Does An Ethical Business Have An Economic Advantage?


Do good ethics result in good business? One might have a tendency to think, well yes, of course. Does not everyone prefer fairness and openness? Another might think, not so fast. If a company chooses to operate on the far fringes of both the law and accepted ethical norms, and apparently produces results satisfactory to customers and stockholders, is not that enough?

It's not a simple answer. Much has been written about the role of business with regard to ethics and social responsibility. Many feel that a corporation's role is to produce profits and obey the law, period. Others see a corporate entity that should pursue a much clearer role, a role that encompasses motives well beyond that of simply making a profit. While it does not necessarily appear that an ethical business holds an economic advantage in the short-term, one would think that over time the more ethical entity would indeed have grown deeper roots.

Let's look at business ethics as,
1) the avoidance of breaking criminal laws in the course of work activity;
2) the avoidance of actions that may result in civil law suits; and
3) the avoidance of actions that may do harm to the company's image and then devalue the brand.

There are obvious costs associated with ignoring the above. There are also costs associated with behaving ethically and morally. Companies must pay close attention to product safety, truthful advertising, environmental impact, proper working conditions and employee welfare, and the management and enforcement of a published code of ethics. All come with a cost, whether that cost comes from punitive circumstances involving illegal or unethical behavior, or from the cost of safeguarding the company from liability or public-relations imbroglios.

So, do good ethics result in good business, or does good business result in good ethics where both customers and employees alike are demanding over issues relating product safety and working conditions, among other things? Does the company drives its own ethical behavior, or in essence does the marketplace have a regulatory effect? Or does the answer lie in the middle?

I believe the answer is equal parts of both. And I posit that the ethical organization will create an economic advantage for itself as its culture becomes imbued and recognized.

Business ethics, however, are sometimes viewed cynically, an oxymoron better suited for late-night comedy fodder. But I believe business ethics are a reliable, reasonable model for stating an organization's principles so that those both within and outside the company have a common frame of reference.

Here are three reasons I feel business ethics can provide an economic advantage:

1. Business needs to help rebuild the trust that Americans are fast losing in its long-time institutions. Surveys indicate that the public is losing confidence in its government, the press, the public school system, the church, and business. There is ground to be made up here, and those in the forefront in a sincere, trustworthy way will be noted.

2. Business leaders need to lead from the front, demonstrating by their own ethical behavior that business is indeed an honorable and noble profession; that it has the capacity to improve the human condition and provide opportunities for large numbers of citizens. Schools of business will respond by concentrating on ethics as much as quantitative methods.

3. It's the right thing to do, now more than ever. Simple as that.


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