This article by Lynn Sharp Paine addresses the necessary and often overlooked relationship between business management and ethics. With most managers focused on bottom line results, the concept of ethics is often lost in rushed daily decisions or is not considered at all. But as the article suggests, a clear commitment to integrity-based management can not only avoid unnecessary legal complications in the courts but can strengthen business operations in times of stress and uncertainty, precisely the occasions where ethics are tested by exigent circumstances.
Some CEOs and business models concentrate their ethics evaluations on the most obvious parts of the organization, such as departments like compensation committees where individuals with poor integrity can cause great harm. However, greater attention should be placed to all parts of the organization from executive management down to the retail sales floor. As was noted during the analysis of the Beech-Nut apple juice case study, many individuals within the organization knew of substantial problems with the product but were afraid of being considered “Chicken Littles” if concerns were raised within the firm. The subsequent legal settlements and damage to the reputation of the company only reinforces the rule that ethics should be universally viewed as important within all parts of the organization chain and not merely a quaint or outdated theoretical consideration.
The framework of an integrity compliance program cannot merely ask the simple question “If it’s legal, it’s ethical” and move on. Many professional actions and business procedures are lawful but not in the company’s best interests to perform since they are viewed as either unethical or intentionally negligent. An excellent illustration of this principle in action is the Solomon Brothers case study outlined in the text where four top officials of the firm failed to report wrongdoing by others. There was no law, regulation, or internal company policy that required this disclosure, suggesting that the behavior itself was not considered “unethical” in any way by society, the legislature, or even the firm’s own ethics committee.
Nevertheless, the actions were considered as such by the investing public and the Wall Street community that penalized the firm for its inaction in the face of misconduct. This case sets a clear standard that relying upon written ethics policies does not provide a clear safe harbor in case of potential misconduct. Put another way, just because an action is not expressly unethical according to some objective guide or measure does not make any specific behavior either ethical or even correct.
An ethics compliance plan sounds like a reasonable solution to the problem of business ethics, but the issues are not that simple to solve with merely a board’s review of potential conflicts. Legal compliance, of course, is not the issue since all firms must comply with the law. A standard of ethical compliance suggests there is one ethical standard by which one can comply, a fact that is more true in the exception than the rule. A personal commitment to the highest ethics possible by visible business leaders and managers certainly is a prerequisite to any compliance plan. Another important goal should be the integration of ethics into the daily business model as seamlessly as possible to make these rules a constant reminder, in other words, not some distant academic rule to be avoided if possible but a clear path that guides retail decisions at all levels of the organization.
A commitment to ethics management within a firm can reduce internal criminal misconduct and also provide a company with an added boost of public confidence and reliability. Moving away from lawyers making ethics decisions to having them assist in the formation of ethics consistent with legal practice is a superior solution because it changes the scope of the business decision process. By concentrating on ethics instead of legality makes the decision-making process fuzzier and more cumbersome since ethics are subjective and not bright light tested like most statutes which clearly delineate acceptable conduct from illegal ones.
But a focus on ethics, especially through a visible and vocally supported ethics compliance program, can broaden the executive decision-making process from what is merely legal to what is morally correct. The public (and all judges and juries) expect business executives to have higher moral considerations that what is legal or what is not prohibited in a company employee handbook.