Ethikos Weekly Editor’s Picks – May 8, 2014


Editor’s Top Choice:

Business ethics: 3 questions every business leader must ask 

From The Washington Business Journal:

Gordon Gekko, from the 1987 movie “Wall Street,” was right about one thing: The most valuable commodity is information.

Most business professionals get this. In fact, they spend their days drinking in key performance indicators (KPIs) like inventory turns, selling price margins, retained earnings, fixed asset turnover, discounted cash flow, price-to-earnings ratios, and sales projections. This data is vital for making rational judgments about strategy and the future allocation of corporate resources.

However, one set of KPIs generally absent from the list is anything associated with compliance and ethics program performance.

Since 2004, the Federal Organizational Sentencing Guidelines have mandated that the organization’s governing authority “shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.”

Despite numerous corporate compliance and ethics scandals that have occurred over the decade since this requirement was established, compliance and ethics KPIs continue to be as rare on corporate dashboards as polar bears in the Sahara. In addition, few business leaders have the academic or on-the-job training to help them understand what a meaningful compliance and ethics KPI looks like, let alone how to effectively respond to one. This can leave corporations exposed to significant and unmitigated risks… Read more

Other Featured Picks of the Week

The Trust Agenda

CEOs are increasingly seeking “good growth,” aligned with business ethics and sustainability

Dennis Nally, Chairman of PwC International, writing for Strategy+Business writes, “As the global economic recovery gathers momentum, optimism among CEOs is increasing. The postrecession period challenged many companies, and their chief executives focused their attention on survival. But they are now switching into growth mode. This drive for growth is shaped by fundamental external forces that are transforming business and society.

The world in which we live and work is being redefined by five global trends: technological advances, demographic changes, global economic shifts, urbanization, and resource scarcity and climate change. These trends have far-reaching and often interrelated effects on society. For example, the migration of spending power to emerging markets, along with explosive population growth in some countries, will result in a billion people being better off than they are now. The same developments, however, could exacerbate unemployment, social unrest, and resource shortages.

The impact of these trends is radically changing society’s expectations of business. And the extent to which a business behaves in line with these expectations determines how trustworthy it is perceived to be. Trust is pivotal because it is the basis of every human relationship, every transaction, and every market. Trustworthiness is the foundation of a business’s “license to operate” in any region or industry.

All of this is causing chief executives to think strategically about international business ethics—specifically, how trustworthy their companies need to be. To generate that trust, CEOs are not just interested in growth for their enterprises. They want to attain “good growth”: real, inclusive, responsible, and lasting growth. And they want their companies to contribute to good growth in every country where they operate…” Read more

Ethics and the HR department – a happy marriage?

From Polly Foley of the UK Institute of Business Ethics on the HR Bullets blog, “When embedding ethical values into organisational culture, the roles of a company’s Ethics and HR functions frequently overlap, and can create challenges and tensions – so it’s important that they work together effectively.

The Institute of Business Ethics defines business ethics as the application of ethical values, such as fairness, honesty, openness, integrity, to business behaviour. In short, it is about how an organisation does its business. Does it treat its employees with dignity and respect? Does it treat its customers fairly? Does it pay its suppliers on-time? Is it open to dialogue with its local communities? Does it acknowledge its responsibilities to wider society? Does it practice good governance?

Business ethics applies to all aspects of business conduct, from boardroom strategies, sales techniques and accounting practices to stakeholder relations and issues of product responsibility. Business ethics concerns discretionary decisions that organisations, and the individuals who work for them, make in the day-to-day situations they face.

Establishing high standards of business based on ethical principles requires organisations to put in place ethics or corporate responsibility programmes – policies, codes, training and support etc – and actively nurture an ethical culture…” Read more

Learning the ‘grey areas’: EMBA programs forcing professionals to scrutinize business ethics

Rebecca Walberg of The Financial Post writes, “When Dirk Matten teaches about the importance of doing business ethically, he sometimes runs into skepticism from eMBA students.

‘The last time I taught an ethics course, we had a long discussion in class about CSR, and all of them [the students] had experience volunteering on the employer’s behalf,’ says Dr. Matten, professor of strategy and the Hewlett-Packard Chair in Corporate Social Responsibility at York University’s Schulich School of Business. ‘Some of them say, ‘Is this the company trying to look good by doing it on our backs, lending us to charities, or cleaning up rubbish along the highway?’ There’s a degree of suspicion about whether it’s really a corporate priority.’

The financial meltdown of 2008 illustrated how devastating the effects of unethical business practices can be, and in response, business schools have boosted the resources devoted to teaching the philosophy and practice of ethics.

But that’s not always an easy task. It’s one thing to teach business ethics to regular full-time MBA students who have had limited working experience and few instances of ethical dilemmas. It’s another thing to train eMBA students who have already developed their own sets of business ethics based on professional experience to understand the ‘new ethics’ of the business world…” Read more

UK phone hacking scandal’s unsexy lessons on business ethics

Hanna Hasl-Kelchner, of allBusiness: “New businesses are often hard pressed just to get up and running. Long hours, hard work, and stretched financial resources are part of any startup’s standard operating procedure. Under those kinds of conditions, it’s no surprise that newbie entrepreneurs sometimes feel compelled to resort to situational ethics. In other words, they let the ends justify the means, even if those means involve unclean hands.

It reminds me of a student I once had who was starting a business with a friend who had questionable access to a customer list. When he asked me, ‘What should I do?’ I told him that risks taken for expediency today will set a precedent and become the norm for tomorrow. It creates a slippery slope of increased risk and liability exposure.

In other words, how low do you want to go and what is your sensitivity for risk tolerance? This initial question was a chance for he and his business partner to establish the core values of their business.

Some budding entrepreneurs might think they don’t have time for ethics right now. They will deal with those issues later, once their business has “made it.” The problem is that once the lassez faire train leaves the station and questionable habits get entrenched in your business culture they are difficult to stop — absent a train wreck.  For a vivid view of what that kind of train wreck can look like, just look at the recent allegations of phone hacking and bribery used to keep their tabloid press fueled with salacious tidbits in the compromised business culture of Rupert Murdoch’s News Corp…” Read more

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