Ethical practices for long-term sustainability
Companies that lay the framework for business ethics in all facets of operation are more likely to become and remain profitable than those that conduct business in an unethical manner
Masihul Huq Chowdhury
Getting penalised by the magistracies for adulterated foods has become a common feature in the dailies of the food shops and restaurants . The groceries are fined on regular basis for selling expired items. The news of a bank official dashing out Tk 380 crore by defrauding common people or physicians using malpractices is not a very uncommon scenario now a days. That raises the issue of ethical business practices in the forefront. Business ethics refers to contemporary organisational standards, principles, sets of values and norms that govern the actions and behaviour of an individual in the business organisation. Business ethics have two dimensions, normative business ethics or descriptive business ethics. As a corporate practice and a career specialisation, the field is primarily normative. Academics attempting to understand business behaviour employ descriptive methods. The range and quantity of business ethical issues reflect the interaction of profit-maximising behaviour with non-economic concerns. Ethics are the rules or standards that govern our decisions on a daily basis. Many consider ethics with conscience or a simplistic sense of right and wrong. Others would say that ethics is an internal code that governs an individuals conduct, ingrained into each person by family, faith, tradition, community, laws, and personal mores. Corporations and professional organisations, particularly licensing boards, generally will have a written Code of Ethics that governs standards of professional conduct expected of all in the field. It is important to note that law and ethics are not synonymous, nor are the legal and ethical courses of action in a given situation necessarily the same. Statutes and regulations passed by legislative bodies and administrative boards set forth the law. Slavery once was legal in the US, but one certainly wouldnt say enslaving another was an ethical act.
Ethisphere released its 2018 list of the most ethical companies include Microsoft, LinkedIn, Salesforce, Intel, and Dell. The New York City-based institute named 135 companies in total, spanning 23 countries and 57 industries. The assessment is based on Ethispheres Ethics Quotient (EQ), which factors in five categories: ethics and compliance programme; corporate citizenship and responsibility; culture of ethics; governance; and leadership, innovation, and reputation. Ethisphere Institute USA publishes list of Worlds most ethical company on an annual basis. This year two Indian organisations, Wipro Limited and Tata Steel Ltd., are amongst the 135 organisations among the list of Most Ethical by US-based Ethisphere Institute. The think-tank has been publishing the Worlds Most Ethical Companies List annually since 2007, and according to the institute, these are organisations that ...recognise their critical role to influence and drive positive change in the business community and societies around the world and work to maximise their impact wherever possible. This year, a total of 135 companies from 23 countries and 57 industries were selected to be a part of the list, amongst which, there are twelve 12-time honourees (i.e., companies that have made it to the list each year since its inception) and fifteen first-time honourees. The companies that have been included in the list outperformed the large-cap sector over five years by 10.72% and over three years by 4.88%, Ethisphere said. The list emphasises the importance of being ethical in todays polarised world and says that companies have increased their role in the society in the past year, Values-based leadership leaped to the forefront of business strategy, and companies increasingly discussed their purpose in broad, community-focused terms. Diversity and inclusion, investment and long-term commitment, and constructive use of a companys voice are now the hallmarks of what stakeholders are expecting, and investors are rewarding. For example, JRD Tata cared greatly for his workers. In 1956, he initiated a programme of closer employee association with management to give workers a stronger voice in the affairs of the company. He firmly believed in employee welfare and espoused the principles of an eight-hour working day, free medical aid, workers provident scheme, and workmens accident compensation schemes, which were later adopted as statutory requirements in India. TATA group instituted a new practice: a worker being deemed to be at work from the moment he leaves home for work till he returns home from work. This made the company financially liable to the worker for any mishap on the way to and from work.
Business ethics is the study of proper business policies and practices regarding potentially controversial issues such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities. Law often guides business ethics, while other times business ethics provide a basic framework that businesses may follow to gain public acceptance. The key elements of business ethics include: 1. Develop Ethical Standards: An integral first step is to formalise the expectations and make it clear about which behaviours are and arent acceptable. A code of ethics section needs to be incorporated in the employee handbook that outlines proper business conduct. This should eliminate any confusion and ambiguity about your companys ethical practices and keep everyone on the same page; 2. Ensure Leaders Exhibit Proper Behaviour: Behaviour often trickles down from top to bottom within an organisation. Its therefore crucial that the leaders in the organisation to act virtuously and serve as examples for the rest of the staff. After all, if managers demonstrate questionable ethical behaviour, why should anyone else be expected to act with moral conviction? When leaders practice what they preach and uphold a high standard of ethics, the rest of your staff will have a positive role model; 3. Be Diligent About Enforcing Policies: Lets be realistic. Not everyone is going to uphold every single ethical expectation 100 per cent of the time, and rules will inevitably be broken. Its important that the organisation to set zero tolerance towards unacceptable behaviour and must instil that there are consequences. Holding employees accountable should prevent the perpetuation of any unsavoury behaviours and nip them before they get out of control; 4. Praise Positive Behaviour: Just as its important to stomp out unethical practices, its equally important to praise the employees for following best practices. This doesnt have to be anything over the top, but pure acknowledgement of the individuals who live up to expectations. Doing so should serve as positive reinforcement, which can have some long-term benefits for your business; 5. Promote Community Involvement: Whats a common thread among some of the worlds most ethical companies? Most tend to place an emphasis on community involvement and are genuinely interested in having a positive impact on the world. Whether its raising money for local causes, establishing volunteer programmes for employees or donating to worthy charities, this can be huge. A common fallacy in discussions about ethics is If its legal, its ethical. Thus, a common response to charges of impropriety is to invoke the law. This legalistic approach to ethics assumes that anything not prohibited by law is, by that fact itself, proper and ethical. The main error in this approach flows from the implicit assumption that legal standards articulate or establish ethical principles. Although to abide by the law carries with it an ethical obligation or responsibility (it is generally unethical to break the law), laws and rules do not depict what an ethical credit professional ought to do. It has been proven time and again that employees who are satisfied with the environment in which they work are more productive than workers who are unhappy. Unethical practices in the workplace can cause widespread unrest with employees, leading to a greater sense of dissatisfaction with the work they are doing and their employers. However, when business ethics are encouraged from management and company executives lead by example, the ability of employees to focus on the work they need to complete to make themselves and the organisation successful increases exponentially. Productivity increases when fewer distractions are present and morale is high, and this leads to greater profit levels for the company. Employee happiness can also have an impact on turnover and retention, as unsatisfied workers are more prone to seek out other opportunities, regardless of higher pay or benefits offered by their current employer. Continuous recruitment and training of new employees can reduce the capital a company can spend on revenue-producing activities, ultimately shrinking its long-term profits. Companies would be nothing without shareholders and investors, and as such, operating with business ethics in mind is most important when interacting with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behaviour is discovered. When investor confidence is lost, it can be a struggle for a company to regain the trust of the public, its investors and its valuable shareholders; profitability may take years to build up again. Companies that lay the framework for business ethics in all facets of operation are more likely to become and remain profitable than those that conduct business in an unethical manner. Research from McKinsey tells us companies with more diverse workforces outperform their peers, added Erblich. Edelmans Trust barometer shows employees increasingly look to their companies for societal leadership. Responsible investing continued its meteoric rise. The last two decades have been especially revealing. We have witnessed businesses succumb to poor ethical standards, impacting not only on their immediate stakeholders, but entire economies and industries. A common reason attributed to the falling trust in business is that the latter is trained to act primarily in its own interests with little consideration for the larger good; the 2008 global financial crisis is often cited as an illustration of this moral shortcoming. Naturally, there is a crisis of confidence in the values of business organisations; there is a crisis of confidence in their ability to lead; and there is a crisis of confidence in their moral right to continue to do business. However, there is a silver lining to the cloud. Over the last decade or so, the response from the business community to integrity violations and breaches is growing wider and stronger. This is encouraging. We are witnessing a course correction. Societies and companies are creating better ways to address the issues of eroding business values, integrity and ethics. Policy and standards are coming into play, stronger management systems are evolving, transparency in business conduct is highly prized and where there is failure the penalties are severe. This is commendable. But it is difficult to say if these are truly the solutions that drive business sustainability. Sometimes, policy, standards and legislation appear to tilt on the other side, and seem stifling. The long term sustainability depends on the ethical practices followed by the people in that business. A healthy work culture creates the preamble to increase in productivity and efficiency. The ethical standards are felt by the customers who help increase the reputation and in terms get translated to higher goodwill. Lets look at these points and appreciate the fact that good corporate citizen charters will reduce the news of adulteration and other types of alarming news items related to malpractices.
The writer, a banker by profession, has worked both in local and overseas market with various foreign and local banks in different positions
