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The importance of business ethics
by
Michael E. Mares
Virginia Business
March
2005
It
seems that hardly a week goes by without news of another
scandal involving a prominent American business. Even
organizations generally considered above reproach have
had their dirty laundry hung and examined in the public
square.
Negative
publicity, however, is but one result of unethical behavior.
Others are reduction of profits, even bankruptcy (with
Arthur Andersen being a prime example); morale problems
as employees are kidded or ridiculed by social acquaintances;
the increased costs of combating a “bad image,”
including additional advertising and public relations
expenses; a decrease in employee efficiency as time
is devoted instead to responding to the crisis; public
suspicion of a company’s intentions and future
actions; and heightened government regulation.
When it comes to ethics education, the fundamental question
all corporate employees must confront is not “Can
I?” but “Should I?” For instance,
while I “can” download music from the Internet
without paying appropriate royalties, is this an action
I “should” take?
Generally, history has demonstrated that ethical misconduct
ends careers more quickly than mistakes in business
judgment. Further, it is not always the perpetrator
who suffers because the one who “does as he was
told,” without fully considering the ethical consequences,
often becomes the scapegoat when events turn sour.
What’s more, ethical lapses undermine the basic
foundation of the free enterprise system. Lying and
cheating are universally detested, and such conduct
can indicate an underlying immorality that is presumed
to extend to other business practices. To compensate
for this lack of trust, there must be additional checks
and balances, verification and supervision that add
time and cost to each transaction.
Any business ethical system must also recognize that
a failure to be conscientious at work can affect relationships
with family and friends. Conversely, adherence to moral
standards on the job can have positive influences on
society by promoting strong ethical behavior in all
aspects of life.
Any ethics system presents a mixture of moral and economic
rules and challenges. For example, while I can charge
$2,000 for a generator (that normally sells for $300)
after a hurricane, is such an excessive charge fair?
Then, of course, there is the question of enforcement
and consequences. What is the appropriate penalty for
an unethical act?
Still another concern — maybe the most vexing
— is conflicts of interest. Should saving a company’s
good name have precedence over an individual’s
professional self-preservation? One solution is to require
full and accurate disclosure of any potential conflicts
to all parties before a transaction, thereby enabling
all of the parties to scrutinize fully the terms of
a deal.
It has often been said that business ethics are not
an attack on business, but rather its first line of
defense. By building a strong set of ethics, educating
employees about why they should adhere to those rules,
a business can enhance its standing in both the public
and private sectors. That, in the end, benefits us all.
Michael
Mares is a CPA at Witt Mares PLC, based in Newport
News.
He chairs the Litigation Task Force for the American
Institute of Certified Public Accountants’ Professional
Ethics Executive Committee.
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