Ethics in business

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Print this page By Clare Levison, CPA

Webster’s Dictionary defines ethics as a system of principles governing morality and acceptable conduct. “Honest,” “fair” and “law-abiding” may be a few words that come to mind when you think of someone who acts ethically. “Deceitful,” “unscrupulous” and “greedy” could define unethical actions.

The trouble with ethics is that black-and-white rules are sometimes hard to establish for difficult ethical situations. Everyone knows that you shouldn’t steal your employer’s inventory, visit pornographic websites on your employer’s computer system, or create fraudulent expense reports. When Bernie Madoff, the Ponzi scheme king, scammed thousands of investors out of billions of dollars, it was clear that his actions were unethical, and he ended up with a 150-year prison sentence. But many situations are not that black and white.

Sherron Watkins, the former vice president of corporate development at Enron, became a famous whistleblower when she exposed the irregular accounting activities of the company.  She was one of three whistleblowers selected as People of the Year in 2002 by Time magazine. But Dan Ackman, writer for Forbes magazine and The Wall Street Journal, argued that she was not a true whistleblower because she only wrote an internal email to Enron’s chief executive officer (CEO) and didn’t alert anyone outside of the company. Because of this, some feel Watkins didn’t do enough; others think her courage in reporting her concerns to the CEO is admirable.

This is just another example of the gray area that exists when it comes to ethics. It’s very difficult for us to put ourselves in someone else’s shoes and to know for sure what we would do if placed in the same situation. Hindsight is always 20/20, but we must be as prepared as we can to know how to do the right thing when the time comes. We must also be aware that when it comes to ethics, perception often becomes reality.

Ultimately, it’s difficult to create a one-size-fits-all set of ethics for any group. Ethical standards need to be broad enough to be usable by all members of a profession, yet specific enough to be meaningful.  Many companies have a formal ethics policy that governs employee conduct. Most have a broad corporate ethics statement, as well as specific ethics codes that provide guidance on ethical issues that commonly occur in the workplace. Companies use these codes to create ethics awareness and prevent ethical mishaps and typically require training that includes a discussion of corporate policy along with case studies.

But sometimes an employer’s ethics policy can seem just as much like a document designed for the purposes of limiting legal liability as it does a code of conduct that can be easily applied during any ethical dilemma. Even though you might agree with all of the principles and strive to uphold them, being ethical in the strictest sense in every situation may be a goal that is, in reality, not easy to completely attain. And while you may find it a no-brainer to follow policies such as “refrain from forging expense reports,” “don’t take home office equipment” and “don’t engage in insider trading,” the greatest difficulties may lie in reporting the unethical behavior of others.  Many people find it difficult to get involved when someone else is acting unethically, but if you see something unethical taking place, you have a responsibility to act.

And how does intent come into play? It is often said that “the road to hell is paved with good intentions.” Although good intentions can’t be used as a substitute for actual knowledge of appropriate rules, regulations and policies, when it comes to ethics, acting with good intentions may be one way to measure whether or not you’re acting ethically. While it may be difficult to always follow the exact letter of a policy, it shouldn’t be difficult to apply good intent and a good dose of common sense in order to maneuver your way through ethical dilemmas.

When dealing with one of these dilemmas you can often ask yourself this simple question in order to help you decide what to do: Would I feel uncomfortable if other people knew that I was involved in this situation? Feeling the need to hide something is often an indicator that unethical behavior is taking place. But remember, even if you had no fear of being caught or exposed, being truly ethical means doing the right thing even when no one is watching.

Clare Levison, CPA, is the author of "Frugal Isn’t Cheap:  Spend Less, Save, More, and Live Better." She has served as a member of the Virginia Society of Certified Public Accountants and a prior member of the VSCPA Board of Directors. She has over a decade of corporate accounting experience. Contact her at clare@clarelevison.com.

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