What is your first thought when it comes to business ethics? Many large companies would like to draw attention to the fact that they give lots of money to social causes. Many would like you to think it’s the corporate responsibility they feel they have to their community. Some would even like to draw attention to the scandal their competition is going through. “See, aren’t you glad you do business with us instead.” Is that the right thing to do? Many businesses are surprisingly dirty, and business ethics is surprising complex.
Who could forget Enron? They are an excellent bad example. I was living in Texas when the company crashed and burned. I was in my algebra class when my teacher was talking about a friend who’s Enron stocks went from $80 a share to .80 a share, and she wasn’t sure what to do. As the dust settled the former employees were struggling to find new work, no one wanted to touch them! Many employees had their entire 401K invested in Enron stocks. They lost it all. Even years later while I was in business school, Enron was still the poster child of running a business unethically. Enron is why so many people now diversify their 401K’s.
Business as usual, or unethical behavior
According to dictionary.com Business ethics is defined as, “the study and examination of moral and social responsibility in relation to business practices and decision-making in business” Enron’s business practices were both unethical and illegal. It is not uncommon for businesses to act unethically to make money. You would think people would learn from Enron, but some still try to push the envelope. This company is a great example. They weren’t the only one’s either check out Fortune’s 2016 scandal list.
So, what is the business responsible for…
Business are in business to make money. They are responsible to the law to conduct their business in a legal fashion. That is the core of what the business is responsible to do. But, it does go a little deeper than that. As businesses grow they hire employees to cover some of the work load based on their skills and experience. Legally their wage must be minimum wage or higher. Hired employees turn around and go buy things which stimulate the economy. Thus, a growing thriving business has a trickle down effect that is good for the community. Often times, legal correlates directly to ethical, but not all the time depending on the laws. I think throwing your co-worker under the bus for a promotion is unethical. However, it’s not illegal so it won’t be prosecuted. That is the core of business ethics. That is their legal and social responsibility.
There is a lot of talk about corporate responsibility. It’s a close cousin to business ethics, but it is not exactly the same thing. Dictionary.com states it is “duty and rational conduct expected of a corporation; accountability of a corporation to a code of ethics and to established laws.” The ‘expected of a corporation’ portion of that can look different to everyone. Just because something is ‘expected of a corporation’ to you, doesn’t mean it is to the corporation. A company’s code of ethics may be very different than mine, but they can still be in business legally. Consumers value companies that they deem to be ethical. They don’t shop at places they consider unethical. Since, this is important to consumers, it is important to businesses. The free market ultimately determined that.
Why the focus on corporate responsibility
There are a couple of big stake holders who like a business that takes corporate responsibility seriously. Consumers, and the government. Usually these go hand in hand to increase profits. For example, there is a very large company up north that provides buses for it’s employee. These buses run from the various campuses to the bus station for employees. The goal is to encourage the green initiative by putting fewer cars on the road. This makes them look good to consumers because this is something their customer base values. If customers like them they buy their products, and they make money. Everyone is happy. But there is one other large component.
You know how you can get tax right offs for giving to charities. Corporations are no different. They owe a lot of taxes. Basically, these ‘responsible initiatives’ go under a cost benefit analysis too. They are looking at tax write offs. So, there is a substantial amount of ‘motivation’ from the government. So, it’s not all about being the ‘good’ company. But, a company’s end goal is to make money, not give a ton of it to the government.
Corporate reputation is a pretty big deal
Business has really shifted over the years. The best deal is still important, but consumers do tend to gravitate toward the good and responsible company. According to the guardian, that trend is here to stay. That’s not really a bad thing. I don’t want to give my money to a company that is fraught with corruption. I vote with my pocket book just like so many others, and the free market has driven companies to be more socially responsible as a whole. The advances in technology make it very difficult for a company to hide it’s unethical behavior as well. Any former employee can start posting a company’s dirty laundry on glassdoor, facebook, twitter, you name it! Within a very short period of time, it’s viral! The bottom line is that good actual corporate responsibility translates into higher profits for the business.
Corporate responsibility is important and it has proven to be profitable to businesses. However, it is a bit different from business ethics. I still like to employ a buyer beware policy when shopping because not every company is as ‘good’ as it may want you to believe. Sometimes the corporate responsibility gig is just a way to charge you more money for the same product. However, the average consumer is more informed than ever, so it all tends to come out in the wash. It’s always important to do your research but, by and large, most companies are gearing more toward being responsible stewards of their community.
I appreciate you writing about this topic. It’s something I’m thinking a lot about lately as a conscious entrepreneur and have so many feelings to sort out – my biggest grievance being around the idea that businesses exists *primarily* to make money (and having the conversation focus on this function as if it is the be all, end all).
It’s just so disheartening and even infuriating that as a society we are so grossly out of alignment that we glorify money as opposed to the fulfilling lives that money is intended to make easier for us to acquire and create. In every way we could have corrupted the use of money, we have. So corporate responsibility and business ethics becomes such a frustrating conversation for me because the focus continues to be in the wrong place. Still, I do believe that we will evolve past these short-sighted perspectives and I know that takes time.
It is frustrating! You are absolutely right. The double speak and ‘business ethics’ are not really being business ethics, I just couldn’t handle it anymore! I have a friend who owns a coffee shop in the Seattle area, he roasts and buys his own beans too (that’s a big part of his business). He went was in one of the countries that he and a certain large coffee chain purchase their beans from. He told them what the large coffee company was selling their fair trade coffee for and they balked! They were receiving like .10 a pound for the ‘fair trade’ beans from this large coffee company. (I’m sure you know who I’m talking about 🙂 ) The ‘fair trade’ was just a reason to jack up the price to consumers. It wasn’t at all coming from a good place.