The advantages of being ethical
Andrew Crane, a professor of policy/strategy, the George R. Gardiner Professor of Business Ethics and director of the Centre of Excellence in Responsible Business at Schulich School of Business at York University, lives and breathes business ethics. He is also co-author of the book, Business Ethics and the popular blog Crane and Matten (http://craneandmatten.blogspot.ca). Here are some of his thoughts on both the challenges and the importance of businesses ethics in this day and age.
Q Is the way we look at ethics in business today different than in previous decades? Is it a bigger issue?
A I’d say business ethics is definitely bigger now than it was 10 or 20 years ago. You can see that in a number of ways. First off, it’s not something a CEO has any kind of embarrassment talking about these days. It’s much more part of the company agenda, a key part of doing business, not that it wasn’t important before but it would be something you dealt with after you dealt with your main priorities. At the same time, many of the issues are similar to what they always were. I think the biggest change is that companies are starting to see there might be some advantage to being ethical. This isn’t across the board but there is a lot more interest in where those win-win opportunities might be, and a lot more attention to the issues. Ethics isn’t just seen as a cost of business but also a potential opportunity.
Q Can you give me some examples?
A Clearly, there is a consumer segment that is concerned about ethical issues but to some extent almost everyone is. So companies can incorporate those benefits into a product that looks good, has the same price and quality and styling of products consumers are looking for. Companies with CSR programs are also seeing its benefits for engaging and retaining employees.
Q In today’s globalized business environment, do companies face far more complex ethical issues?
A Many companies are managing companies that are dealing with multiple stakeholders in multiple countries. So there is not typically one correct solution to an ethical problem. It’s often a matter of trying to navigate with competing perspectives. Your customers want one thing, your suppliers want another, your employers want something else and so do your shareholders. So it becomes about prioritizing and showing those who you can’t satisfy as much as you would like how they can reach a reasonable level of satisfaction so you don’t lose your licence to operate. That becomes more complicated when you move overseas because the range of different perspectives increases. You have to be mindful of the different local communities, also what NGOs are going to be involved, as well as the different governments, whether there is going to be corruption issues, all kinds of different perspectives can arise.
Q What if you are operating in a country where corruption and bribery are widespread?
A In recent years, we’ve seen increased potential for enforcement of ethical obligations for companies with international operations. Internally, a company has to ensure its operations are corruption free. That requires clearly articulating expectations, a lot of training and attention to taking employees through the consequences of unethical behaviours and supporting employees when they do say no to bribery. They have to know they won’t be penalized if they stick to the company rules. The external part is ensuring that by not bribing, you’re not losing the business to someone else who bribes. For this, companies need to connect with their industry peers and competitors to eradicate bribery and deal with it in a more systematic way for all to benefit.
Bribery gives an unfair advantage based on aspects that are unrelated to the quality of the product and it has a huge negative impact on business because the public loses trust. Trust is the oil that makes business run smoothly. If we don’t have ethics, then we spend a lot of money on lawyers and it slows everything down as everything has to be heavily document and we lose the benefit we have of working as a collaborative enterprise, which is what business should be.
Q How do you begin developing an ethical code for your company?
A Most companies start with what they believe in. In smaller companies, it’s often based on the founder’s values. Larger companies might look to their employees to see what their values are, what’s important to them, and what are the things that are critical to them as a company.
Then do some sort of audit to see how you are doing. This is critical. Most companies have a great set of ethical principles pinned up on the wall that nobody takes any notice of. The worst thing is to have a set of ethical principles the company seems to break with impunity by hiring the most unethical people, promoting those that cross the line now and then, and not rewarding the whistleblowers.
If the unwritten rules of the workplace have very little relation to what the CEO is saying in the annual report, those unwritten rules will become embedded over time. You have to make sure there is alignment between the articulated values and what’s on the ground. For example, you can align executive compensation with ethical or sustainability performance. If you’re only compensating people for adding to the bottom line, then you are sending a key signal that ethical expectations and social performance are not really as important as you say they are.