Ethics and Credibility — What Now?

A series of scandals in the corporate world — Enron and Andersen being just two of the leading examples, now seem to have been put behind us. Sarbanes-Oxley and similar legislation in almost every country around the world has been enacted and for a while at least the genie is back in the bottle.

But this round of failings in ethics and credibility is just one of many throughout history, and there’s every reason to be confident it’s going to happen again. When it does a lot of businesses will go under with it, and not all will be household names. How can you keep your organization away from temptation and on the side of the “good guys”?

Strangely enough, a lot of the illegal and unethical activities took place under the guise of �delivering shareholder value�. To look good in the eyes of their shareholders a number of senior executives utilized questionable accounting practices and constructed forecasts far too optimistic to have ever been achievable.

In organizations with flatter structures the outcomes have been much the same. Dishonest brokers touted worthless stocks to their clients; foreign currency traders took risks with other people’s money and lost billions. What it all comes down to is that some people are just plain unethical. They abuse their positions of trust and wind up destroying businesses and the life savings of employees and investors.

Unfortunately this also takes place at the small business level. Owners and managers of some small enterprises have made promises to customers they never intended to keep, or borrowed money they could never repay. The result is that the unsuspecting people who trusted them lost savings, homes and even their own businesses.

We can’t allow ourselves to forget that all of this was caused by people, not the businesses they controlled or exploited. This had nothing to do with a change in the way businesses should be conducted; in many ways it was something that had built up for years and only peaked with the fall of some big players. And it was all caused by people behaving improperly.

If they had thought further ahead than the next profit projection or about what they could make out of the next deal they’d have realized that it couldn’t go on forever. They were always going to be caught eventually and when they were they’d have to pay the penalty. Unfortunately they also dragged a lot of innocent victims down with them.

It’s up to the owners of any business to create and maintain a culture of ethics that will create and protect the firm’s credibility. Your business, regardless of its size, can and should have a means of encouraging ethical behavior among all the members of the team, from senior management to the office junior.

It might cost a bit to do whatever’s necessary to create an ethical business climate within your business, but the option is to accept that you can lose your business almost as quickly as the business can lose its credibility.

Business ethics are really about ensuring that our relationships with others, both within and outside the business, are conducted in a way that is moral and consistent with all applicable legislation. It’s not about ways to stay within the boundaries of the law; it’s about wanting to comply with it.

Think of the benefits of being known as a business that actively pursues ethical behavior. The public perception will be one that tells all stakeholders the business can be trusted. It’s something you can publicize with pride.

You’ll also avoid the increasingly heavy penalties that most jurisdictions apply to those whose ethics are called into question. Even if you, the owner are unaware of an employee’s wrongdoing you can still be held accountable for allowing transgressions to take place.

By encouraging ethical behavior the business is also protecting itself against fraud by team members who might see something going on at the top of the organization and take their own actions to get a share of the spoils. As may owners have discovered at their own expense, it starts with stealing things like pens and paper and grows from there.

The most successful programs targeted at creating an ethical culture within a business are based on values, not on simply complying with policies, rules or guidelines. The business must have clearly defined values that determine the way it should conduct itself commercially — with its suppliers and with its customers.

It follows that the business has to act in a way that is consistent with these values in everything it does. Just having a statement of values isn’t enough; communicating them and gaining the buy-in of all team members is required.

Identify the Organization’s Values

Begin by making a thorough examination of the values underlying the way the business behaves. This includes both good and not-so-good values; most businesses have both kinds.

Correct the Negatives

When you turn up anything that is unethical or could lead to unethical behavior find a means of correcting it that will result in the creation of a positive value. If, for example, “loading” invoices is a common practice, make it a business value to ensure that all relationships with customers are conducted accurately and honestly.

Prepare a Code of Ethical Conduct

Work with your entire team to produce a code of ethical conduct that is all-encompassing. It should cover everything your business does, even down to the way team members interact with each other. Put it in writing and make sure everyone has a copy.

Train the Team

Prepare a training session (or more than one if required) that will communicate and reinforce the values of your business to everyone on the team. It will tell them how to comply with the code of ethical conduct in their day-to-day work. This should also be part of every new team member’s induction to the business.

Monitor and Follow-Up

If there are any suspected breaches of the organization’s code of ethical conduct you need a means of investigating and resolving them. This should be a part of your overall code and not be taken lightly. Establish a clear set of responses to proven violations that go all the way to dismissal.

If you go about it with sincerity and a determination to get it right you’ll be able to build a culture of ethical behavior that will be a big positive for your business.

You will remove the potential for people in your business who are now behaving ethically to later yield to temptation and cause damage to your business. Your credibility till be greatly enhanced and you can go to sleep at night knowing that you and your organization are perceived as ethical and credible members of the business community.

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Copyright 2005, RAN ONE Inc. All rights reserved. Reprinted with permission from www.ranone.com.