Ethics in Business: The priority Dilemma

To ignore evil is to become an accomplice to it. – Martin Luther King Jr.

Ethics is the ability to distinguish right from wrong and the commitment to do what is right.

Law is adherence to the enforceable, ethics is adherence to the unenforceable.

                                                                                    Institute for Global Ethics

Corruption is more than just giving and taking bribes.

Ethics was discussed from the time of Socrates, Plato and Aristotle. One of the earliest codes of ethics exists from the time of Hammurabi. Hammurabi is the best known and most celebrated of all Mesopotamian kings. He ruled the Babylonian Empire from 1792-50 B.C.E.

The prologue or introduction to the list of laws is very enlightening. Here, Hammurabi states that he wants “to make justice visible in the land, to destroy the wicked person and the evil-doer, that the strong might not injure the weak.” The laws themselves support this compassionate claim, and protect widows, orphans and others from being harmed or exploited.

Some of the phrases that we have used often come from this code- An eye for an eye, and a tooth for a tooth.

Some of the laws were quite brutal, others rather progressive. Members of the upper class often received harsher punishments than commoners, and women had quite a few important rights. However Business Ethics has become an area of study, research and relevance since the 1980’s. In India, business ethics is a more recent area of concern.

Business Ethics, for many years, has been considered an oxymoron. It suggests that there is not and cannot be ethics in business. That business is, in some way, unethical by principle.

According to N.Vithal, Former Chief Vigilance Commissioner- Corruption flourishes in India because it is a low-risk and high-profit activity. We need to make it a high-risk activity and promote zero tolerance.

A conservative estimate as estimated by the World Bank Institute results to US $1 trillion for annual worldwide bribery. This estimate does not include the extent of embezzlement of public funds (from central and local budgets), or from theft (or misuse) of public assets.

The IMF Chief says that the annual cost of bribery equals 2 percent of global GDP. These costs represent only the tip of the iceberg and the long-term impacts go much deeper says Christine Lagarde, MD, IMF.

Furthermore, the $1 trillion estimate does not include the full extent of ‘tainted procurement’, but only the bribe fees associated with such procurement. It is not surprising that Business ethics is still considered an oxymoron by many. It is a matter of grave concern that this amount of $1 trillion exceeds the GDP of many countries, of which only 15 have a GDP above $1 trillion.

Significant losses in investment, private sector development and economic growth of a country, or the increase in infant mortality, poverty and inequality, all result from corruption and misgovernance.

However the positive side is that there is lower skepticism now with the concept of ethics in organizations. Larger numbers of studies are being conducted focusing on the benefits of organizations being ethical. Within recent interactions with board of directors, most of the members believed with confidence that Business ethics is not an oxymoron and that it actually pays to be ethical.

Also, the PhD thesis of Dr. Anita Shantaram ‘Ethical Business Practices and Corporate Financial Performance: An empirical analysis’ shows a positive correlation between the practice of ethics in organizations and certain financial variables.

37% of respondents thought employees’ cynicism was a top threat to the effectiveness of their Ethics and compliance programs. Thus, an important way of influencing ethical practices and behavior in organizations is to ensure that senior management places a high premium on ethical behavior and tone at the top.

“Tone at the top” dictates the integrity of an organization and how employees will conduct themselves. When leaders demonstrate a commitment to ethics, workplace integrity improves significantly. When top management is perceived to have strong ethical commitment there is reduced pressure to compromise, reduced misconduct, greater percentage of reporting observed misconduct and reduced retaliation.

In addition what is heartening to see is the recent establishment of the UK Modern Slavery Act 2015, which provides the needed leadership. It introduces a number of measures to combat slavery and human trafficking. In addition to creating new criminal offences, powers of enforcement and measures to protect victims, it introduces requirements intended to eliminate slavery and trafficking in global supply chains. It gives the UK the same wide-reaching ethical remit as regards slavery and trafficking as the Bribery Act 2010 gives it in the field of bribery and corruption.

Thus, though compliance is about adherence, good governance cannot be achieved by compliance alone. However, acts such as the one above and the Indian act on CSR, Prevention of Sexual Harassment, and Whistleblower Protection, etc. gives us a focus and a direction about the intention of countries.

Lynn Sharp Paine in her book ‘Value Shift’ says: The law does not generally seek to inspire human excellence. It is no guide for an exemplary behaviour. Those who define ethics as legal compliance are implicitly endorsing a code of moral mediocrity for their organization.

Thus we have to be proactive in our approach to ethics and not just compliance-based. The development of an economy needs a more ethical approach by organizations. We will grow faster once we stop considering Business Ethics as an oxymoron and make ethics a natural way of operating.

Managing only for profit is like playing tennis with your eye on the scoreboard and not on the ball.

Ken Blanchard and Norman Peale.