Bring up the subject of business ethics these days and you'll probably get a good laugh. Many people from the media to main street think, "Business ethics? The two words just don't go together."
It's a pretty cynical viewpoint, one that isn't all that surprising at a time when the collapse of Enron and MCI WorldCom dominate the front page and news shows run videos of disgraced corporate leaders being dragged away in handcuffs.
I imagine that most of us in the industry have a fairly extensive code of business conduct that governs every aspect of how we do business. I know we do. We don't lie, cheat, steal, or take bribes. We don't sell our clients faulty products or do slipshod work. We treat people with respect. Everybody agrees that businesses should have ethics. But nobody seems to talk much about why companies should be in the business of ethics.
Thirty years ago, Milton Friedman, the guru of market economics, said that the one and only social responsibility of business is to increase its profits. I agree with Friedman. Only I'd put it a different way. Good ethics are good business.
A big reason many companies worry about their ethical reputations, if they are really being honest, is the fear of legal penalties if they're caught doing something illegal. Then there's always the potential in our 24-hour cable news world that our actions will show up on the evening news. Reports of bad actions will lead news broadcasts around the world. Executives in handcuffs provide a powerful message.
Both of these situations are powerful motivators. None of us wants to be on the receiving end of a hefty fine or bad publicity. Not to mention that your company may suffer losses when a community where you want to work decides that, because of the poor safety and environmental record of anyone in our industry, you're not a good neighbor and they don't want you there.
The fact is, health, safety, and environment, which compose the ethical cornerstone for many companies, is really about good business practices. Take, for instance, company-mandated driver safety initiatives, like biannual employee driver safety training and mandatory seatbelt policies and, most recently, prohibiting cell phone use while driving. Why do we do this? Because it is the right thing to do.
Innovest, a US-based financial information services and investment advisory firm that researches companies for some of the world's biggest pension funds, has shown that bad environmental and social practices have a negative effect on profits. Many large investors are using the Innovest reports to make their decisions about which companies they will invest in, with more weight given to firms with higher ratings – those companies doing the right thing. With investment capital in short supply these days, it's another good reason to pursue ethics.
The point is, business ethics comes down to a simple question: Are you interested in short-term profits or long-term wealth? If your interests don't extend beyond quarterly earnings, then ethical behavior doesn't really matter. If ethical behavior doesn't matter, you can lie, cheat, and deceive with impunity because you probably won't be around long enough to pay for your actions.
But if you believe that a company's first obligation is sustainable wealth generation, then every decision you make has to be viewed through the prism of how your decisions will impact the future. Your decisions regarding ethics clearly affect your future and the ability to generate sustainable wealth.
Business ethics isn't a matter of choosing between right and wrong. We all know the difference, and we know that doing wrong is never an option. Most often, the choices we face in our day-to-day business life are between two rights: between the group and the individual, truth and loyalty, long-term and short-term gain, justice and mercy. That's when you have to decide which choice achieves the greatest good for the greatest number of people. Even after conscientiously weighing your choices, you may still be faced with an unsatisfactory decision. So you do the best you can and try hard to do the right thing.
For as long as there have been records, humans have struggled with and written about the subject of ethics. And as most of them have found, from Aristotle on down, the best way to teach people is by telling stories.
Even with all the volumes of information that we are bombarded with every day, human beings have an incredible capacity for determining what is relevant and irrelevant. We store the relevant information in the form of stories and anecdotes. And we communicate those stories to others in a colorful, passionate way because they contain urgent, critical information.
Imagine stories about an employee who didn't risk his life to save a piece of equipment and got rewarded for it because life is more important than anything. Or the work crew that erected a protective circle of stones around a bird's nest, because they understand innately that loss of biodiversity can have environmental, social, and economic consequences. Or how about the employee who bicycled 60 mi in the middle of a transportation strike to deliver a tape to a customer because she had given her word?
I propose that we provide employees with real-life models like these. We should collect our stories of ethical deeds and circulate them throughout our companies. In emails and newsletters. By word of mouth. Through reward programs. Do it until they become etched in our corporate ethos.
Why? Because ethics sustain us when a sudden change in the marketplace or the economy thrusts an organization into uncer-tainty. And in a global marketplace, where the inefficient, the complacent, and the corrupt no longer have a place to hide, only companies that pursue profits with honor will survive.
Chief Executive Officer
Energy Services Group, Halliburton
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