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The pace, scale and complexity of modern business has forced a change in how business is done. While it is accepted that it is foolish to do business with someone who is not trustworthy, the question arises whether you can trust those who are not ethical in all of their behaviour. Short timelines, tight supply chains and narrowing margins mean that chances cannot be taken that suppliers or customers will not honour their contracts as expected. Suppliers and customers are now becoming partners and stakeholders in business, and relationships with them are becoming more and more underpinned by trust. Trust is built on expectations of truth in words and consistency in behaviour. It is impossible to do profitable business with someone who says one thing one day and does something different the next.
Ethical leadership is vital in business today. It is the backbone to any long lasting successful company in today's business market. It is important for companies to clearly layout their stance on ethical leadership to employees and the public, to have members of the company lead by example, and to reinforce the ethical leadership concept through out the year. By following these steps, the company will sustain or acquire ethical leadership in their company's culture.
Although business accepted ethics slightly change through out the years, everyone should know if an action is ethical or unethical before they take an action. The importance of companies clearly defining their stance on ethical behavior will let individuals know how making an unethical decision will impact them, their fellow workers, and the company as a whole. On the other hand members of the company will also know how making an ethical decision will have a positive impact. Once a clear ethical leadership stance is taken, rewarding or punishing ethical or unethical actions should strictly uphold the rules. There should be an unbiased group to facilitate this activity, for example a Human Resources Department.
Every employee, from the CEO to the mailroom clerk, should practice ethical leadership. Every member and every group can and should exhibit ethical leadership. This concept should not just be thought of as a manager to his report. Ethical leadership can happen in unexpected situations, for example where a CFO of a company asks the mailroom clerk to do an unethical act and the mailroom clerk refuses the CFO's request. The clerk refused based on the company's stance on ethical behavior. In this example, the clerk presented ethical leadership, but was in no way in a leadership role. The clerk would also feel safe taking this stance because he believes in his companies set rules on ethical leadership. He will not be negatively impacted due to the fact that he can contact his unbiased Human Resources department with issues of this nature, on top of the fact that he maybe rewarded for taking this ethical stance.
Reinforcing the ethical leadership concept through out the year is also important for businesses. Not only reinforcing, but also reinforcing with meaning and showing the value of ethical leadership. Making positive examples of employees through rewards, have mandatory yearly training (make it fun), send positive ethical leadership examples out as part of company newsletter, ensure that unethical behavior is dealt with in an ethical way, restate company's stance during large meetings, make ethical leadership apart of each employees personal evaluation each year (make them give examples) and have ethical workshops. All of these examples will ensure that every employee knows the company's stance on ethical leadership through reinforcement.
The over all concept of ethical leadership is that it is as important as making a profit in the business world. Profit and ethical leadership should be top priorities for any company that plans to have a long lasting existence. Ethics in itself can become a very pliable term with many grey areas, so focusing on specific ethics may prove futile. However, focusing on doing the right thing along with the reinforcement of ethical leadership may be the answer. Baking ethical leadership into a company's culture is key.
Ethical leadership holds a positive outlook with great potential in the current business environment is the improvement that we have seen in ethical issues over the relatively recent years. As we all know accepted ethical behaviors have slightly changed over the years and will continue to do so. Ethical leadership along with the help from laws has driven the implementation of the halt or reduction of racial discrimination, sexual harassment, and sexual discrimination. It is believe that accepted ethics have made great leaps and ethical leadership is one of the driving tools to solidify these concepts.
Recent huge companies like Enron and World Com have made great examples of the importance of ethical leadership. It is said that the CEO of Enron, who was just sentenced to many years in prison, had the saying that nothing else matters besides profit. This is apparently not the best way to lead a long-term successful company. The fall of companies that disregard ethical leadership cost all Americans, the company's employees, and share holders billions of dollars. Based on this fact, the health of economies depends on companies to lead with strong ethics. One positive aspect that these unethical companies did do for America is to drive home the absolute importance of ethical leadership in business. Due to the unethical acts of these huge companies, everyone has taken notice. Many colleges are driving ethics harder then they ever have, the media attention has been enormous, and US companies are really sticking to ethical leadership programs better now than in the past.
Recent changes in the business environment have deeply affected businesses and ethics consultancies that are concerned that the word ethics, in a business context, has lost its original meaning. They consider ethics to be unregulated behavior as well as regulated and talk about what is ought to be done as well as what we is compelled to be done. Not only would an ethical person not break the law or flout a regulation, but he/she also would think hard about doing something perfectly legal that gave the person ethical concerns. The ethics industry, now called the ethics and compliance industry, dwells almost entirely on issues of law and regulation. It is thought that ethics, as an important business tool, has been sidelined.
The ethics industry emerged in the 1970s with defense scandals that resulted in the Defense Industry Initiative, a self-regulatory body of defense contractors. It really launched in 1991 with the Federal Sentencing Guidelines for Organizations, which helped judges to determine consequences for corporate misbehavior and, critically, identified seven steps that businesses could take to mitigate those consequences. The suggested steps included a code of ethics or conduct, training in the code, and a high-ranking person to oversee the program
Many of the early providers were academics and nonprofits, like IGE, who believed that it was possible to guide corporate behavior through improved corporate decision-making. The waves of scandal that culminated in the 2008 financial tsunami have all but erased our formal ethics beginnings in business. A backwash of regulation, prompted by an outraged public, followed each wave.
Companies, ethical and otherwise, are drowning in rules, expensive rules and regulations that make global competition difficult. Good companies are still doing the right things, but the focus has shifted from thinking ethically to complying with myriad regulations. In other cases, a whole new "workaround" ethic focuses on ways to skirt the rules. Following the recession, companies are demanding that people "make their numbers" while still following the rules, which even ethics professionals see as difficult.
Professionals who used to direct their employers' ethics programs are disappearing, replaced by legal professionals with specific expertise in bribery and corruption, export controls, insider trading, money laundering, and other topics of special interest. We're unhappy with the retrogressive sea change, but our respondents found some treasure - silver lining, perhaps - washed up on the beach.
Anticorruption has a surprising ally, social networking, which has become a global phenomenon. Although the United States has a new portfolio of laws governing business (especially financial business) called the Dodd-Frank Wall Street Reform and Consumer Protection Act, which encourages whistle-blowers with offers of cash bounties and protection, social networking already has leapt far beyond. It is almost impossible to escape the reach of texting, tweeting, YouTube, and Facebook. Employees, customers and suppliers stay connected and there's really no place to hide when people take pictures and movies with their smart phones and make their observations public on the Internet.
Although staff departments responsible for ethics have experienced cutbacks in funding, they are now working more closely with other departments that help to manage their company's risk. It's common to find close cooperation among ethics and compliance, internal audit, security, health, safety and environment, legal, and human resources. The benefit is that companies are likely to spot and avert misbehavior more quickly. Additionally, ethics and corporate social responsibility (CSR) now work more closely because their intentions are similar - making the corporation a responsible citizen through attention to environmental and human rights issues.
There is also exposure to legal penalties. Companies involved in international trade have to represent their products to potential or current clients based on their expected inputs by the suppliers. Â A company that is involved in illegal activities, or that knowingly falsifies information on inputs supplied can create serious problems for its business partners. Â A company with a good reputation and solid brands has much to lose, and should not take chances with its brand value.
Another issue challenging the practice of good business ethics is the values, which employees bring to the work environment. Much has been said over the years about the deterioration of employees' work ethics. The impact of poor work ethics results in low productivity owed to high levels of absenteeism, tardiness, theft and acceptance of bribe taking.
A company that wishes to be efficient and competitive in the future cannot accept this state of affairs. There is a strong business case for the introduction of structured programs to support ethical behaviour in companies, size notwithstanding. These programs should be more than a mere encouragement to be honest, and should be based on clearly articulated values that are linked to the overall vision and mission of the company. The Manual of Business Ethics for Small and Medium Sized Enterprises prepared by the Inter-American Investment Corporation (IIC) and the US Department of Commerce describes the following benefits among others:
Enhanced Reputation and Goodwill: A reputation for integrity is important for securing the loyalty of customers, for recruiting and training the best staff, for winning community acceptance and accessing bank and supplier credit.
Risk reduction: The process of developing a business ethics program involves the company in identifying and assessing the factors that could pose risks to reputation and financial performance, and developing and implementing the business processes that reduce those risks.
Reduced costs: Providing employees with clear guidelines of how to conduct day to day business such as where and when to obtain quotations; how to carry out tenders; how to conclude contracts and how to avoid conflicts of interest can reduce transaction costs and improve the supply chain function.
Protection from Unethical Employees: A program would include clear guidance in respect of the misappropriation and unauthorised use of company resources, and the consequences that could flow from violations, information that employees with undeveloped values may not fully appreciate.
Recommendations for efforts that build ethical cultures without increasing expenses are as follows:
Improve communication practices. Ethics programs are usually well constructed, but poorly disseminated. Require middle managers to train their direct reports and keep the message alive with ethics meetings. Employees often don't know or recognize the CEO and merely tolerate E-learning, but they actually pay attention to their managers.
Encourage government to recognize and reward the value of ethics and compliance programs.
Focus on corporate culture. Perhaps more emphasis on culture will galvanize corporate intentions and resources toward long-term corporate health in addition to dealing with the emergency of the moment. Operating according to values, accentuating the positives, telling the stories, and removing the negatives would empower good employees and managers and boost productivity. People actually like to work when the culture is right.
Ever hopeful, we expect corporate ethics to rebound with serious attention paid to aligning individuals within positive values-driven cultures. It won't happen until the recession fades and businesses start spending the cash they've hoarded for the last several years to acquire the human and intellectual resources needed to make it happen.