The question of ethics is often left out of the business discussion. Yet, as we learned, thanks to Enron, Quest and ImClone, they can have a profound impact on business beyond the offending companies.
Consider the Sarbanes Oxley legislation.
One might assume that when the economy slows, people are more likely to cross ethical lines in business. But that might not be the case.
“People who are predisposed to cut corners and cross ethical lines will do so no matter what the economy is doing. The difference is that they tend to get exposed in bad times,” said Phil Weiser, professor of law and the University of Colorado. “For example, the downturn in the economy laid bare Enron’s long standing and pre-existing practices, their behavior did not change due to the economy.”
Where the economy does make a difference is when employees want to get out of a questionable situation.
A weak job market might make it difficult to leave and find other employment.
We are all aware of the major ethical breaches that were played out in newspaper headlines across the globe, but what about the lesser-known infractions that take place every day?
There is a whole gray area of ethical missteps that takes place. Customer relations is one area that can be particularly gray.
“How many people have gone into a project thinking it would cost X but ends up costing Y?” said Maurice Gaubatz, CEO of Pyxant Labs. “Providing transparency for customers is important but not always easy to do for some companies. Well-meaning business people may not provide a complete cost picture because they don’t want to scare away customers. But in the end they end up crossing a line and surprise customers with a much larger bill.”
Other gray area examples of ethical behavior include not paying for services as per the contract. You might agree to net 30 terms but the customer might choose to wait to pay for 90 days.
“In one case we did not get paid for nine months,” Gaubatz said. “It got to the point where we had to withhold a deliverable until the amount was paid.”
When trying to sell a business, you always want to create the best possible scenario to garner the highest price. However, this is another common area where seemingly small ethical violations can negatively impact the buyer.
Some people are tempted to misrepresent the amount of business in the pipeline to make the company more attractive.
Another area, which is getting more media attention, is scientific fraud — particularly in drug development. The gray ethical questions surround the selective presentation of data and clinical trial results to support conclusions.
Some people might feel pressure to cut corners and push ethical lines, justifying such behavior by telling themselves that it is just this one time.
“That’s a trap,” Weiser said. “Once you get away with an ethical infraction one time you are vulnerable to do it again. This is a slippery slope.”
Gaubatz and Weiser agree that setting the ethical tone and culture for a company has to come from the top.
“Most everyone wants to be good,” Gaubatz said. “So, senior management needs to set forth ethical guidelines and principals and then demonstrate their commitment via actions.”
Weiser said that workers need to know that certain behavior will not be tolerated.
“Top executives need to make a commitment to employees and customers and clearly articulate and follow policies,” he said.
The question of ethics has gained so much attention that national organizations such as the Public Relations Society of America are taking it very seriously. PRSA is considering creating an ethics accreditation program.
“We are in the process of completing our due diligence and research to see how such a program might work for PRSA and outside the profession,” said Bob Frause, APR and Fellow PRSA, vice chairman of PRSA’s national board of ethics and professional standards. “We are determining the need and/or market demand for certified public relations professionals vs. the Wild, Wild West.”
If you find yourself in a business where there is a culture of crossing an ethical line, your best strategy is to leave.
“If you don’t have an exit option, you could end up getting pulled in,” Weiser said.
If you can’t leave, Weiser suggests being extraordinarily creative about removing yourself from any bad behavior.
Companies with solid ethical reputations will often attract top people who leave bad situations in search of ethically sound companies.
“We have hired strong performers who left previous jobs due to the fact that they did not appreciate the appropriateness of what they were being asked to do,” Gaubatz said.
Businesses that maintain high ethical standards can attract the right people and make lots of money without having to cheat.
Consider that if Martha Stewart had kept her ImClone stock, it would be worth a lot more today than when she sold it ahead of bad news and went to jail for lying about it.
Ann Snortland, principal of Snortland Communications, is the spokeswoman for the Peak Venture Group Middle-Market Entrepreneurs. She can be reached at asnortla@yahoo.com.