WASHINGTON, August 27, 2014 — The US Government is making multi-billion dollars settlements with America’s largest banks, including Bank of America, Citi Bank, and Goldman Sachs for their involvement in the housing meltdown. But these settlements dwarf the damage caused by the banks. In addition, they do little to discourage shortsighted, self-serving behaviors that create systemic risks.
That’s because they do not target the decision makers. A company does not act solely on its perceived interests, but rather, its interests and the interests of its leaders as perceived by those leaders.
Beyond smarter regulations and proactive enforcement of existing regulations, what businesses need is a renewed commitment to and investment in rigorous ethics.
Board members, executives, managers, and supervisors set the tone and direction of a company’s operations. As business leaders, they are also the ones to shape the ethical culture of their firms while business leaders across an entire industry maintain standards for ethical conduct. Consequently, leaders of business define what ethics and other values mean for their industries, companies, and subordinates.
The second half of the twentieth century was marked by a shift in business philosophy that pushed for massive short-term profits and shortsighted cost-cutting measures that rarely took ethics into account. They forgot business ethics exist to help promote top quality products and/or services at the best possible price, healthy competition, and strong community relations.
Without strong business ethics, employers cannot expect employees to respect their companies, nor can they expect customer loyalty. An industry without ethics, in any aspect of business, is one that earns the scorn of its consumers and eventually causes pain across the entire economy.
Because business leaders are decision makers, they are the source of moral examples for all their subordinates and future business leaders. Yet they too often lose sight of necessary moral and ethical business principles.
Under the blanket excuse of unfettered competition, business leaders can easily come to define company ethics in terms ensuring that their own interests are over-served. This creates a serious issue as these leaders fail to consider implications of their decisions and behavior on business outcomes and corporate reputation. It’s clear that in corporate America today, that a strong ethical stance is an increasing necessity to assure both employees and customers of the quality of a company’s products and the fairness of its work environment.
Business leaders tend to view relations among professionals at their level as a pledge not to undermine the profitability of the company. Yet they often fail to recognize how unhealthy internal competition hurts long-term viability. Baby Boomers as well as current generations have learned that most businesses, in fact, are not necessarily upstanding, ethical, or loyal to their customers and employees.
It is easy to see that these businesses act solely on what they immediately perceive to be in their own best interests without regard to their employees. In a logical reaction, employees have learned to do the same. Business leaders may be concerned about how the behavior of these employees can harm a company. But instead of looking inward at the corporate culture, they address these issues with punitive “ethics” policies. Instilling a positive corporate culture and a strong ethical and moral sense in each employee is a more positive way to go.
A company that treats its employees poorly, rips off consumers, and/or undercuts other firms with unhealthy, unethical competition, is going to teach employees to behave unethically. This means business ethics extend beyond employee relations to include how a firm treats its competitors across its entire industry. Business ethics also address the quality of products and services, providing its customers with the best quality at the fairest price.
A strong ethical stance must be factored into every aspect of business. That’s because ethics ultimately shape the culture within which all businesses and industries must operate.
While corporate ethics must start at the top, each and every employee is also responsible for instilling a strong culture of ethics in the workplace. While business leadership must guarantee the proper corporate atmosphere and lead by example, the only way to ensure that corporate values are properly ingrained in a firm’s culture is to create an environment that addresses ethical violations when they arise.
Building a positive corporate culture begins by understanding why a corporate ethical code is necessary, identifying moral ethical considerations, building a positive and proactive corporate culture, and addressing and correcting ethical violations when they occur whether at the lowest employment tier or in the highest level of management.