Do the right thing Featured

8:00pm EDT June 25, 2009

In an economy in which profits are hard to come by, survival is not a given and there is extreme social unrest, business ethics is an issue of global importance. And there’s no reason to risk losing your company’s profits, your own personal assets or, potentially, your freedom by not being informed or by making faulty decisions.

Bette Walters, adjunct professor at Delaware Valley College, says that businesses are in a period of massive upheaval, and business owners need to take a fresh look at their ethics as they struggle to survive.

“There are a host of roles and responsibilities attributed to business now that historically haven’t been there,” Walters says. “How are you supposed to reconcile these new expectations and requirements with your basic obligation to make a profit?”

Smart Business spoke with Walters about how ethical missteps can doom you and how education can help you avoid making critical mistakes.

What are the big global business ethics issues that are affecting businesses today?

The No. 1 issue is loss of trust. To paraphrase Ben Franklin, ‘Glass, china and reputation are easily cracked and never well mended.’

Fraud, malfeasance and a lack of professionalism have broken trust in business, governments and institutions on a global scale. People around the world are pulling back from spending and investing. They’re angry and confused and want someone to blame. Governments are struggling to address basic human needs, stabilize the financial system, punish wrongdoing and establish new standards. Businesses are struggling with the right course of action — for example, do you outsource, or bring some jobs back to the U.S.A.? What if you have a headquarters in Michigan but make most of your profits in Europe? There are no simple answers.

The underlying causes of the current global economic crisis are complex, and they won’t be remedied by hasty legislation and throwing money at solutions — there will not be a quick fix.

How are those issues changing the way businesses are run?

Corporate compliance, governance and risk are high on the agenda. Some key concerns include determining what constitutes compliance, when and how do you conduct investigations, how do you train your employees, how do you police activities, who should govern and how, what are the risks of a business — not just traditional economic and political risks but social risks — and what is the social responsibility of the enterprise?

The federal government and shareholders are getting deeply involved in the pay structure of many corporate executives. The U.S. government has issued sweeping proposed regulatory reforms imposing new rules on how corporations are run.

Roles and responsibilities are in a state of flux. Businesses must not be paralyzed by fear or pretend they are not undergoing a time of great social unrest. Change is going to happen. The question is whether business will be ahead of the curve — and influencing the outcome.

How can educators get students to consider the implications of global business ethics?

Educators should include ethical considerations in everything they teach. They can explore the costs of both impropriety and the appearance of impropriety — and how those costs can act as a deterrent. Tracing history and relating it to the issue curve (societal pressure builds — you get action at the apex of the curve and compliance thereafter) helps students understand that business must be alert to the world around it and operate within ethical bounds.

On the positive side, focus on how you can use ethics to enhance your brand for both customers and employees. Why waste your efforts generating profits by ignoring society’s needs and expectations and inviting ruin? Use the issues to foster innovation and create a sustainable business.

What are some mistakes that businesses make?

Examining cases involving short-term thinking in the interest of immediate gains, not taking the time to understand how the underlying subprime mortgage investments were structured, not studying the numbers, ignoring questionable practices, not considering intended and unintended consequences of legislation and regulations, and disregarding laws. Businesses need to be aware that actions have real consequences and frame discussions regarding what we need to do to establish a better framework for decision-making. Whether it is how you treat employees or how you set up your reserves, there are many choices to be made; the question is, how to do make the best choices?

What can be done to rectify the situation?

The business needs to apply its skills, consider why and how bad behavior has occurred, and what needs to be done to restore prosperity and faith in free enterprise. As we work toward a new standard of best practices, a business needs to actively participate if it wants a result that accurately reflects a profit motive and legitimate business needs.

How can executive education help?

Executive education helps educators understand the needs of business and helps executives identify the trends, risks and opportunities arising out of the current global business environment. Working on oral presentation skills, developing sensitivity to issues and the environment of business, considering what is happening among the regulatory community, and learning how to work with stakeholders to maximize your opportunities for success and to minimize your risks all go toward creating a sustainable business model. An ethical framework and strong corporate culture are essential to survival. Education can help you learn how to deliver the hard no.

Bette Walters is an adjunct professor at Delaware Valley College. Reach her at bettewalters@comcast.net.