“There is only one ethics, one set of rules of morality, one code: That of
individual behavior in which the same rules apply to everyone alike.”
“Management is doing a thing right; leadership is doing the right things.”
Does the name Kenneth Lay ring a bell? Kenneth Lay was the CEO of ENRON, the disgraced American energy, commodities, and financial services company found to be defrauding consumers and investors out of billions of dollars when it filed for bankruptcy in 2001. Before bankruptcy ENRON had approximately 20,000 staff and was one of the world’s largest corporations with claimed revenues of nearly $111 billion dollars. At the end of 2001, it was discovered the company’s sizable financial position was sustained predominately through institutionalized, methodical, and creatively planned accounting fraud. The implosion even took down the famed accounting company Arthur Anderson, who had been involved in the company’s accounting schemes. In a cruel case of irony, Fortune magazine named ENRON “America’s Most Innovative Company” for six consecutive years.
It is the responsibility of every business to be honest. This is not rocket science. Honesty is telling the truth in every way possible, to investors, employees, consumers, and the government. Trade secrets which might damage a company’s competitive advantage and which are ethically held private are of course, an exception. When it comes to honesty and business ethics, transparency is a key idea. Transparency to investors and regulators is of particular concern. Debt, profits, revenues, and all relevant accounting data should be objectively detailed and reported.
Governments play a key role in regulating business activity and legality. Without government regulations, businesses would undoubtedly be tempted to “cross the line” of ethics. In recent years, business schools in America have pushed the idea that businesses have an obligation to participate in society and contribute to a greater good. Though this is a somewhat ambiguous and amorphous ideal, it is sound and I support this idea wholeheartedly, though individual employees should have the right to voice and disagree with their owners, managers, or fellow employees as to what exactly a “good” society consists of and be able to refrain from engaging in activities which conflict with their own moral and ethical code. A business has a responsibility to create value in an honest, ethical, and legal way.
Where I live in Atlanta, GA, I have access to many morally questionable activities within a short driving distance. It is not up to me to decide whether or not these businesses should or should not be available to residents in my area, it is up to the local government. Smoking cigarettes, blowing money at strip clubs, eating fatty junk food, drinking excessively, playing poker, or racking up piles of debt at shopping malls may not be good for anyone, but we as free Americans have the right to do these things. The freedom to do them doesn’t make them right, or good, but they are available nonetheless. Culture does affect the quality of life and health of a particular place, but the laws of our land allow freedom of expression and local control of businesses and certain morals.
Practically any business product or service can hurt someone. A chiropractic adjustment gone bad could injure, a meal with bacteria could poison, or an appliance faultily wired could catch on fire. The list goes on. Our system is a system of checks and balances. Businesses should regulate themselves, governments should reasonably regulate businesses, and consumers should beware of the products and services they buy. If necessary, in cases of ethical mistreatment of consumers or investors, legal retribution may be required. Sure, too much alcohol, debt, or sugar could be bad but these things can be a net good in life, if used responsibly, so we’re not going to ban them. It’s not up to a business to determine how a consumer uses a product or service, a customer must be responsible for his own behavior. After all, a knife could be used to kill, but a knife is an indispensable part of life. We want to live in a free world, with free markets, where people are allowed to decide for the most part what makes them happy, but business still must always abide by Peter Drucker’s admonition to lead by “doing the right things.”
In response to government pressures to reduce carbon emissions, automobile manufactures signed on and agreed to create more fuel- efficient vehicles. These ongoing efforts since the 1970s have significantly reduced pollution and smog in American cities. Whether you agree with climate change regulation or not, or pollution standards or not, it is the responsibility of businesses to follow the law. Volkswagen (VW), the iconic German car manufacturer who also owns the Audi brand, was recently exposed as having implanted a sensor into their car engines which would allow the engine to “know” when it was being tested in a lab setting, so that the engine could skirt by emission standards in a lab setting.
"We've totally screwed up," said VW America boss Michael Horn, while the group's chief executive at the time, Martin Winterkorn, said his company had "broken the trust of our customers and the public". (bbc.com) As a result of this moral lapse, the company, investors, and consumers will all be damaged by these actions, referred to popularly as the “diesel dupe.” Chalk another iconic company up on the dust heap of disgraced brands in corporate history. Companies and business people should tell the truth. Radical honesty is the only way.
In medicine, ἐπὶ δηλήσει δὲ καὶ ἀδικίῃ εἴρξειν or Primum non nocere, means “first, do no harm” and refers to the Hippocratic Oath, often thought of as the guiding ethical principle of medicine. Why not use this guiding principle in business? We live in a new era. The internet and technology are ubiquitous. For a business model to be sustainable over the long haul, a race to the top is in order. What is best for everyone? What is the best way to create value along the value chain, in an ethical way? These are the questions every business should ask and the only way to operate responsibly and healthily.
Disgraced investor Bernie Madoff, serving a life sentence for defrauding clients out of millions of dollars in a Ponzi scheme said “The nature of any human being, certainly anyone on Wall Street, is 'the better deal you give the customer, the worse deal it is for you'”. I couldn’t disagree with Mr. Madoff’s win-lose dichotomy more. How about, as Stephen Covey, in his classic business book “The 7 Habits of Highly Effective People” we think in terms of win-win instead. When value, real value that is, is created, all parties are the better for it.