Weighing Ethics and Profits

The scandals at Enron and WorldCom generated a lot of bad publicity, forcing many managers to pay more attention to business ethics in the workplace. Although the chance to generate business profits is the reason most companies are in business, you cannot afford to overlook the importance of making ethical decisions. Good business ethics can help you distinguish your business from competitors, build good relationships with customers, and comply with laws and industry regulations.

In an article published in the "Harvard Business Review," Constance E. Bagley said managers are short on tools when it comes to focusing on business ethics. Many professional associations encourage managers to make ethical decisions, but they fail to offer practical advice to make it easier to do so. Bagley recommends using a decision tree to determine if a proposed action is the right thing to do. This tool can help you decide if the action maximizes shareholder value and adheres to the principles of business ethics. A decision tree can also help you determine if it would be unethical not to take the proposed action.

Some shareholders mistakenly believe making ethical decisions will cost them money. It's important to know that ethical companies have actually been shown to be more profitable. Charles Schwab & Co. managed to make it through the subprime mortgage crisis because executives never got involved with that particular market. They felt subprime mortgage securitization was not a good long-term strategy, so they did not ask their employees to sell unethical mortgages like many of the big banks did. This shows it's possible to generate business profits without resorting to unethical tactics.

The decisions your employees make will affect your company, so you must give workers the tools they need to do the right thing. Create an ethics committee or compliance program to help employees learn about business ethics. AECOM Technology Corporation has an ethics and compliance program based on the company's code of conduct and core values. Employees have access to several training opportunities, giving them the knowledge they need to make ethical decisions in a crisis or during daily operations. If you decide to create this type of program, make sure every department has at least one representative participate. This will ensure all departments have access to the same valuable tools and resources.

Making ethical decisions can help you generate higher profits and strengthen your relationships with customers. If you are struggling with a decision, try using a decision tree to guide you in choosing the best course of action. Consider creating a compliance program so that all employees have access to the tools they need to make ethical decisions. Make sure investors know good business ethics can actually make your company more profitable. All of these actions will make it easier to follow the principles of business ethics.

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