notably all agree that unethical business practices cost more than the ethical and provide greater value, both in contribution to the community and profits, than the other. Most, if not all, unethical decisions are discovered and in the ensuing turmoil any profits gained by these decisions, any value added, and indeed any value the company may have had at all, is lost. Executives are jailed or fired and reputations are damaged and, unless the company is big enough, seldomnly regained. Companies with clear ethical stances, a focused sense of right and wrong, rarely have to attend to the problems, and the great expense, that these issues bring. They continue to do what they are in business for: sell a product and make a profit. And more besides since the people who work for them add value too: to their families, communities, and the business world in general.
For some reason business has been graced with the notion that it is ethically neutral. A Corporation, which in legal terms is an entity much like a person, exists in and of itself. Therefore, the people who run the business can exist and make their decisions while the corporation takes the blame. Executives, like drunk drivers, rarely have to take personal responsibility for the decisions they make. They are given the benefit of the doubt in the sense that it is expected they made the decisions they did for the good of the business-which is paramount. So, if it is profitable that a company pollute the environment to make a profit then this has been the accepted practice. Penalties are paid by the company if they are paid at all. Faceless corporate decision makers reason and act behind this corporate veil without fear. The legal costs of piercing this veil are enormous and generally lawsuits are settled over money and not punishment. However, businesses are run by people and it is these people who should recognize their responsibility when they do their jobs.
It is interesting how business people argue that they should not have to worry about right and wrong. The main argument is that market forces control the business and these will dictate what is and is not profitable. Then if an unethical practice is not profitable then it simply will not be done or the business will not be in business and the issue will die. Unfortunately this has not been the case. Business and the markets are not self-correcting. For instance abuses of the employer to the employee were not corrected by business but were forced upon business by the government and the action of unions. Businesses were forced into collective bargaining that required standards of practice for companies when dealing with their people. In spite of the fact that happy people are productive people. That employees who feel their employers care for them work harder and do more. Instead, some companies reward managers for encouraging the antagonism that exists between management and labor. What we see, and will continue to see, is that running a business is not always about profits.
There are many cases describing how unethical business decisions have cost companies money, market position, and even the business itself. One company in a misguided attempt to corner the children's apple juice market lost almost all share value. In order to lower the price per unit the company replaced the juice with sugar water dyed the appropriate color. Of course they sold quite well until someone realized that there was no juice. The company involved lost all the goodwill they had built up over the years by selling good products. The question we need to ask is why? Why embark upon such an act of deception? Why sell food to children that was patently no good? Why take the chance of negative reprisals with such a policy? It is highly unlikely that this could have gone unnoticed forever-sooner or later someone would run the test that would determine there was no juice. It is because someone believed they could and therefore did? Is business about power rather than profits? Here is another case. It is about a network of institutions run by trusted and apparently dedicated men. They tend to the young, the sick, and the needy. Over time this group attracts men who see the young, in particular, as sexual objects and therefore are drawn to a profession where accessing them is part of the job. Under the guise of the Institution they are able to get the sexual pleasure they need. Their actions do not go unreported. The Institution responds not with censure and police but by hiding these men, blaming the victims, and in general pretending the problem does not exist. The Institution is the Catholic Church and the perpetrators are Catholic Priests. If any business, and the Church is a business-one of the largest-would be expected to take a stand on right or wrong the Church, we would expect, would do so. But they did not. It was not until the law was changed that the Church changed. When the law required that all cases of claimed sexual abuse of children had to be reported to the police and child welfare agencies then the Priests were found out. The culpability of the Church was also found out. The costs in legal bills and damages will be in the millions and will likely wipe out much of the Church's holdings in some cities. The cost in human life is impossible to calculate.
What is business all about? We were led to believe that is about profit and loss, market forces and sales, value and products. What we are beginning to see is that it is all of these things and more. The matter that brought the business to life is simply the beginning. Once the workings of success are figured out then other factors come into play. What cannot be ignored is that businesses do not exist in a vacuum. They have an obligation to the community they serve regardless of the laws and customs that may or may not exist. It is therefore not appropriate for a company to use child labor in another land to create a product somewhere else. At the same they must realize how their impact will or will not benefit the lives of the people they employ. While child labor is bad-firing the children causes even more harm. So having the children go to a school paid for by the company and then hiring them at a good wage is the way to go.
Another side of the business ethics coin involves operating the business with regard to carefully spending the shareholders money. That is the Board runs the company profitably without wasting time and money on fruitless ventures. The example I have in mind concerns a recent episode in Great Britain. A large and popular fast food restaurant is having trouble with a local environmental group. Apparently this group is hanging around their restaurants distributing leaflets alleging that the restaurant is involved with some rather nasty practises: exploiting child workers, exploiting the environment, and in general not following up with their image as a nice company. Rather than ignoring these rabble rousers the restaurant sues the environmental group. What results is the longest litigation in English history. At a cost of sixteen million dollars the restaurant gains a judgement that is ambiguous at best. While the group is fined 100,000 pounds they are not constrained from continuing their campaign and some of the allegations are considered to be true. At the same time the group uses the Internet to distribute their ideas. So rather than having, at best, a few thousand people hearing the allegations the website gets approximately seventeen million visitors. The campaign is translated into twenty seven languages just in case. Ethically, has not the directors of the restaurant made a mistake in fighting a case they could not possibly win? Have they simply squandered shareholder value and company money to gain almost nothing but more bad press? Would they have been better off working with the people who made these claims to prove either that their allegations were baseless or, if true, remove the cause? As you might be able to tell the issue of ethics brings in a lot of questions and fewer answers. You would be correct to ask what I as a businessman am doing about the ethics of my company? This is something that will face constant review as my company grows. Part of my answer is to make sure that the companies I work with have a similar concern about their ethics. Being in business is more than making money: saying business is business is not an excuse to do whatever I please. I am also concerned that other foundations and causes receive what they can from the Internet and I will help them as I can. I have a strong desire to use the Internet to teach and educate people who use it. So my clients will get websites that will also teach according to the demands and standards of their market. The effort, though costly, will pay back in huge dividends either measured in goodwill or in the benefit people who receive this teaching may realise.
Ethical decisions are not easy decisions. Ethics is about life. So we must ask ourselves how our decisions support or do not support life. When they do they are right and when they do not support life they are wrong. Selling sugar water to children is not supporting life and it is therefore wrong. As much as we can we must determine what the criteria is to be. Can we stand to see people in a position of trust abuse that trust while their superiors let them get away with it? Can we allow the continued destruction of our environment when we know that it is being destroyed and that we will be destroyed with it? The ethics of business encompass all aspects of life. It is no longer a matter of money but it is a matter of power. Can we as businessmen and businesswomen assert our rights to a future even though we are in business?
We hope you have enjoyed this article. Please remember it is copyright 1998 all rights reserved. Please do not edit, alter, or publish. You may distribute it one copy at a time as long as this copyright notice is included. We welcome your views and your feedback. We can be reached at monette@iaai.ca or through our website at www.iaai.ca
Revised, August 18, 1998
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