Few things are as scrutinized these days
as the ethical behavior of CEOs.
“Business has the responsibility to set the tone for social consciousness,” says
Satinder Dhiman, professor of management at Woodbury University. “That’s
where the ethics and credibility come in.”
Smart Business spoke with Dhiman
about how critical ethics in business has
become and what’s necessary to develop a
culture of ethical business behavior.
How important is ethics?
There is an intense credibility gap that I
would almost describe as a credibility crisis. A [New York] Times/CNN poll in 2002
reported that 71 percent of people who
were polled said a typical CEO is less honest than a typical person. Now, that is serious. When [people] think that a CEO is less
honest than the average person working in
the corporate world, that should be
described as a credibility crisis.
What is considered ethical behavior by businesspeople?
Moral uprightness and honesty toward all
the constituents of business. For instance,
by being a leader, you assume the responsibility that you have to act in a morally
upright manner because the stakeholders
have entrusted their money and expectations to you. Ethical behavior would be acting with moral uprightness toward all the
stakeholders. What would be considered
unethical?
Unethical behavior would be when the
CEO or the leader acts in contradiction to
what could be called moral uprightness
and does not act in a responsible manner
toward all of the stakeholders. For example, when a CEO spends $1 million throwing a birthday bash for his wife, $6,000 for
a shower curtain and so forth, or when
CEOs use the money to further their personal ends, they feed personal greed. That
is unethical behavior in the business sense
of the word.
What dangers are there when a company’s
executives are unethical?
Unethical behavior is like a leak in the
organization’s coffers. The employees and
the customers get short-changed.
But I think it creates a credibility crisis in
society. Companies like Tyco and Enron,
by doing what they did, created a credibility crisis and, from a larger point of view,
the economy suffered. It created a ripple
effect.
How can instilling ethics as a standard practice safeguard a business’s interests and reputation?
When the fence of the farm starts eating
the farm, there is no crop left to harvest.
The fence is supposed to safeguard the
farm. The accounting practices [of a business] are supposed to be the fence and the
mirror of what a company’s financial position is. If they cease to be that, then that’s
where the problems start.
Start by instituting proper checks and
balances and by introducing proper
accounting processes and procedures. By
doing that, you can reduce what Alan
Greenspan once called the ‘avenues to
greed.’
It also has to do with the ethical training
of people. A company has values, and then people that work in the company have
their values. Research shows that if people
have their own strong values of uprightness and moral integrity, it is more likely
that you will have an ethical workplace
than if it is the other way around.
Many times, we think what is legal is ethical, which is not the case. What is legal is
the baseline, then you ask yourself what is
right. And then you ask how you feel doing
what may not seem honest.
I would start at the top. When you hire
CEOs, during the interview, look for such
signs as inflated view of oneself and
marked indifference to the plight of others.
Hire CEOs who have a track record of honest work and do not suffer from egomania.
What can you do to reinforce that message
throughout an organization?
Start with a good role model; the CEO
who sets the tone and sends a clear message that the funds of the company will
never be misappropriated for one’s personal ends. That’s the role model part.
Gandhi says, ‘Be the change you want to
bring about in the world.’ So these CEOs
need to be the change, in the ethical sense,
that they want to bring about in the company.
Second, the organizational culture has to
have openness and transparency. The
information, communications, the way
dealings are done, nothing should be done
behind closed doors.
I’m not talking about giving all the payroll
details to everybody, but anything short of
that should be public information. You
have to have a culture that supports this
kind of openness, where you do not shoot
the messenger and where people are free
to speak their minds.
SATINDER DHIMAN is a professor of management at
Woodbury University. Reach him at [email protected] or through the university’s Web site at
www.woodbury.edu.
