Why Should Business Executives Be Concerned With Ethics?

There are two separate reasons why contemporary executives should be concerned with ethics:

1. Enlightened Self-Interest. A business needs to avoid scandals, keep government off its back, protect itself from internal corruption, avoid fines and penalties, and keeps its executives our of jail. This is a powerful impetus but it is responsive; it encourages walking the line of propriety, doing only what one has to do, making minimum performance the standard of responsibility. When business decisions are designed to walk the line, someone will inevitably cross it.

2. It’s the Right Thing to Do. The real “bottom line” is not what you make, but who you are. Even if you are not religious, you have to believe that for your life to account for something, it has to represent more than the accumulation of material things or the transient value of improved quarterly reports. Every person is an independent moral agent capable of making choices and accountable for the consequences of those choices.

Additional Sources of Ethical Obligation

Laws

Business executives and their firms are regulated by an extensive and complicated body of laws which establish obligations that may or may not have an ethical basis. In many cases, the laws impose heavy burdens on business without apparent justification. Many of the laws and regulations appear to be, and some are in fact, foolish. It is, therefore, tempting to evade certain rules and easy to justify the evasion. Nevertheless, all laws impose an ethical obligation on responsible citizens to either abide by them or openly protest them in an effort to get them changed.

A company that is caught violating even technical laws is generally regarded as unethical and, in addition to the civic and criminal penalties that may be invoked, lawbreaking often causes serious damage to the reputation of the company and executives involved and to the morale of the company’s employees.

Professional Standards

Though there are thousands of business executives with advanced degrees, business is not formally a profession and, therefore, executives are not subject to coherent codes of conduct which seek to establish standards of professionalism. There are, however, a number of prestigious business organizations such as the Business Roundtable, the Conference Board and the Better Business Bureau which occasionally articulate ethical standards.

In-House Rules

Every company has the right and power to impose standards of behavior which supplement and extend laws and generally accepted professional practices. There has been a lot written in recent years about “corporate cultures” and how top management, especially the Chief Executive Officer, determines that culture and the general level of ethical sensitivity and commitment down the ranks.

There is little doubt that senior managers who are fully and genuinely committed to uplifting and upholding the ethical quality of corporate behavior can have an enormous impact. Even if they do not change attitudes, and they often do, they can affect conduct by the reward systems they establish and the sanctions they impose and threaten to impose.

There has been a major movement in the boardrooms of America’s top corporations to find ways of inculcating and reinforcing positive ethical values. As part of this process, company executives have often had to develop and implement explicit, coherent and specific standards of conduct. In many cases, the activity has resulted in written codes of conduct, in others it has resulted in more general credos or statements of principle. In addition to written codes, many companies have instituted company-wide ethics “training” of one form or another.

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