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Principle vs. profits Featured

9:34am EDT July 22, 2002

There was a time when the concept of "business and ethics" seemed like an oxymoron.

But intense competition in today's marketplace and unprecedented pressure from the media and nongovernmental organizations have corporate America scrambling to develop praiseworthy ethics policies.

Ethics philosophers like William Sledzik, associate professor at Kent State University's School of Journalism and Mass Communication, say that as the national media spotlight zeros in on corporations closer to home, the "business ethics boom" is all the rage.

Cognizant that ethical scandal is no longer limited to corporate giants, even small business entrepreneurs are rethinking issues ranging from human resources policies to OSHA and environmental compliance to consumer safety and customer data protection.

Notably, business ethics research shows that entrepreneurs consistently place greater emphasis on ethical behavior than do business managers.

"Ethics of Business Managers vs. Entrepreneurs," a 1998 study released by the Research Institute for Small & Emerging Business in Washington, D.C., compares the ethics of 165 entrepreneurs and 128 business managers. Written by Robert D. Hisrich of Case Western Reserve University, key findings reveal that entrepreneurs are more sensitive to societal expectations and more critical of their own performance than is the general public.

Entrepreneurs also have stronger ethical perceptions about their relationship to the businesses they are involved in.

"That's why the entrepreneurial companies have an easier time of it," says Sledzik, remarking on the CWRU research. "The values of the person who's guiding the company are more evident to the employees because there's that direct, day-to-day hands-on management of the owner. When you get into a larger organization, like a Goodyear or an IBM, it becomes far more difficult for the person at the top to push those values down."

When ethics collide

The most admired code of ethics is one that simply invokes the Golden Rule, Sledzik says. In going about their business, if managers do only what they would have done to them, they can be assured they are working ethically.

But here's the rub. As management guru Peter Drucker notes in "Management Challenges for the 21st Century" (HarperBusiness, 1999), the practice of ethics cannot be separated from the businessperson practicing them. To be effective, one's own values must be compatible with the organization's values -- at least, compatible enough to coexist.

The Hisrich research also revealed that 70 percent of business managers said their personal ethics are sacrificed for the corporation's business goals.

"That's the quandary for many corporations. It's a case of upper management asking middle management to do whatever it takes to perform a certain job and to create a result," says Sledzik. "Implicit in that often means bending or breaking a few rules, or acting in a bit of an unethical fashion.

"In my experience, there have been managers who would say, 'I've got a problem -- make it go away.' It's that 'make-it-go-away' philosophy that presents the ethical dilemma."

Chairman emeritus of FirstMerit Corp. Howard Flood offers his insight to the controversy.

"That may not be significantly prevalent in every industry, but it does exist. But that's not the quandary of the corporation -- it's the quandary of the people in the corporation," Flood says. "It's the people who will take the company in the direction it eventually goes, and if they try do to so by compromising their ethics rather than by standing behind their principles, then you have a real dilemma."

By definition, an ethical dilemma occurs when accepted rules or values are at odds with one another. Often, that occurs when management proposes something that will jeopardize a relationship with one or more key loyalties -- its employees, customers or shareholders.

From Flood's standpoint, the dilemma happens when business managers are more focused on "doing well" rather than "doing good."

"There are a number of transient, high-level managers that come into a company, haven't developed an affinity for the company's people, customers or products, and instead are oriented to making the company grow for purposes of shareholder expectations," he says. "Following that dictate, when a problem arises that has an ethical dilemma attached to it, rather than deal with it, they'd prefer to have it disappear as quickly as possible, so they can focus on their strategic plans."

Revisiting the "make-it-go-away" philosophy, Sledzik refers to calamities such as Three Mile Island, in which management withheld information, resulting in the ruin of an entire industry.

"And we may be watching a brand formerly based in Akron doing the same thing right now," Sledzik observes.

While the jury is still out on the Firestone tire fiasco, he says, the reality is that if a corporation is not forthcoming with the facts, grave consequences are inevitable.

"It's too early to elaborate on that because we don't have all the facts as to who did what to whom, but obviously, there were some people who had some information that probably should have been more forthcoming with it," Sledzik says.

Flood concurs, noting that somewhere along the line, the pursuit of profits may have overshadowed the practice of principles.

"Firestone is having the finger pointed at them, but we don't know yet if something went wrong at the management level, or at the line level," says Flood.

"Whatever happened, I think it's safe to say that the Firestone brand will never, ever be what it was," Sledzik says.

Ultimately, every company must accept the reality that virtue is its own reward.

"There's a growing body of research out there that says that consumers want to do business with companies they trust, and companies that display ethical conduct. We don't want to do business with companies that do the wrong thing," says Sledzik. "And that's the bottom line to ethics.

"If you don't do the right thing, you lose credibility, and after that, it's downhill all the way."

Two-minute checklist

When you're presented with an ethical dilemma and need quick inspiration, refer to Bill Sledzik's "Two-Minute Checklist" for a quick moral diagnosis.

The smell test. The smell test is intuitive. You just sense something isn't right. When the feeling overcomes you, go to step two.

The mom test. Our parents play a central role in shaping our ethical and moral beliefs. Ask yourself: What would Mom do in this situation?

The "page one" test. Make your ethical decisions as if the details will appear on tomorrow's front page. If such public scrutiny would cause embarrassment, consider alternative solutions.

The public interest test. Ask yourself if your decision is really serving the needs of your key publics -- and ponder this from an unattached viewpoint, not from your insider's perspective.

Do the right thing

Here are key points of the U.S. Dept of Commerce's voluntary guidelines for how businesses can adhere to a code of conduct that respects universal human rights:

1. Provide for a safe and healthy workplace.

2. Practice fair employment practices, including avoidance of discrimination, and respect for the right of association and the right to organize and bargain collectively.

3. Practice responsible environmental protection.

4. Comply with federal and local laws promoting good business practices, including those prohibiting illicit payments and ensuring fair competition.

5. Maintain, through leadership at all levels, a corporate culture that respects free expression consistent with legitimate business concerns; that encourage good corporate citizenship; and where ethical conduct is recognized, valued and exemplified by all employees.