The ethical breaches at Enron, Tyco
and Adelphia vividly illustrate the
damage that can occur when the leader of a company chooses to act in an
unscrupulous manner. The profound lack
of ethics on display can cost employees,
officers and shareholders dearly.
To circumvent such problems, it is
important for top management to set a
good example. After all, an environment
conducive to high ethical standards is
good for business. Companies that behave
ethically are rewarded in the form of loyalty, honesty and productivity from
employees, customers and suppliers.
A company lacking ethical standards is
destined to fail, points out Satinder
Dhiman, a professor of management at
Woodbury University. “Without an ethical
framework, business or any kind of
exchange is not possible,” he says.
Smart Business spoke with Dhiman
about the importance of ethics in a business setting.
How should a company go about developing a
culture of ethical business behavior?
A company’s culture is not something
that can be mandated from above; it has to
be nurtured. An ethical framework and
processes have to be developed at every
level of the organization. Although top
management can initiate certain processes
and provide a clear message about the
importance of proper conduct, the culture
is determined from the grass roots up.
How important is it for management to align
their behavior with their beliefs in regards to
If there is one way that humanity has discovered, in regards to effectively changing
behavior, it is role modeling. There is no
other way to affect change in a group setting. People learn more by watching their
leaders than by listening to their speeches.
It is of paramount importance that
employees and staff get a consistent message from the top leaders and that these
values are aligned.
How should a company’s ethical standards be
communicated to employees?
We can use modern technologies like e-mail, we can have bulletin boards, we can
have town hall meetings, but what really
matters is how a company practices ethical principles on a daily basis. The ethical
framework has to be tangible in a company’s daily conduct.
Nothing underscores a message as forcefully as when a company takes a stance on
an issue that has lasting ethical implications. In this manner, you communicate
the message in a way that employees are
acutely aware of where management
stands. You can have it written all over the
walls, but if you don’t live it, then it won’t
If a breach in ethics does occur, what steps
should be taken to rectify the situation?
This is a question that has been asked
many times since the collapse of Enron.
The first step would be not to justify or
rationalize the breach and to admit there is
a problem. The chiefs of Enron kept saying until the end that they had done nothing wrong. If a breach has already
occurred, it is important to be honest.
They say that when you speak the truth,
you don’t have to worry about remembering. If you try to gloss over things, it adds
insult to injury and worsens the matter.
Also, after admitting that there is a problem, it is important to establish a preventive mechanism so that you have early
warnings about these kinds of things happening in the future.
How have new technologies affected ethical
issues in businesses?
New technologies have impacted business because information is more easily
accessible and more universally available.
I remember someone saying that it is not
that there is more crime today, it is just
that there are more reporters. Technology
has made news about scandals mainstream and more available to public scrutiny than ever. There is no hiding anymore.
New technologies have made things more
There are also more preventive mechanisms in place. The stock market crash
about 80 years ago may not happen today
because we have mechanisms in place
that warn us early of potential problems.
This is the salutatory effect of technology.
SATINDER DHIMAN is associate dean of business and a professor of management at Woodbury University. Reach him at
[email protected] or (818) 252-5138.