Management of Ethics:

Ethical or unethical behavior of individual employees is influenced in the work

place both by their own moral development and the influence that the
organization culture exerts on them.
They are influenced by a group of forces that surround them such as their
peers, their supervisors, and superiors, the reward system, group norms,
company values and policies and the manner of their implementation.
Human resource management department ( in big organizations) can execute
ethical behavior among employees through training, communication and
discipline.
In some other organizations, there may be ethics officers who are entrusted
with the responsibility to bring ethics and manage ethics in every endeavor of
their organization.
Structure of ethics management:
A sound ethics management programme in an organisation include:
(i) Formal code of conduct.
(ii) Ethics committee.
(iii) Ethical communication.
(iv) An ethic office with Ethical officers.
(v) Ethics Training Programme.
(vi) A disciplinary system.
(vii) Establishing an ombudsperson.
(viii) Monitoring.
1. Formal code of conduct:
Several organizations have started the process with developing and
implementing codes of conduct for their employees.
Codes of conduct are statements of organizational values. It comprises of
three elements such as a code of ethics, a code of conduct and statement of
values.

 A code of conduct is a written document, inspirational in contents and

specifies clearly what is acceptable or unacceptable behavior at workplace
and beyond ,when the employees represent their organizations outside.
In general the code should reflect the managements desire to incorporate the
values and policies of the organization.
The statement of values envisages by the management to serve the public
and normally addresses the stakeholders groups.
A code of ethics must summarize the beliefs and values of the organization.
Those beliefs and values should become internalized by all employees and
used regularly in all business practices, no matter the type of business.
2. Ethics Committee:
These committees can rise concerns of ethical nature; prepare or update
code of conduct, and resolve ethical dilemma in organizations. They
formulate ethical policies and develop ethical standards.
The committee evaluates the compliance of the organization with these
ethical norms.
The members of the ethical committee should be selected from those
persons who have knowledge in their industry, their code of ethics and
community standards.
The following committees are to be formed :(i) Establishing an ethics committee at the board level The committee would be charged to oversee development and operation of
the ethics management programme.
(ii) Establishing an Ethics Management committee Ethics Management committee would be charged with implementing and
administrating an ethics management programme, including administrating
and training about policies and procedures, and resolving ethical dilemmas.
The committee should be comprised of senior officers.
3. Ethical Communication System:
An effective ethical communication system should allow employees to make
enquiries , get advice if needed or report wrong doing. Ethical communication
system is a necessity to educate employees about the organizations ethical
standard and policies.
Objectives of Ethical communication system:

 to communicate the organizations values and standards of ethical conduct or

business to employees.
to provide information to the employees on the companys policies and
procedure regarding ethical conduct of business.
to help employees to get guidance and resolve questions regarding
compliance with the firms standards of conducts and values.
to set up the means of enquiry such as telephone hotlines, suggestion boxes
and email facilities for employees to contact with and get advice from
competent authorities.
Top management can communicate the ethical standards to lower level
managers and they can communicate it to operational levels.
Sometimes the organization publishes newsletters. It can be used to expose
companys code or ethics.
If an organization has briefing and management meeting, these can be used
as a means of communicating values.
Certain companies use attractive multi colored posters to publicize their
codes and ethics, these posters are placed in most visible places of the
organization premises.
4. Ethics Office and Officers:
Ethics offices are to be established to communicate and implement ethics
policies among employees of the organization.
For this purpose an ethics officer is to be appointed.
The ethics officer should develop a reputation for credibility, integrity,
honesty and responsibility through establishment of such ethics monitoring
bodies.
Functions of the Ethics Officers:
Ethics officers are responsible for assessing the needs and risks that an
organization-wide ethics programme must address.
To develop and distribute a code of conduct or ethics.
To conduct ethical training programme for employees.
To establish and maintain a confidential service to answer employees
questions about ethical issues.

 To ensure that the organization is in compliance with governmental

regulations.
To monitor and audit ethical conduct.
To take action on possible violations of the companys code.
To review and update code in time.
5. Ethics Training Programme:
To ensure a good ethical behavior in the organization the employees are to be
given training.
For this purpose a corporate ethical training programme is to be devised.
The main objective of an ethical training program is to offer assistance to
employees to understand the ethical issues that are likely to arise in their
work place.
When new employees are to be recruited, the induction training should be
arranged for them.
This training will help to familiarize with the companys ethical code of
behavior.
Importance of abiding code should be dealt with at the induction meeting.
6. Disciplinary System:
A disciplinary system should be established to deal with ethical violations
promptly and severely.
If unethical behavior is not properly dealt with, it will threaten the entire
social system that supports the ethical behavior of the organization.
While enforcing disciplines to ensure ethical conduct, companies should be
consistent. ,i.e., the company should adopt a fair attitude towards every one
without any discrimination or bias.
7. Establishing an Ombudsperson:
The ombudsperson is responsible to help coordinate development of the
policies and procedures to institutionalize moral values in the workplace.
This position usually is directly responsible for resolving ethical dilemmas by
interpreting policies and procedures.
8. Monitoring:

 To become an ethical programme fruitful and successful, an effective

monitoring committee is to be formed.
It can be monitored through keen observation by ethics officers, internal
audits, surveys, investigations and supporting systems.
Advantages of Managing Ethics in Workplace:
Significant improvement to society:
Application of business ethics helps to avoid many evils from the society. It
includes child labor, unscrupulous price fixing, harassment of employees,
poverty and starvation of employees etc.
Cultivate strong team work and productivity:
Ethical programme helps to tune employee behavior in accordance with the
values preferred by leaders of the organization. It helps to build openness,
integrity and a sense of oneness among all. Employees feel strong alignment
between their values and those of the organization and they react with strong
motivation and performance.
Support Employee Growth:
Ethics programme help employees to face reality, both good and bad in the
organization and themselves. They feel full confidence to admit and deal with
whatever comes their way.
Insurance policy:
Ethical programs help to ensure that policies are legal. Ethical principles are
often applied to current, major ethical issues and become legislation. A major
intent of well designed personnel policies is to ensure ethical treatment of
employees.
Avoid Penal action:
Ethical programs help to detect issues and violations early so that they can
be reported or addressed which helps to avoid subsequent penal actions and
lower fines.
Helps in Quality Management, Strategic planning and diversity
management:
Ethical programme identify favorite values and ensure organizational
behaviors which are associated with those values. This complex effort can be
aligned with values, including quality management, strategic planning and
diversity management.
Ethical Dilemma:

 Ethical dilemma as situations with conflict between two or more ethical

principles and each solution may contain unpleasant outcomes for one or
more involved parties.
Ethical dilemma is a situation that arises when all alternative choices or
behaviors have been deemed undesirable because of potentially negative
consequence, making it difficult to distinguish right from wrong.
Types of ethical dilemmas:
1. Bribery: It is a manipulation where the manager buys the power or the
influence of the other person in order to satisfy his selfish need. This will end
up in mismatch between the organization interest and individual. When there
is a mismatch, he cannot be loyal to the organization and indulge in unethical
practices. Bribery undermines market efficiency and predictability.
2. Deception: Deception or frauds are acts to propagate beliefs that are not
true. It leads to betrayal and distrust between employees.
3. Discrimination: It means treating the people differently according to the
race, caste, colour, creed, religion etc., it has been increased due to diversity.
But diversity increased due to globalization. Hence, globalization is the
indirect cause for discrimination.
What are the types of discrimination?
a. Gender-based: It involves discrimination against women like less wages
than men, sexual exploitation at work place is the example.
b. On the basis of color of skin: discrimination in the form of colour. Ex.
Americans will be given preference when compared to blacks.
c. On the basis of Age: Here treating same level of employees according to
age.
d. On the basis of Nationality: Employer treats the employees according
to their nation. Due to globalization, employees working in different countries
will be given preference according to their nation.
4. Black Money: It refers to illegal earning made by the people. It is the
consequence of system failure in legal licenses, permits, quotas etc.,
Sources of Black money:
a. Under-reporting of output or sales or over reporting of the costs or misclassification of personal expenses by organizations.

 b. Income generated in relation to capital receipts on sale of assets. Eg:

Registering only 60% of the assets value.
c. Substantial quantity of black income generated through over-invoicing of
imports by the private sector and sale of import licenses.
5. Coercion: is forcing a person to act in a manner that is against his or her
personal beliefs. It may be in the form of blackmail to an individual in an
organization. It may be in the form of a threat of blocking a promotion or loss
of a job. Coercion violates a persons negative freedom.
6. Theft: It is the illegal taking of another persons property without that
persons freely-given consent. The employee leaks out certain confidential
data to outsiders or to other insiders, which in turn ruin the reputation of the
company.
7. Conflicts of Interest: It arises when managers as well as employees
behave with private interests that are substantial enough to interfere with
their job or duties. They are morally perturbing.
8. Honesty: It refers to truthfulness, integrity and trustworthiness and
impartial.
Issues of honesty are:
a. Employee and the organizational relationship.
b. Security of organizational records.
c. Helping a competitor.
d. Inappropriate gifts, un authorized payment.
9. Insider trading: Here, the employee leaks out certain confidential data to
outsiders or to other insiders, which in turn ruin the reputation of the
company.
10. Tax evasion: Many large corporations hire the services of professional
tax consultants to take advantage of loopholes in the law and evade taxes to
the extent possible.
11. Pollution: The high level of pollution due to the indiscriminate and
improper disposal of effluents by industries has rendered the world a highly
unsafe place for progeny. J.R.D. Tata in his Foreword to the creation of wealth
in 1992; wrote I believe that the social responsibility of our industrial
enterprises should now extend even beyond serving people to the
environment.

12. Corruption: Is it the illicit use of ones position or power for perceived
personal or collective gain. It includes terms such as corporate wrongdoing,
management fraud and illegal corporate behavior. Ex: Intel Corp, the giant
manufacturer of computer chips, is now facing new antitrust charges alleging
that it threatened other computer manufacturers and paid billions of dollars
in kickbacks to stop them from using a competitors chips.
Approaches in ethical dilemmas:
Organizations need a set of guidelines for thinking about ethical dilemmas.
These guidelines can help managers and employee to identify the nature of
the ethical problem and decide which course of action is the most likely to
produce the most ethical results.
The three approaches that provide managerial guidelines for
handling ethical dilemmas are:
1. Utility approach.
2. Human Rights approach.
3. Justice approach.
Utility approach:
This approach emphasizes the overall amount of goods that can be produced
by an action or a decision. It judges actions, plans and policies by their
consequences.
The primary objective of this approach is to provide the greatest goods for
the greatest number of people.
It is often referred to as a cost-benefit analysis because it compares the costs
and benefits of a decision, a policy or an action.
These costs and benefits can be economic (expressed in dollars), social (the
effect on society at large), or human (usually a psychological or emotional
impact).
The utility approach supports the ethical issues of profit maximization, selfinterest, rewards based on abilities and achievements, sacrifice and hard
work and competition.
The main drawback to the utility approach is the difficulty of accurately
measuring both costs and benefits. Ex: Things such as goods produced, sales,
payrolls and profits etc., can be measured in monetary terms. Other items

such as employee morale, psychological satisfactions etc do not easily lend

themselves to monetary measurement.
Another limitation is that those in the majority may override the rights of
those in the minority.
Despite these limitations, cost-benefit analysis is widely used in business.
If benefits exceed cost, the organization makes a profit and is considered to
be an economic success. Because managers sometimes rely on it to decide
important ethical questions without being fully aware of its limitations or the
availability of other approaches that may improve the ethical quality of
decisions.
Human rights approach:
This approach to ethics holds that human beings have certain moral
entitlements that should be respected in all decisions.
These entitlements guarantee an individuals most fundamental personal
rights (e.g., life, freedom, health, privacy and property).
The human rights approach to ethical dilemmas holds that individuals are to
be treated as valuable ends in themselves simply because they are human
beings.
The main limitation is the difficulty of balancing conflicting rights.
Ex: Using a polygraph test to evaluate an employees honesty to protect the
organizations financial responsibilities may be at odds with the employees
right to privacy.
Justice approach:
Under the justice approach, decisions are based on an equitable, fair and
impartial distribution of benefits (rewards) and costs among individuals and
groups.
Justice is essentially a condition characterized by an equitable distribution of
the benefits and burdens of working together, according to some accepted
rule.
For society as a whole, social justice means that a societys income and
wealth are distributed among the people in fair proportions.
Determining what is just and what is unjust can be a complex issue,
especially if the stakes are high.

 A major limitation of the justice approach is the difficulty of measuring

benefits and costs precisely.
Ethical decision-making:
Ethical decision-making refers to the process of evaluating and
choosing among alternatives in a manner consistent with ethical
principles. In making ethical decisions, it is necessary to perceive and
eliminate unethical options and select the best ethical alternative.
Making an ethical decision:

1. Recognize an Ethical Issue:

Could this decision or situation be damaging to someone or to some group? Does this
decision involve a choice between a good and bad alternative, or perhaps between
two goods or between two bads?
Is this issue about more than what is legal or what is most efficient? If so, how?
2.

Get the Facts:

What are the relevant facts of the case? What facts are not known? Can I learn more
about the situation? Do I know enough to make a decision?
What individuals and groups have an important stake in the outcome? Are some
concerns more important? Why?
What are the options for acting? Have all the relevant persons and groups been
consulted? Have I identified creative options?

3. Evaluate Alternative Actions:

Evaluate the options by asking the following questions:
Which option will produce the most good and do the least harm? (The Utilitarian
Approach)
Which option best respects the rights of all who have a stake? (The Rights Approach)
Which option treats people equally or proportionately? (The Justice Approach)
Which option best serves the community as a whole, not just some members? (The
Common Good Approach)
Which option leads me to act as the sort of person I want to be? (The Virtue
Approach)

4. Make a Decision and Test It:

Considering all these approaches, which option best addresses the situation?

If I told someone I respector told a television audiencewhich option I have

chosen, what would they say?

5. Act and Reflect on the Outcome:

How can my decision be implemented with the greatest care and attention to the
concerns of all stakeholders?
How did my decision turn out and what have I learned from this specific situation?

Managers Role in Ethical Conduct:

Managers hold positions of authority that make them accountable for the ethical
conduct of those who report to them. They fulfill this responsibility by making sure
employees are aware of the organization's ethical code and have the opportunity to
ask questions to clarify their understanding. Managers also monitor the behavior of
employees in accordance with the organization's expectations of appropriate
behavior. They have a duty to respond quickly and appropriately to minimize the
impact of suspected ethical violations. Lastly, managers make themselves available
as a resource to counsel and assist employees who face ethical dilemmas or who
suspect an ethical breach.
Of course, managers are responsible for upholding ethical standards in their own
actions and decisions. In addition to following the organization's ethical code,
managers may be obligated to follow a separate professional code of ethics,
depending on their role, responsibilities, and training. Fiduciary duty is an example
that applies to some managerial roles. A fiduciary must put the interests of those to
whom he is accountable ahead of any interests, and must not profit from his
position as a fiduciary unless the principal consents.
Many managers have responsibility for interacting with external stakeholders such
as customers, suppliers, government officials, or community representatives. In
those encounters, managers may be called on to explain a decision or a planned
action in terms of ethical considerations. The stakeholders will be interested to hear
how the organization took ethics into account, and in those cases it is the
manager's duty to speak on the company's behalf.
Additionally, managers may be responsible for creating and/or implementing
changes to an organization's ethical codes or guidelines. These changes may be in
response to an internal determination based on the experience of employees; for
instance, additional clarification may be needed about what constitutes nepotism or
unfair bias in hiring. Alternatively, new regulations, altered public perceptions and
concerns, or other external factors may require the organization to make
adjustments.
Managers hold positions of authority that make them accountable for the ethical
conduct of those who report to them.
Managers monitor the behavior of employees in accordance with the
organization's expectations of appropriate behavior, and they have a duty to
respond quickly and appropriately to minimize the impact of suspected
ethical violations.

Managers may be responsible for creating and/or implementing changes to the ethical codes
or guidelines of an organization.
Managers may also be subject to a particular code of professional ethics, depending on their
position and training. Fiduciary duty is an example that applies to some managerial roles.

The Role of Leaders:

Develop ethical behavioral influences.
Provide sound ethics training.
Instill strong organizational values.
Implement plans and strategies to achieve ethical excellence.
Build an integrity based organization.
1. Develop Ethical Behavioral Influences:
Objective
Code of Ethics
Policy Guidelines
Standards of Ethical Performance
Training
Punishment/Consequences/Discipline
Peer Reporting
Subjective
Moral Development
Appearance of the Act
Intensity of the Choice
Ethical Climate
Culture
Management and Leadership
2. Provide Sound Ethics Training:
o Provide rationale for ethical behavior.
o Help associates make sense of abstract ethical priorities (policies,
procedures, ethical performance standards).
o Provide intellectual weapons to support ethical standards.
o Enable associates to recognize issues that may result in ethical
dilemmas.
o Sharpen sensitivity and conscientiousness of moral issues and moral
solutions.
o Strengthen moral courage.
o Improve the moral climate of the organization.
3. Instill Strong Organizational Values:
o

Strengthens the pursuit of better ways to guide employee decisions

and behavior.

Increases awareness and sensitivity to ethical differences across

cultures.

Coincides with legal and social pressures.

Ensures that all organizational participants understand and are in close

touch with organizational/ethical values.

Influences the personality, reputation, and image of the organization.

4. Implement Plans and Strategies to Achieve Ethical

Excellence:
o

Set an example.

Identify ethical weaknesses.

Look to introduce and rebuild ethical

Assess compliance programs.

Get commitment of top managers.

Align ethics with organizational systems.

Ensure consistency in

Monitor and assess.

Pursue continuous

Design an integrity based strategy.

values.

implementation.

improvement.

5. Build Integrity Based Organization:

o

Starts at the top.leadership!

Set an example of integrity, honesty, and consistent behavior

and reinforce it with associates.

Be involved.

Pursue a culture of ethics and raise ethical awareness.

Establish a system of rewards tied to organizational values.

Make ethics and integrity a core value, and a core

competency.

Create faith in the integrity of common purpose.

Inspire! Empower! Build trust!

Value ownership and entrepreneurship.

Respect individual creativity.

Understand socio-emotional behavior.

Develop emotional intelligence/moral consciousness.

The integrity based organization involves a culture of ethics
that is not demanded, but desired by all associates.

Not a compliance strategy--more than a code of conduct.

Provides a firm foundation for ethical behavior.

Taps into powerful human impulses for moral thought and action.

Defines and gives life to an organizations values that guide behavior.

Instills a sense of shared accountability.

Serves as a frame of reference for all associates.

Unifies the organization.

Defines what an organization is: its culture, its values, its integrity, its
image, its reputation.

In line with a contemporary leadership styles.

Enables responsible behavior and guides self-management.

Ethics Vs. Competitiveness:

There is no doubt that the corporate world (even World for that matter) is getting more and more
competitive. Competitiveness is the key, since everyone knows that its a World where only the fittest
survive. Well, is there anything wrong in being competitive? I would say, No, but then there is another
question at what cost?. If the answer to this question is Ethics, then the competitiveness is Hollow.
Definitely you can find many examples of people who do not give any important to Ethics but they still

rise to higher levels. But there is no guarantee that you will stay at Top if you have compromised with
Ethics.
Ethics and Competitiveness go hand in hand. There is no doubt about it. All individuals are faced with
situations where one has to choose growth or ethics and even though its a straight forward choice, there
are people who would choose growth over ethics. To explain this better let us take an example of
Misselling. What is mis-selling? It is an approach very commonly taken by sales people to sell their
products or services by hiding facts and giving false promises to the customer. This is very much
prevalent in the sales world and in the race of being competitive, many professionals fall prey to this
monster. This may lead to various types of impact on the end customer which may be inform of financial
risk, health risk, reputation risk, other direct or indirect risk/loss. Misselling may not necessarily mean
lying about the product, it may also mean hiding important terms and conditions, or operational
procedures, or missing features, hidden charges, refund policy, return policy etc. Very frequently most of
us fall prey to mis-selling and get frustrated at the sales man, most of the times it is because of the hidden
charges. This has really spoiled the image of the sales community.
Sales team is a backbone of every organization as it is the sales team that brings in revenues by selling
products or services. But recently there has been increased emphasis in large organizations on Sales
ethics. Mis-selling is taken very seriously and strict disciplinary action taken against those who do not
comply. Reputation of an organization primarily depends on the sales force representing it. Organizations
have started becoming more and more transparent in their sales processes. Most of the times the details of
product/ service being sold is documented by way of an agreement, brochure, offer letter which clearly
mention all the terms and conditions, product features, pricing etc. Mutual fund companies and Insurance
companies also clearly tell their clients to read the terms and conditions before buying the product. This is
done to ensure that the client is not cheated and to save the reputation of the organization.
But, despite efforts being taken by large organizations to avoid mis-selling, it is really important to lay
emphasis on sensitizing the sales force to understand the importance of ethical sales. Just to be
competitive and to achieve or over achieve targets the sales team should refrain from unethical sales
practices. Even though in short term you may be able to achieve the numbers but this does not take you
very far. Any sales done by hiding facts or lying will sooner or later be unearthed, which may lead to
reputation loss for the organization as well as the employee (and a disciplinary action).
Unethical sales may also include compromising the interest of the organization that you are working for.
Sometimes a sales person may show value to the customer by promising something that may be against
the interest of the organization; this comes in forms of bribery, passing on other tangible or non-tangible
benefits to the client who may be from the pocket of the organization or from his or her own pocket. A
sales person may ask for a favorable business deal from a specific individual at the client organization and
in return he may offer something for the personal benefit of the person who is in decision making position
at a client organization. Its very easy to close out business deals by promising such personal benefits, but
then, this is completely unethical and unacceptable. This ultimately leads to loss of reputation for the
selling organization.
Many large organizations take this type of unethical sales very seriously and have very strict policies to
completely stop such dealings between sales team and client. There are strict gifting policies and very
strong disciplinary action taken against employees if they try to do such act. For organizations it is very
important to closely scrutinize such transactions.

It may not always be linked to the sales function, professionals use unethical practices to grow within the
organization, offering personal benefits to stakeholders or bosses, hiding facts that may be a risk to the
organization, snatching someone elses credit, passing-on blame to others and various other
unprofessional and unethical practices.
Compromise with Ethics in any form is not a long lasting tool to success. One is that it spoils the
organization culture and more importantly it is a big reputation risk for you and the organization. There
are ethical ways of growing and being competitive. Very easily you can find examples of top
managers/CEOs who have grown to that level just because of the level of ethics that they maintained
during their professional careers. Compromising with ethics may seem to be a shortcut, but its definitely
not going to take you to the right destination.
Being professional is very much equal to being Ethical. And an Ethical person earns a lot of respect and
even if you lose the sales opportunity or promotion because of representing the facts, dont worry, you
have earned mental peace and respect. A customer always respects a fair sales person, a boss always
respects a true employee, stakeholders always respect an honest colleague, an ethical organization will
always respect an ethical employee.
So, dont let competitiveness and ethics compete with each other. Make them shake hands with each other
and surely it will become easier for you to climb up the ladder of success.

Profitability and Ethics:

A number of factors play a part in making a business profitable, including expert management
teams, dedicated and productive employees, consistent consumer demand and careful watch over
the bottom line. In addition to these well-known business practices, companies that implement a
management philosophy that relies heavily on business ethics are proven to be more successful
than those that operate in an unethical manner. Although it may not be the first variable
considered in analyzing the profits of a company, business ethics is an equally important catalyst
to the success of a company.

Business Ethics in Management

The leadership of an organization holds the key to its long-term success and remaining consistent
with a management philosophy built on a foundation of ethics creates a positive example for all
workers. Ethical accounting practices, treatment of employees, interactions with the public and
information disseminated to shareholders are all responsibilities of the leadership team and can
have a direct impact on the overall profitability of the company. When these integral aspects of
business are not performed with a resounding theme of business ethics from the top down, each
facet of the business beneath the management team has a greater potential to falter in the short or
long term.

Business Ethics and Employee Morale

It has been proven time and again that employees who are satisfied with the environment in
which they work are more productive than workers who are unhappy. Unethical practices in the
workplace can cause widespread unrest with employees, leading to a greater sense of
dissatisfaction with the work they are doing and their employers. However, when business ethics
are encouraged from management and company executives lead by example, the ability of
employees to focus on the work they need to complete to make themselves and the organization
successful increases exponentially. Productivity increases when fewer distractions are present
and morale is high, and this leads to greater profit levels for the company.
Employee happiness can also have an impact on turnover and retention, as unsatisfied workers
are more prone to seek out other opportunities regardless of higher pay or benefits offered by
their current employer. Continuous recruitment and training of new employees can reduce the
capital a company can spend on revenue-producing activities, ultimately shrinking its long-term
profits.

Business Ethics and Public Image

Companies would be nothing without shareholders and investors, and as such, operating with
business ethics in mind is most important when interacting with these crucial players. It is
common for the profitability of publicly traded companies to decline rapidly when they
encounter situations where information regarding unethical behavior is discovered. When
investor confidence is lost, it can be a struggle for a company to regain the trust of the public, its
investors and its valuable shareholders; profitability may take years to build up again. Companies
that lay the framework for business ethics in all facets of operations are more likely to become
and remain profitable than those that conduct business in an unethical manner.
What is Ethical Profitability?
Consider this balance between profits and ethics to be "ethical profitability." Well-balanced
companies not only consistently reward owners, investors and employees with profitable
performance, they also genuinely focus on these five key areas:
1. Leadership by example
The chasm between managing and managing well is wide and deep. To manage is to merely lead
employees. To manage well is to lead employees effectively, ethically and without arrogance.
Company owners, executives and managers must set the highest examples of attitude and
conduct for their employees. "Do what I say, not what I do," is a parental anachronism with no
value in management.
2. Company-wide ethical awareness

Most employees, when not at work, practice personal ethics in areas such as caring for others,
being kind and honest, and not harming others. Do these same people, when they arrive at work,
maintain their personal guidelines? In-the-office ethical behavior includes demonstrating
trustworthiness to managers and coworkers, respecting privacy and avoiding conflicts of interest.
Ethics knows no time clock.
Occasional classes can help, by reminding employees of the simplicity of determining ethical
behavior. In a nutshell, examine questionable action and speech, and determine if it's harmful to
yourself or another. If it is, avoid that behavior. Employees with any sort of religious background
will recognize this ethic of reciprocity as familiar. The Bible's Golden Rule is a good example.
3. Strong management of revenue generation and reporting
Corporate temptation to stretch ethical behavior in revenue generation and reporting is universal.
From excessive cost-cutting to expand short-term market-share, to outright lies about revenue to
positively affect stock price, it's easy to see why an otherwise intelligent, educated corporate
officer can end up behind bars for condoning such behavior.
To overcome these temptations, revenue-related managers must establish and maintain a firm
stance on ethical marketing, advertising, selling and reporting. This requires regular
dissemination and enforcement of codes of conduct.
4. High level of internal trust
The level of trust within a company should reflect the level of trust the company solicits from
customers. If customers are encouraged to put their complete trust in the product or service, then
company teams must do the same with each other. Management must guide this internal process.
An increase in trust is a reduction in risk and uncertainty, which in turn will keep the revenue
generation process flowing smoothly. Another advantage of running a high-trust organization is
improved internal flexibility and creativity. Instead of being constantly monitored, the person to
whom a task is assigned can accomplish it the best way possible. The outcome is never in doubt
because of the trust the team shares.
5. Formal and active compliance program
Ethical profitability is far more than merely operating within the boundaries of the law. Legal
compliance limits unethical behavior, but it does not define ethical behavior. An organizational
ethics doctrine does have legal benefits. Properly written, published and disseminated ethical
codes will reduce corporate risk if an employee creates a criminal or civil problem because of
poor ethical behavior. (Even federal sentencing guidelines recommend lower fines if such
violations occur contrary to the existence and enforcement of compliance codes.)

The true test of ethical profitability is whether or not the company is a positive example to its
employees, to its customers and even to other companies. Such companies practice the truest
form of leadership-by-example. They reach for a higher bar.