Business Management Challenge: Ethics or EthiX?

By Brona Pinnolis, c. 2009 All Rights Reserved

With financial and other business scandals making the headlines these past few months it might be easy to point the finger and dismiss this activity as the result of aberrant behavior. The scale and depth of these corporate disasters such as Peanut Corporation of America (nine confirmed deaths due to salmonella), Bernard Madoff (alleged Ponzi scheme), Stanford Financial (similar allegations) or political tribulations such as Rod Blagojevich’s alleged selling of President Obama’s Senate seat are startling, but are also nothing new. Think back to exploding Ford Pinto gas tanks, cigarette additives, oil spills in Prince William Sound, Enron, Tyco, Ivan Boesky, Michael Milken, and so on. I call this “ethiX” for obvious reasons.

The vast majority of Americans expect companies to act in an ethical fashion, not simply watch out for the bottom line. The fact is, however, that ethical behavior in a company is defined by managers and carried out every day—or not—by every person in the organization. While the culture of ethics starts at the top, most of us are familiar with the common rationalizations used to excuse unethical decisions by both managers and rank and file employees. These rationalizations include everything from the scale of the activity (“No one will miss a few reams of paper taken from the office supply room.”) to necessity (“We have to do this to be competitive.”) to peer pressure (“Everyone else does it.”). An embezzler might tell him or herself, “I’m just borrowing this money and will replace it before anyone even knows it’s gone.” They might intend to replace it, might believe they will replace it, and therefore consider it justified. However, we all know that it’s still wrong and in this latter case criminal.

Sound business management is therefore critical in creation of an ethical atmosphere in the workplace. When employees see management setting high ethical standards for themselves and creating an expectation of the same for each employee, a healthy tone is created. Conversely, if employees see management taking short-cuts, turning a blind eye to perceived ethical breaches, the company is likely to reap what it sows.

What does ethics mean in the workplace? Certainly, every profession and market sector have issues specific to their industries. However, other areas are common to any working environment. It starts at the top with good communication of company expectations for all staff.

Management can

• Set forth clear and concise behavioral expectations in an employee handbook, including a prescribed course of action for breaches of these expectations.
• Conduct team meetings and on-site training to reinforce the company values.
• Provide safe avenues for reporting of possible ethical violations. Most people do not want or cannot afford to bear the repercussions of being a so-called “whistle-blower,” but companies need and should want their employees to be able to sound the alarm if needed.
• Confer with their professional organizations or licensing boards to refresh corporate information based on developing laws, regulations or industry standards.
• Consider an “open-door” policy for employees to communicate concerns.
• Consistently and fairly discipline those, regardless of position, who breach the company’s ethical standards.
• Maintain an appropriate separation of functions among managers/principals of the company.
• Include independent audits of both financial transactions and quality and safety matters.
• Formalize job responsibilities for each individual to help define the job’s parameters.
• Stay informed about current events. The publicized ethical and possible criminal breaches in the news impact customers’ perceptions of all business. A savvy manager can take steps to allay customer concerns if you are in an affected industry.
• Solicit feedback from customers, clients, suppliers, etc. to make sure staff and management are meeting expectations on the front lines of the business.

There are numerous web resources regarding ethics in business. One excellent site is http://ethics.georgesmay.com. Bottom line, managing a company includes a responsibility to set the tone and expectation for ethical behavior from everyone.

This article is appearing in the March 2009 issue of Memphis Minority Business Magazine.