Doing Business Ethically

2nd March 2009

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Over recent years the growing public and media interest in how companies do their business, as well as how they spend their profits (e.g. supporting the community), have all helped put ethics firmly on business and governance agendas.

Today’s world of increasing uncertainty and change means that companies are facing more complex dilemmas. The globalisation of business has highlighted the question of how a company can apply its ethical values to the different cultural societies in which it operates, up and down its supply chain. The fast-growing pace of information and communication technology offers new dilemmas, such as human rights, data protection, and privacy. The global threat of terrorism stretches companies with regards to their duty of care of employees: how far must a company take its responsibility for the safety of its staff? Environmental issues stretch companies more and more as they learn new ways to minimise their impacts. As the financial world wobbles and credit becomes scarce, companies need to be self-vigilant and not cut corners.

As the media and public are now more aware of business ethics issues, organisations need to scrutinise all aspects of how they operate and ‘do’ their business. To get this right takes leadership, and ‘setting the tone’ cannot be underestimated. Openness, courage, ability to listen, honesty, and fair mindedness are all attributes of an ethical leader. Leadership though is not always just about those at the top. A determination to stamp out bad behaviour and a willingness to stand up and challenge the status quo is to be encouraged throughout organisations.

This is made easier if there is a corporate ethics policy and guidance for staff. To make this effective, employees need training to help them understand the company’s policies and to ‘live’ them at work. That way companies can be confident that their employees understand that ‘doing the right thing is the right thing to do’. This has particular relevance in today’s difficult markets.

For instance, in general, employees respond well to the motivational use of targets and goals. But when there is a lot at stake, as there often is in an economic downturn where jobs maybe on the line, employees can feel pressured to behave unethically in order to achieve set targets. A climate of severe competition may even encourage staff to put their personal goals (e.g. achieving the target and beating their colleagues) above those of the company. Micromanagement by managers under pressure to meet targets can also create an atmosphere of mistrust. Staff do not feel trusted to do their best, or that their best is not good enough and in turn are placed under pressure to achieve ‘whatever it takes’.

One solution for companies is to create a supportive culture whereby employees are encouraged to do their best for the company. Chief executives can lead by example and state openly in their codes of ethics that the ends may not always justify the means. These statements need to be backed up by actions, so that employees at all levels are rewarded for ethical behaviour and sanctioned for unethical behaviour. Assuring staff that any concerns they raise about the way business is done, whether to a line manager or a formal speak up line, will be treated with respect and investigated, goes some way to communicating that how business is done is more important than targets reached.

Doing business ethically will make for better business. Companies recognising this are benefiting from a new level of engagement with and support from all of their stakeholders, and enhancing their reputations, which can feed through to the bottom line and the share price.

Philippa Foster Back is Director of the Institute of Business Ethics. She is responsible for implementing strategy, leading the team and ensuring that the Institute meets its charitable aims, of raising awareness and spreading best practice in the field of business ethics. The Institute undertakes six key activities: advisory work with companies; events; research and publications; training; education through university academics; and advocacy work in the wider business context.

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