Ethics Can Boost Your Bottom Line

By Mark Fulton

A few months ago, I told you the tale of Wonder Widget, the successful company that went astray when it let profit displace principle in its business practices. Wonder Widget was doing just fine, man-ufacturing world-class widgets and wowing its customers with service that was the envy of all widgetdom. Then a new CEO decided to boost the bottom line by upping prices and cutting back on quality.

With little thought about the consequences, Wonder Widget’s leadership started making decisions purely based on financial considerations. Before long, the company’s profits began to soar, but consumer confidence and employee morale began to sink.

As the guiding light of Wonder Widget’s core values began to dim, the company sailed straight toward the shoals of self-destruction. They abandoned the course that had carried them to steady revenue growth and customer loyalty, and they allowed themselves to be blown wherever the winds of maximum profit took them.

Ultimately, even the CEO couldn’t ignore the effects of Wonder Widget’s new business practices: wobbly widgets, wandering customers, wrathful vendors and wary employees. When the company hit bottom, the CEO donned his golden life preserver and jumped ship.

A 1987 survey conducted by Business Week and Lou Harris asked Americans this question: How would you rate the ethical standards of business executives: excellent, pretty good, only fair or poor? Only 2 percent rated the ethics of business executives as excellent, while 58 percent considered them to be only fair or poor.

In a more recent survey of 2,000 secretaries, 88 percent said they have told lies on behalf of their supervisors. Is it any wonder that many Americans think American business is suffering from a bad case of moral atrophy?

So what can you do as a business leader to establish clear-cut ethical practices for your company that will keep it on the straight and narrow? A good start down the path of principled business conduct is to craft a code of ethics for your company. Rather than a meaningless trek into the wilderness of bombastic blather, the process of crafting a truly useful and relevant code of ethics can be an adventure in rediscovering the vision and purpose that launched your company in the first place.

Generally, a corporate credo addresses ethics on three levels:

1) The corporate mission — Companies exist to make a profit. Beyond that basic mission, a company’s primary ethical responsibilities are determined by the nature of its business. The products and services a company sells should serve an inherently ethical purpose rather than a harmful or disreputable one.

2) Relationships with constituents — Most corporate codes of conduct address the company’s commitment to employees, customers, vendors, shareholders, the community, the general public, etc.

3) Policies and procedures — A company’s modus operandi should be to make a profit through business practices that reflect accepted ethical principles. This is the area that takes the most work, depending on how specific corporate leaders want to get.

A clearly stated business code of ethics serves three important functions. It becomes a guide for making right decisions at every level within your company. It serves as a tool for creating a positive work environment. And it can be a catalyst for building business.

More than a lengthy list of rules and regulations, a truly functional business code of ethics should promote a mindset that permeates the thinking of every employee. In other words, a code of ethics should be woven into the fabric of the corporate culture and should be the underlying pulse of how a business and its agents operate.

Having a code of ethics for your business also sends a very positive message to your company’s customers and vendors. It says this is a business that intends to treat people with fairness and integrity. It says this is a business that will seek the greatest good for the greatest number when faced with an ethical dilemma. It says this is a business that can be trusted.

Finally, establishing a code of ethics is good for your business’ bottom line. That may surprise you. There’s a common perception that the more profitable a company is, the less ethical it must be. However, many organizations are proving that just the opposite is true. Companies that have made a sustained commitment to a code of ethical standards include: J.C. Penney, General Mills, Chemical Bank of New York, Levi-Strauss, Caterpillar and IBM, among many others. Not exactly a group of business underachievers.

Business ethics and profits aren’t mutually exclusive. Conducting your business according to a clearly stated code of ethics really can make your cash, well, flow. Experts agree that companies for which ethics amount to more than platitudes on a plaque over the receptionist’s desk are building their fortunes on a solid foundation and will weather ethical dilemmas without sinking in red ink.


© Copyright 1999 Mark S. Fulton