The concept of ethical behaviour (including honest business) has been explored by societies from ancient times until today. Behaving ethically is, unsurprisingly, the foundation stone of the philosophy in almost all of the world’s religions. In its simplest definition, ethics relate to knowing and doing what is ‘right’. As stated by the Oxford Dictionary, ethics is “moral principles that govern a person’s behaviour or the conducting of an activity”. By being moral, you are doing what is ‘right’.
The hindrance of ethical behaviour originates from defining what is ‘right’. People from different religions, countries, cultures, families and even from the opposite gender can view certain situations as ‘right’ that others would differ with. The definition of ethical behaviour has even shifted within similar cultures as society has evolved and changed.
As for businesses, the role that ethical decisions play within an organisation depends on the leadership style and the vision the company wants to put into practice. With ethical leadership, clarity is vital for clear and coherent policies, rules and regulations. The more exhaustive the policies, the easier it is to assure those proper ethical standards are upheld. But the rigorous clarity and consistency could be challenging, especially for smaller organisations.
Despite the positive elements ethical leadership can provide to an organisation, its arguable fundamentals can cause issues as well. In ethical leadership, the leader’s ethical framework needs to fall in line with the vision of the organisation. The leader, the subordinates and the organisation all need to be aligned. Tony Hsieh, the owner of the successful business Zappos, made an interesting point about this, stating: “It doesn’t really matter what the core values are, as long as the entire organisation commits to those core values.”
Yet people commit serious crimes of fraud worldwide. As reported by the Financial Times, the value of fraud hit a shocking £2.11bn in 2017 in the UK. The total value of fraud rose to £899.7m in the financial services industry last year. Employees were behind most fraud in 2017 with £474.3m, and tax fraud cost £351.8m. Corruption, money laundering, and management fraud in financial accounts were other common problems.
As global citizens, doing what is right all the time is certainly very hard, but as good old John once said: “Being honest might not get you a lot of friends, but it will get you the right ones.
Questions which arise from this:
1. A solid code of business conduct and ethics, within the framework of the law, is intended to encourage honest employees to report wrongdoing. Do employees follow this code for legal reasons only or do core values drive their actions?
2. Employees are bound by a code of ethics that requires confidential treatment and are subject to disciplinary action if they fail to follow this code. So, why fraud is a significant problem among corporations?
3. In any given enterprise, it is likely that a large number of employees act in their self-interest, but there is a significant number of honest workers as well. Is economic incentive the real driver of the actions of the honest workers?
Vocab to describe honesty in business
1. Fraud – wrongful or criminal deception intended to result in a financial or personal gain.
2. Shareholders – an owner of shares in a company.
3. Whistleblower – a person who informs on a person or organisation engaged in an illicit activity.
4. Ethicist – an ethicist is one whose judgment on ethics and ethical codes has come to be trusted by a specific community, and (importantly) is expressed in some way that makes it possible for others to mimic or approximate that judgment.
5. Utility – something useful or designed for use.
6. Bonus payment – compensation over and above the amount of pay specified as a base salary or hourly rate of pay. The base amount of compensation is specified in the employee offer letter, in the employee personnel file, or in a contract.
7. Benevolence – the quality of being well-meaning; kindness.
8. Tax – a compulsory contribution to state revenue levied by the government on workers’ income and business profits or added to the cost of some goods, services, and transactions.
9. Values – a person’s principles or standards of behaviour; one’s judgment of what is important in life.
10. Incentive – a thing that motivates or encourages one to do something.
The Ted Talk below describes a better way to do business and therefore improves society as a whole. The main fact listed in the talk is that one in seven companies engage in fraud and their actions are entirely dangerous for wider societal goals.
Watch the video and then answer the questions below
1. How many companies commit fraud?
2. How much do these fraud cost to society?
3. How many companies remain honest?
4. Who is Michael Woodford?
5. Who was Adam Smith?
6. What was Adam Smith’s basic idea?
7. Who was Emanuel Kant?
Advantages of Business Transparency
1. Customers’ Loyalty. Business ethics offer companies a competitive advantage. Consumers learn to trust ethical brands and remain loyal to them, even during difficult periods.
2. Respect. When outsiders have the opportunity to see how transparent a business operates behind the scenes, they are more likely to have respect for that organisation.
3. Positive Public Perception. A transparent approach to business is especially effective when honest business operations include open and straightforward communications to the public. Being up-front with corporate information, even if that information is unfavourable, demonstrates integrity.
4. Customer Service. Customer service can improve through transparent business operations. A manufacturer that publicly admits a flaw –and takes steps to repair it– while expressing regret for its mistake is more likely to retain or even attract customers who appreciate the level of honesty exhibited.
The drawbacks of business ethics
1. Ethics in business reduce a company’s freedom to maximize its profit. Improvements in working conditions, such as a living wage and minimum health and safety standards, reduce the level of cost-savings that the company generates.
2. Sharing sensitive information, like the financial struggles of the business, brings overall instability to business.
3. Honesty often depends on specific personality types. Consistency can be difficult to maintain when aligning different ethical standards.
4. Ethical behaviour depends on the person’s worldview. Therefore, the ethical behaviour of an organisation might not be considered ethical by another person. The different ethical frameworks can cause tension within a business and certain people might not find the work environment pleasant or welcoming.
Potential debating topics
1. Is behaviour determined by nature or nurture?
2. As religion plays an important role in our morals, society must learn to be secular in order to unify universal moral values.
3. Multinational companies, mainly American, often relocate factories in Latin America to exploit the available cheap labour.
4. Developing nations’ inexpensive labour force reinvigorates the economy of the developed countries.
The world of business is often filled with ethical dilemmas. Every leader is to make decisions, and the decisions they do make can determine whether their leadership is based on an honest framework or not. Motivation aside, it is in the interest of business that both leaders and employees align their own ethical standards with those of the organisation to ensure there is an overall environment of integrity.