OVERVIEW: Business ethics involves much more than simply complying with the law. It involves taking positive measures to promote integrity which go beyond merely avoiding illegality, writes Peter Archer.
In a testing economic climate, the temptation may be to cut costs at the expense of ethical standards. Similarly, companies may be tempted to seek a short-term business advantage through bribery or other corrupt dealings.
But, from next April, companies registered in the UK will face stringent new requirements of openness and propriety under the far-reaching provisions of the Bribery Act. Harsh penalties await transgressors.
Comply with the law or face the consequences may be a strong motivator, but there are other compelling reasons for upholding high standards of conduct.
According to anti-corruption certification agency Ethic Intelligence, maintaining ethical values is a busi¬ness driver which promotes efficiency and profits.
“We can even make the argument that integrity forms part of a company’s immaterial assets,” says the agency’s Alexandra Almy. “This is be-cause a culture of integrity offers an assurance to management, investors and other stakeholders that 100 per cent of the company’s turnover is due to the quality of its products, services and innovative strategy rather than to illegal or grey-area ‘arrangements’.
“In making strategic decisions, it is important for executives to be sure that, in any given market, the company is truly competitive and not in any way relying on risky, grey-area ar¬rangements to stay ahead.”
Increasingly, such an ethical culture is attracting and retaining quality employees for whom integrity is an im¬portant job criterion. This is particularly true among younger recruits for whom business integrity may foster a feeling of pride which can increase motivation and productivity.
“Business ethics goes beyond compliance,” says Philippa Foster Back, director of the Institute of Business Ethics. “Compliance can all too easily be about ‘ticking the boxes’ so only the bare minimum is achieved, whereas business ethics is about striving to up-hold the highest standards, above and beyond those that comply with law, and doing the right thing even if no one is watching.”
From a legal perspective, an ethical business regime protects against al-legations by competitors wishing to destabilise the company in any way. When faced with defamatory claims, a company with concrete, proactive integrity measures in place has a strong defence.
“A culture of integrity offers an opportunity for companies to create standards and differentiate themselves from competitors,” says Ms Almy.
David Trachtenberg, chief mar¬keting officer at ethics solutions provider Global Compliance, con-curs. “Ethics and compliance is about much more than keeping an organisation out of trouble. It is ul-timately about improving organisational performance,” he says.
“In fact, research shows that there is a corporate responsibility premium by which ethical and compliant or¬ganisations outperform their peers based on overall financial results.
“The bottom line is organisations should strive for a culture of integrity because it’s legal, it’s ‘the right thing to do’, it significantly reduces risk and because it leads to better performance. In other words, it’s good for business.”
David Greenberg, executive vice president at business ethics consult¬ants LRN, calls for a new culture of values and responsibility. “I would argue that our business cultures need to change,” he says. “And they can only change if they are driven by some-thing more compelling than rules.
“Where rules create loopholes and limits on behaviour, values do not. If those in leadership roles want to shape behaviour, they must pay more atten¬tion to instilling values.”
Mr Greenberg says values are the underpinning of belief, which inspires people and gives them a sense of mis¬sion and purpose.
“Values perform a kind of double duty by acting as both a source of in¬spiration and a mechanism for regulation by inviting people to embrace shared beliefs and values so that they are inspired – not coerced or motivated – to act responsibly.”