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Wednesday, July 22, 2009

Why Behaving Ethically is Important for Business

JoAnn Lombardi
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It’s not unusual to look in the newspaper or on the Internet any day of the week to find at least one business scandal that has taken place. It’s not shocking for people to read about how a corporation such as Enron violated the rules of engagement that’s accepted by society. Whether company finances have been manipulated in order to secure a business deal, child labor has been used to assemble a product, discriminatory practices have prevented the employment or promotion of members of a particular group; businesses regularly behave unethically.  
What being unethical means is that they behave in ways that have a harmful effect upon others and are morally unacceptable to the larger community. Moreover, the impact of businesses is increasing as they become larger and expand globally. As this has happened, functions such as railroads, water utilities and health care have gone from being publically controlled to private - profits dominating the frame of mind.
Therefore, the private sector is now determining the quality of the air that we breathe, the water we drink, our standard of living and even where we live and how easily we can move around.              
Having the Long-Term Piece of Mind
Choosing to be ethical can involve short-term disadvantages for a corporation. However, in the long term, it is clear that behaving ethically is the key to sustainable development. When you’re faced with an ethical dilemma in which the immoral choice looks appealing, ask yourself three questions:  
What will happen when the action is discovered?
Increasingly, the behavior of corporations is coming under scrutiny from their various stakeholders –customers, suppliers, stockholders employees, competitors, regulators, environmental groups and the general public. People are less willing to keep quiet when they feel an injustice has been done. In addition, the Internet and other media give them the means to make their concerns about a business known to a wide, global audience.  
Corporations that behave unethically are unlikely to get away with it, and the impact when they are discovered can be catastrophic.   
Is the decision really in the long-term interest of the corporation? 
During the 1990s, many UK-based financial services companies generated short-term profits by miss-selling personal pensions to people who would have been better off staying in their company’s pension plan. However, in the long term, these businesses have suffered by having to repay this money and pay penalties. Most significantly, the practice has eroded public confidence.  
Will organizations that behave unethically attract the necessary employees? 
Corporations that harm society or the environment are actually harming their own employees, including those who are making the decisions. For example, corporations that pour toxins into the air are polluting the air their employees’ families breathe. Ultimately, a business relies on its human resources. If a company cannot attract high-quality people because it has a poor public image based on previous unethical behavior, it will flounder.  
Behaving ethically is essential to the long-term sustainability of any business. Focusing on the bottom line – the social and environmental as well as the economic impact of a company – provides the basis for sound stakeholder relationships that can sustain a business into the future.


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