FAQ — Ethics

What does the term "business ethics" mean?

Essentially, "business ethics" is a term representing the application of accepted norms of "right and wrong" in business situations. More formally, I find the following sources useful on this subject:

1. Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce… it takes the ethical concepts and principles developed at a more theoretical, philsophical level, and applies them to specific business situations.
   [ wordiQ.com»]    [See also: "Typical Issues in Business Ethics"»]
   
   
2. Business ethics. The examination of the variety of problems that can arise from the business environment, and how employees, management, and the corporation can deal with them ethically. Problems such as fiduciary responsibility, corporate social responsibility, corporate governance, shareholder relations, insider trading, bribery and discrimination are examined in business ethics. [ InvestorWords.com»]
   
   
3. Business ethics. [See also: http://www.bnet.com/topics/Business+Ethics»]

How do "business ethics" differ from "personal ethics" (if at all)?

In the best of all worlds, these two concepts should be strongly related and in balance with one another. As each moral person strives to apply his/her personal code of conduct to his/her daily activities, interactions, and decisions. So, too, moral business leaders and organizations strive to interpret and apply both personal and social codes of conduct (ethics) in business situations. This is not always easy due to strong pressures to perform, produce, and increase profits within an organization and the world of business at large. However, as most of us discovered with our mothers (who always seemed to have eyes in the back of their head), unethical behavior is usually found out in the end. Unethical business practices usually hurt more people than they help. They undermine trust and can destroy individual careers and corporate reputations. Once lost, that trust is rarely, if ever, recovered.

In a theoretical sense, business and personal ethics should, and do, have a lot in common. The biggest differences between them are related to the situations in which they are respectively applied. Most people bring their personal ethics with them into the world of business, but they must learn to apply those ethics with a different set of situations, circumstances, and pressures than they might otherwise experience in their personal lives.

In my experience, individuals with a strong understanding of, and commitment to, ethical behavior on a personal level tend to join, form, and support corporations/organizations with a strong ethical foundation reflected in their day-to-day business practices. Those with weak or non-existant ties to a solid code of ethics tend to be less concerned with ethics in business and their businesses pay a price for such lack of standards &mdash in poor productivity, shady dealing, misappropriated funds, and the like. This is s very short-sighted way to conduct business, and it often comes with a heavy price tag in the long run (even if short-term outcomes seem appealing).

Do I have to be concerned about business ethics? Why, or why not?

If you want to be an exceptional leader and a good human being, then the simple answer is "Yes!" Personally, I believe in the value of conducting business ethically. It may not always be easy, but it is certainly simpler and, ultimately, less destructive than pursuing business in an unethical manner. However, be prepared for some continuous struggle and sleepless nights as your career develops annd expands.

The more responsibility you have, the more power you wield, the greater the opportunites annd rewards. On the flip side, the more responsibility and power you have, the greater the ambiguity and the temptations on many levels. You will feel the pull to take short-cuts to meet expectations; to tell the occasional "white lie" to a customer, boss, or the media in order to reduce the visibility of problems; or to act in your own best interest, regardless of anyone or anything else, so you can survive (or just because you can). These are only a few of the complications that confront a leader over time.

You cannot know how to navigate beyond these temptations if you never spend time thinking about business ethics and what ethical behavior in business means for you and your team(s). Continually postponing consideration of what constitutes ethical behavior and decisions until a moral dilemma presents itself is not only short-sighted, it will also make your decisions and choice of action much more difficult. Even if you have a business mentor or coach, I do not recommend that you rely solely on these august personages to steer your course through the minefield of ethical dilemma.

A business mentor or coach may not be required to live with the consequences of your decision and choices; you, on the other hand, will be carrying a portion of those consequences (in the form of memories — if nothing else) around with you for the rest of your life. And that doesn't begin to address the blows to your reputation, your sense of self-worth, and your credibility (naming only a few burdens among many more) that you may be forced to experience when you make the wrong (unethical) choices (even when made with the best of intentions).

So, do yourself a favor and give some serious thought to business ethics. Acting in a moral manner can be both frustrating and stressful at times. However, developing your moral business compass early on in your career is essential if you want to be one of the best and most successful leaders out there. I guarantee, you'll ultimately sleep better at night and your conscience will have less to nag you about.

I don't feel comfortable with some of the business practices I see being employed in my company. What can I do?

First and foremost, gather as much information as you can about the practices you find suspect. You may not be seeing the full picture. Acting precipitously on inadequate information can be worse (and potentially more damaging to your career) than not acting at all. That, which initially appears to be "shady dealing," could have underlying circumstances or facets that are not evident on the surface. Start by asking a few informal questions of the co-worker(s), manager(s), or executive(s) directly involved. For example, "I noticed when [state your observation of what happened]. Could you tell me more about why you [the company] adopted that approach?"

By the way, don't stop with just one source — there may be multiple people involved, or others who either employ or appear to support/condone the same practice. Keep your "investigation" very informal and low-key, especially if what you observe appears to be “business as usual" (i.e., no one seems to seriously object to the practice). You don't want to raise red flags until you have solid facts (not just perceptions and/or gossip) upon which to base your assessment.

Next, trust your personal ethics as a preliminary yardstick, but also check out any stated (written or otherwise) organizational policies, standards, or conventions. Keep in mind, that some behaviors and/or practices may be "understood" but not formally stated anywhere. For example, think in terms of: 1) a practice that has been followed for so long that it is taken for granted and has become part of the culture (could be positive or negative); or 2) the attitude that some individuals or organizations adopt where the less said and the less tangible evidence that's available, the less the company can be sued for it (a.k.a. deniable plausibility — which is rarely a good sign).

Once you've done your homework, you have a number of options. You may decide:

One you have chosen a course of action, and have thoroughly considered and accepted the potential consequences, then move forward with conviction, caution, and a clear conscience. Just remember, that your choice to act (or refrain form acting) is something you will be forced to live with — one way or the other — for the rest of your life.

CAUTION: If your safety or the safety of others comes into question, always seek assistance from the proper authorities; do not put yourself or others in danger!

What should I do when I know one of my associates (or someone reporting to me) is lying or doing something dishonest?

With regard to the practice of lying, I'll direct your attention to my newsletter article, When Co-Workers Lie» (October 2008 issue).

Lying is but one facet of how dishonesty is manifested. Other facets of dishonest behavior include (but are not limited to):

In each of these cases, you may choose any or all of the following course(s) of action:

All of the above cases (with the exception of the first) require documented evidence of an individual's or group's cognizant involvement in inappropriate or unethical behavior. Do not proceed merely on the basis of hearsay or pure suspicion. If you are unsure as to what information or evidence is required, consult your Human Resources Department or an attorney and use caution.

CAUTION: If your safety or the safety of others comes into question, always seek assistance from the proper authorities; do not put yourself or others in danger!

How do I promote ethical behavior without sounding like a cleric or someone's mother?

The first and best way to promote ethical behavior is to "walk your talk," i.e. show by your own behavior the standards you expect and support. Of course, this assumes that you are clear about your own ethical standards — make this a priority before addressing the behavior of others. When you practice what you would preach to others, those around you will notice. You will be seen as a straight arrow — someone to rely on, trust, and respect. People will also notice if you do not act in accordance with your stated or implied beliefs.

Consider holding or promoting a "summit" (formal or informal) about best practices for dealing with clients and co-workers — you might even invite a noted speaker on the subject or bring in a professional facilitator, which would allow you to step out of the spotlight and participate more fully in the actual discussion, without imposing your personal viewpoint on the group. This sort of discussion will raise group and individual awareness concerning appropriate business practices without you having to get evangelical about it.

For greatest impact, encourage those participating in the summit to define (at the start) one or more desired outcome(s) that they collectively want to result from the discussion, e.g., "We all want to be successful. The point of our discussion is to set standards of behavior that will: 1) contribute to our overall success, 2) establish more productive relationships (with clients and each other) through greater trust and cooperation, and 3) increase our personal work satisfaction and self-image." During the discussion, be sure to address expectations and the pros and cons of employing various behaviors/practices; use actual examples wherever possible (without pointing fingers at anyone or praising anyone in particular). This establishes a familiar context for discussion.

Most importantly, focus on the consequences (for good or ill) that may result from various approaches, as well as practical ways to promote those practices that ethically generate the most desirable outcomes. Discuss specific results, rewards, and incentives for employing best practices. Where appropriate, discuss possible remedial or corrective measures that could be applied when negative practices are employed, but don't dwell on these. The intent here is to focus on the "carrot" (what individuals and the group will gain by employing positive behaviors and ethical practices) rather than on the "stick" (the painful results if they exhibit poor judgment or behaviors). The key is striking a reasonable balance between the two, with more emphasis put on the side of the "carrot."

A few logistical points: During the "summit" make sure everyone is comfortable (temperature, beverages/snacks/meals provided, etc.). Have someone record ideas and action items as they arise. As the discussion progresses, periodically check back with the outcome(s) defined at the beginning to make sure the discussion is staying on track and contributing toward attaining the discussion goals. Toward the end of your "summit," summarize any action items (who, what, by when). Make sure to follow up (in a timely manner) with everyone concerning the action items and their results. Finally, if you plan to facilitate this discussion yourself, I recommend you check out my tips on Facilitation».

Other techniques for promoting ethical behavior include (but are not limited to):

Finally, allow me to make one thing perfectly clear. As a leader, choosing to ignore unethical or inappropriate behavior/practices is not a wise choice — the potential negative outcomes are too serious for all. Those working with and for you may feel powerless to address such concerns, and will be looking to you to take appropriate notice and action. Such behavior will affect reputations, both organizational and personal. They can also seriously impact current and future success.

Keep in mind that the assessment of behavior is always relative, often subjective, and may be dependent on many factors (laws, standards, conventions, underlying factors and circumstances, etc.). The magnitude/seriousness of misbehavior and/or infractions and their relative impact must be taken into account. Your choice of response will give clear signals to your group members and co-workers about your personal ethics and level of sincerity about promoting ethical behavior and business practices. Others will take their cues from you and what you do.

What can I do if I'm not sure whether or not a course of action is ethical?

When you find your moral compass spinning, here are a few key steps you might find useful:

Before you face a decision…

Your responses to #1 and #2 above help you construct a mental "yardstick" with which to assess the ethics in most situations.

Making a decision about ethics…

Now that you've got your yardstick clearly identified and calibrated, you are in a much better position to make choices concerning what constitutes ethical or unethical behavior.

It's time to make an informed decision. Compare the facts against your "yardstick;" the decision of whether or not ethics is an issue with respect to the situation at hand should become reasonably clear, at least within the context of known expectations. However, although deciding intellectually whether something is ethical or unethical may be a nice exercise in mental gymnastics. Your decision has little value or bearing on the day-to-day workings of the real world until an appropriate response or course of action is chosen and implemented.

A Critical Second Choice

Now comes the hard part…choosing a response or course of action that takes into account the intangibles surrounding your ethics choice — one that's fair (or at least just) and achieves the "best" outcome (whatever that may be). Remember there are two parts to the law — the letter of the law, and the spirit/intent of the law. Both must be considered in a human world; neither should be allowed to fully dictate your choice of response. Consider the information you identified by answering the questions in #2 and #3 above (in the previous subsection). Use this information to suggest viable options and to temper the intensity of your response.

Reality Check

Okay, so this seems a lot more complicated than you may have been expecting. In reality, most of this can happen pretty quickly once you have your "yardstick" defined and you gain some experience through practical application. The key is being able to recognize the complexity, importance, and timing associated with the situation and your options.

There really is no cookbook or formula for appropriately handling business ethics issues and challenges. Some will be straightforward; in these cases I suggest you make the decision quickly using the best information and advice available; then focus most of your effort on crafting an appropriate response. In the more complicated cases, all the analysis in the world may not be enough. It may come down to trusting and following your instincts. If you have done your homework in defining and calibrating your ethics yardstick, then you will likely have a fairly sound foundation upon which to base your decisions. Otherwise, you are stuck with guesses (always chancy) and your own personal prejudices (we all have them).

You may also want to consult a trusted mentor about your ideas and choices — someone who has more experience in what you do. But remember, past experience is great when it comes to dealing with static situations. Unfortunately, new situations and concerns arise everyday. You also must deal with changing conventions over time. Don't put all your trust in the hands of others. Use what they know to your advantage, but learn to trust yourself and commit to self-growth by knowing you will make mistakes and you can learn from them.

The most important thing about this process is what happens after the decision has been made. In the end, don't waste time worrying about whether or not you made the right choice. Not making a choice only postpones the inevitable and can actually cause serious problems both now and later on. Once a decision has been made and acted upon, you can't take it back, nor can you change it. You can only deal with the consequences (that's where contingency/risk planning comes into play). As mentioned above, you can also learn not to repeat the mistake; you have more data and experience to help you make a better decision next time around.