12 Ethical Principles for Business Executives by Michael Josephson

by Josephson Institute on December 17, 2010

Revised November, 2013

If recent history teaches us anything is that ethics and character count, especially in business. Huge organizations like Enron, Arthur Andersen and Health South have been destroyed and others were seriously damaged (AIG, Fannie Mae, Freddie Mac) by  executives with massive ambition and intelligence but no moral compass.  In today’s ultra competitive, high tech, interdependent business world, charisma without conscience and cleverness without character  are a recipe for economic and personal failure of epic proportions.  As President Theodore Roosevelt said, “To educate the mind without the morals is to educate a menace to society.”

Competitiveness, ambition and innovation will always be important to success but they must be regulated by core  ethical principles like the ones described below.

Let’s start with a basic definition: ethical principles are universal standards of right and wrong prescribing the kind of behavior an ethical company or person should and should not engage in. These principles  provide a guide to making decisions but they also establish the criteria by which your decisions will be judged by others.

In business, how people judge your character is critical to sustainable success because it is the basis of trust and credibility. Both of these essential assets can be destroyed by actions which are, or are perceived to be unethical. Thus, successful executives must be concerned with both their character and their reputation. 

Abraham Lincoln described character as the tree and reputation as the shadow. Your character is what you really are; your reputation is what people think of you. Thus, your reputation is purely a function of perceptions (i.e., do people think your intentions and actions are honorable and ethical) .while your character is determined and defined by your actions (i.e., whether your actions are honorable and ethical according to the 12 ethical principles:

1. HONESTY. Be honest in all communications and actionsEthical executives are, above all, worthy of trust and honesty is the cornerstone of trust.  They are not only truthful, they are candid and forthright. Ethical executives do not deliberately mislead or deceive others by misrepresentations, overstatements, partial truths, selective omissions, or any other means and when trust requires it they supply relevant information and correct misapprehensions of fact.

2. INTEGRITY. Maintain personal integrity. Ethical executives earn the trust of others through personal integrity. Integrity refers to a wholeness of character demonstrated by consistency between thoughts, words and actions. Maintaining integrity often requires moral courage, the inner strength to do the right thing  even when it may cost more than they want to pay. The live by ethical principles despite great pressure to do otherwise. Ethical executives are principled, honorable, upright and scrupulous. They fight for their beliefs and do not sacrifice principle for expediency.

3. PROMISE-KEEPING. Keep promises and fulfill commitmentsEthical executives can be trusted because they make every reasonable effort to fulfill the letter and spirit of their promises and commitments. They do not interpret agreements in an unreasonably technical or legalistic manner in order to rationalize non-compliance or create justifications for escaping their commitments.

4. LOYALTY. Be loyal within the framework of other ethical principlesEthical executives justify trust by being loyal to their organization and the people they work with. Ethical executives place a high value on protecting and advancing the lawful and legitimate interests of their companies and their colleagues. They do not, however, put their loyalty above other ethical principles or use loyalty to others as an excuse for unprincipled conduct.  Ethical executives demonstrate loyalty by safeguarding their ability to make independent professional judgments. They avoid conflicts of interest and they do not use or disclose information learned in confidence for personal advantage.  If they decide to accept other employment, ethical executives provide reasonable notice, respect the proprietary information of their former employer, and refuse to engage in any activities that take undue advantage of their previous positions.

5. FAIRNESS. Strive to be fair and just in all dealingsEthical executives are fundamentally committed to fairness.  They do not exercise power arbitrarily nor do they use overreaching or indecent means to gain or maintain any advantage nor take undue advantage of another’s mistakes or difficulties. Ethical executives manifest a commitment to justice, the equal treatment of individuals, tolerance for and acceptance of diversity. They are open-minded; willing to admit they are wrong and, where appropriate, they change their positions and beliefs.

6. CARING. Demonstrate compassion and a genuine concern for the well-being  of others. Ethical executives are caring, compassionate, benevolent and kind. They understand the concept of stakeholders (those who have a stake in a decision because they are affected by it) and they  always consider the business, financial and emotional consequences of their actions on all stakeholders. Ethical executives seek to accomplish their business objectives in a manner that causes the least harm and the greatest positive good.

7. RESPECT FOR OTHERS. Treat everyone with respect. Ethical executives demonstrate respect for the human dignity, autonomy, privacy, rights, and interests of all those who have a stake in their decisions; they are courteous and treat all people with equal respect and dignity regardless of sex, race or national origin. Ethical executives adhere to the Golden Rule, striving to treat others the way they would like to be treated.

8. LAW ABIDING. Obey the law. Ethical executives abide by laws, rules and regulations relating to their business activities.

9. COMMITMENT TO EXCELLENCE. Pursue excellence all the time in all thingsEthical executives pursue excellence in performing their duties, are well-informed and prepared, and constantly endeavor to increase their proficiency in all areas of responsibility.

10. LEADERSHIP. Exemplify honor and ethics. Ethical executives are conscious of the responsibilities and opportunities of their position of leadership and seek to be positive ethical role models by their own conduct and by helping to create an environment in which principled reasoning and ethical decision making are highly prized.

11. REPUTATION AND MORALE. Build and protect and build the company’s good reputation and the morale of it’s employees.  Ethical executives understand the importance of their own and their company’s reputation as well as the importance of the pride and good morale of employees. Thus, they avoid words or actions that that might undermine respect and they take affirmative steps  to correct or prevent inappropriate conduct of others.

12. ACCOUNTABILITY. Be accountable. Ethical executives acknowledge and accept personal accountability for the ethical quality of their decisions and omissions to themselves, their colleagues, their companies, and their communities.

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The Josephson institute is a nonprofit organization that depends on contributions from people like you. Please help us make a more ethical society or simply show your gratitude for whatever value you find in our work by making a tax-deductible donation at http://goo.gl/uUAix

You may want to read What is Character at http://whatwillmatter.com/2011/11/commentary-what-is-character-751-2/  and The Power of Integrity  http://josephsoninstitute.org/business/blog/2012/11/business-ethics-insight-the-power-of-integrity-moral-courage-is-the-bodyguard-of-conscience-and-character/

 

{ 14 comments… read them below or add one }

Ethics Sage December 17, 2010 at 8:20 am

Great list of ethical values that reflect the basis for making ethical decisions. I would add one to the list — transparency. In today’s world it is important to make decisions openly and fairly. Full disclosure enables stakeholders affected by actions to understand the basis for such decisions. The statement “let the sun shine through” embodies the transparency principle.

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admin December 17, 2010 at 1:14 pm

Steven,

Great point about transparency! Do you view transparency as an ethical value on it’s own.

Personally I have thought of transparency as a behavior resulting from an organizational culture that values many of the principals above (honesty, trustworthiness, loyalty, fairness, concern for others, respect for others, leadership, reputation and accountability) seriously.

I’d be interested to hear Michael’s thoughts.

Thanks for your comment!

Dan

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Michael Friedlander December 21, 2010 at 4:37 pm

What I found interesting about the 12 Ethical Principles was not just the order which they were placed, but also how they appeared silent as to a significant. ethical threat in the workplace, namely, the false belief that, as long as the law permits us to do something, it is thereby the right thing to do – and we can do it with alacrity.

I was surprised by the lack of emphasis on the importance of our business leaders exuding moral authority and demanding that those under their umbrella follow their example of the approach and attitude laid out in the 12 Ethical Principles. This was the very moral authority that made Nelson Mandela a world icon

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Rose-Ann Nathan March 23, 2011 at 8:51 am

As the market becomes increasingly competitive I’ve experienced more individuals crossing the line on ethical principles. Have you experienced this? The disappointment is that the Managers reporting to these individuals must accept the behavior to maintain their employment. This is a ripple effect and a new culture developing.

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admin March 23, 2011 at 11:45 am

@Rose-Ann,
This is very true! Pressures can be created to produce short term profitability by those who are not as concerned with the ethical culture of an organization.

Thank you for the comment.

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Dr. Kiweewa March 2, 2012 at 8:48 pm

These principles really outline what we ought to do as business practitioners BUT many times circumstances dictate and make us compromise our conventional ways. Its take courage and determination to live up to them. They highlight the true picture of the behaviors of a complete corporate

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segawa nasser November 1, 2012 at 7:45 am

this page is really helping nice work Mr Josephson keep it up

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MAG HANNAN April 22, 2013 at 12:03 am

This is most impressive list of Ethical standard promotion. You can add the following terms too:
Fair Judgement
No Bias decision

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kellen June 28, 2013 at 4:55 am

Please assist me answer this “Discsuss the relationship between ethics of virtue and ethics of principles”

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Arlen Meyers, MD, MBA December 8, 2013 at 8:00 am

Are the ethics of business compatable with the ethics of medicine? For business, the issue is generating a profit. For medicine, the issue is helping patients regardless of the financial issues.

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Priyanka February 8, 2014 at 6:39 pm

A very interesting article ! truly liked it and the use of Roosevelt and Lincoln’s quotes really made it impressive. 12 priciples were good.

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Tracey June 20, 2014 at 12:12 am

Even though the article is business orientated we need to incorporate the importance of our personal ethical and moral character …. there are those who believe their personal transgressions do not reflect on their business ethical moral character … I used to not think so but it does … lesson of life

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Linda Fisher Thornton September 14, 2014 at 12:11 pm

Michael, Thank you for this informative article and for being a champion of strong character and ethics in business. The Abraham Lincoln quote about character as the tree and reputation as the shadow is especially memorable. All leaders should proactively honor these 12 principles in daily leadership. Linda

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megnot dagn October 19, 2014 at 2:46 am

What is the limitation of ethics interms of law,religion,personal feeling & social standard

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