Why businesses should invest in good ethical practices

The headlines scream "CEO Steals millions from employee pension plan", "Company dumps tons of gallons of waste into illegal dump" or "High ranking executive accepting bribes". Over the last several years seems there is often a story in the news or social media that relates to corporate ethics, or in these cases, lack thereof.

Corporate ethics can get complicated, but when you come down to the nuts and bolts of the matter, it's not very different from personal ethics.

So exactly what is corporate ethics?

What is an ethical dilemma?

We are presented with ethical dilemmas when faced with a decision where available choices conflict. Sometimes the choices are obvious and we know the right thing to do, but other times we're presented with choices where either or both options contain "gray" areas. It could be in the sense where one of the actions is questionable, or it could be that no matter which we choose, there will be unfortunate consequences of some sort.

Frequently we are presented with such dilemmas in the workplace. You have a job responsibility and your job dictates to do what your boss tells you. What happens when your supervisor orders you to do something that you find morally questionable, then what?

Corporate ethics is not much different. A corporation is an entity, but that entity is made up of decision-making individuals. Corporations have a responsibility to their shareholders, which is to typically make a profit for them, but the best ways to make a profit may not necessarily be morally sound choices, but when it comes down to it, individual people are making those choices, often under a lot of pressure.

Reasons corporations fail to make sound ethical choices

There are many reasons why people fail to make sound ethical choices, these may include:

• Competitive pressures. This is one of the largest offenders as to why unethical or illegal choices are made. Short-term financial benefits are often achieved, but in the long term, the corporation loses.

• Rationalizations and justifications. Decision makers look around them and say things like, "Well, it's just the way the system works", "Who will ever find out, if no one knows, then no harm is done" or "They screwed us last time with our shipments, so let’s tweak the books and overcharge them". These factors are huge culprits in how many businesses make poor choices. Once fallen into a quarry of rationalizations, it's easy to get stuck in the pit. Attitudes laced with rationalizations and justifications seldom lead to positive results in the end.

• Superiors have an eye on immediate profits. Corporate shareholders expect a return on their investments and companies want to be "in the black" in their accounting ledgers. Businesses that focus solely on profit operate under egoist philosophies where the morally correct decision is to do what's good for the organization and that is to make a profit even if it harms something else.

• Ignore the truth. It doesn't matter that a shipment of defective toys went out just prior to the holiday rush, the consequences of not sending the toys to the store shelves would have been financially devastating. Better to ignore the truth, make the profits and deal with the consequences later. Not a good ethical choice.

• Assumption superiors will provide protection if action backfires. This is more related to individual employees. An employee is faced with a moral dilemma and decides to take a chance and go with the unethical decision assuming the company will "have his back." This seldom happens because if something goes wrong, there will be a scapegoat and if the person behind the decision was you (even if you were ordered to do it), you'll be the one paying the piper.

Behaviors to avoid

Behaviors that should be avoided include taking items that belong to someone else, whether it's land, profits, products or any other property or right. It's also always a bad idea to give false impressions and misrepresent products or services. Companies that tell tall tales or give false advertising to make a quick buck are not acting in an ethical fashion. Profits are an important and integral part of a business, but lying about a product in order bolster the bottom line is not the way to go. These phony tactics will fail over time and hurt a company in the end.

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Businesses better serve themselves to out of situations involving bribery and avoid getting caught in a conflict of interest scenario. This is one of the cardinal rules in many companies' ethics policies. Other behaviors to avoid include:

• Distributing misleading information, either slanting it or by omission
• Sharing confidential information, 
• Taking unfair advantage by turning a blind eye to organizational abuse of employees, contractors, or customers. 
• Condoning wrongful or illegal activity.

How businesses can promote good ethics

Businesses can do several things to promote an environment of strong ethics. It's essential to provide ethical anchors, leading by example is a solid way to accomplish this. Immerse the organization in a foundation governed by a code of ethics that all employees must read and sign. Part of this is to offer ongoing ethics training to keep everyone on the same page as to what's expected and what is and isn't acceptable.

Social responsibility is an important layer that is a part of working within a framework that relates to practicing sound business ethics. Top company personnel must determine how far they are willing to go in order to make those profits. Chances are at some point they'll be faced with a decision to do what's good for the company or to do what will benefit society as a whole. If the company has developed and nurtured a strong ethical environment, this decision will be easier to make.

Ultimately, businesses that make ethically sound choices profit, even if the initial dollar amounts don't seem to reflect it as high as the unethical choice would show. Public reputation is a valuable asset and customers will return to businesses that run on ethical principles. This is far more valuable and brings more lucrative results in the long run. Displaying sound ethics is worth the effort.