Opinion: Do Ethics Still Matter in Business?

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Recently, Human Resources professionals have been examining their role within organizations and evaluating the position of ethics in business. The question most HR professionals have difficulty answering is, do ethical business practices have an effect on stakeholder value?

The old Adam Smith model that the common good profits and is served only when individuals and organizations pursue their self-interest is being reevaluated as a result of the recent collapse of the world’s financial markets. We only have to look at the wholesale deregulation of financial institutions, which negated the concept of socially responsible corporate behavior in the United States, to see the effects of this method of business operation.

The philosophy that an organization takes care of itself before, and to some extent, to the exclusion of others has created an atmosphere where profit is the Holy Grail, employees are expendable, and everything must be done in the interest of increased quarterly earnings.

The notion that ethics/social responsibility and profits are mutually exclusive ignores the fact that people do business with people they respect.  It is a trust issue. Trust is developed through truth. One must have confidence that the relationship exists in an atmosphere where one can trust that what is said and done is true and accurate. Without this, the business relationship becomes unstable and partnerships dissolve.

Trust Increases Efficiency

As was eloquently stated in a 2009 SHRM study on ethics and business, “Trust increases efficiency. Without it, things would take far longer and costs would be greater, because parties would hesitate to make themselves vulnerable in business transactions. Trust plays a key role in bringing individuals together to create value that no one person could create on her own. Trust acts as a social force to influence organizations that create value, including today’s global corporations.”

The most significant requirement for a new business model will be less absorption with rapid growth and short-term profits as a goal in itself and greater consideration for the impact to stakeholders and society in general. Corporate culture and ethical business practices are central to the discourse surrounding business ethics and the pursuit of profit.

Businesses' desire to return ever increasing earnings to shareholders as an excuse for short term profits and short sighted business decisions must be challenged in light of the long term effects of those decisions. Profit for profit's sake is misleading and detrimental to the good of society.

Ethical consideration in strategic and operational decisions of organizations must be imbued into the fabric of the organization. Human Resources should play a role as the organization’s conscience, particularly in determining how that organization relates to and prioritizes its employee assets.

Top-Down Process

Ethical business practices are a top-down driven process. An organization’s senior management team substantially influences how effectively ethics are embraced within the organization.

By integrating traditional ideas about business and corporate social responsibility, Human Resources can function in a role that includes developing methods to assist managers with their responsibility to have their organization be good corporate citizens and to think through the implications of company decisions in a more thoughtful and analytical manner.

In actuality, organizations must do business ethically and in a socially responsible manner, as a matter of business practice, or government will enact laws to legislate this behavior.

Contributor: Sheila Hadley Strider

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Sheila Hadley Strider is a Principal at KHS Consulting Services, a full service Human Resources consulting firm.  Sheila has over 20 years of experience in Human Resources with industry experience in manufacturing, academia, hospitality, airlines and biotechnology.

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