Losing the Battle: Ethical Business Practices

Ethics is concerned with "doing the right thing" but moral standards differ between individuals depending upon their upbringing, traditions, religion, social and economic situations, and so on. Hence, the existence of gray areas. Therefore, state the "moral" problem in a simple manner and review feedback so that an acceptable decision can be made with minimal overall harm/loss-i.e., we are concerned with "Pareto optimality," which is related to the net balance of benefit  over harm for society as a whole.

Economic theory is concerned with the efficient utilization of resources to satisfy consumer wants and to maximize profit and satisfaction. Pareto optimality exists at the point where it is impossible to make any given individual better off without harming another given individual. Although most businessmen believe that profits and cash flow are very important, there has been a move toward the recognition of social responsibility.

The blind pursuit of profits has resulted in bribes, environmental problems, injured workers, unsafe products, closed plants, and so on-this is unethical. Many business schools emphasize the philosophical, rather than the practical aspect of ethics. We need a practical approach to the solution of ethical problems. Ethical leadership calls for morals, fairness, caring, sharing, no false promises or unreasonable demands on others, etc. Is "ethical leadership" an oxymoron?

I believe that "ethics" should be a part of all management courses. Yes, there are grey areas depending on different perspectives, but there are also areas of "black" and "white". There is more to ethics than drafting and implementing codes of ethics for others to observe. Leaders should lead by example and refrain from adopting an approach which conflicts with ethical interests. Therefore, leaders should respect and care for all stakeholders: owners, employees, customers, suppliers, the community, etc., rather than only stockholders.

Making false promises and unreasonable demands on employees and others, preventing participatory management, talking about the "green" approach as a public relations exercise, rather than adopting a "green" approach, is unacceptable. Ethics is conscience-based, knowledge-based and attitude-based, and not suited to some individuals, who, by their very nature, have consistently demonstrated selfishness and greed.

Business ethics is concerned with dealing with dilemmas that sometimes do not have a clear indication as to what is right or wrong e.g. potential conflicts of interest, wrongful use of resources, mismanagement of contracts, false promises and exaggerated demands on resources which include personnel.

Right and wrong are black and white - pure and simple. Our ethical system and behavior are a function of several factors, including our cultural background, upbringing, education, ego, environment, circumstances and the related stress. Hence, the development of gray areas i.e. areas where explicit rulings or guidance is not available Looked at in another way, there are shades of black and shades of white, just like when you go to a paint shop to buy black paint or white paint or when you go to a clothing store to buy a black suit or a white suit. If you find that your ethical standards are higher than those of most people, you should follow your own standards.

It is possible to improve, from an ethical point of view. As we mature into adulthood, we develop an ego and try to use our communication skills to justify our behavior, while focusing on our own goals. With our ego-based approach, our innate selfishness, and the influences of friend and environment come many gray areas. One's image will depend on one's operation within the black, white and/or gray areas. This should always be borne in mind.

Alas, many business schools provide courses in business ethics which are philosophical, rather than practical, in approach. This needs to be rectified in the light of experience in the real world. Research confirms that the focus on ethics deters people from straying, although it is difficult to alter the basic nature of some people e.g. Bernie Madoff and Vincent Lacroix.

Constant communication and open discussions on ethics foster a bond between individuals who are keen on being ethical and help promote teamwork built on good spirit. Emotionally intelligent people are often more ethical than others.