March Business News sponsored by:

By Thapelo Petje, Executive Director: Group Strategic Sales, Jasco Group

Ethics is a key issue for both the private and public sector, instilling confidence in its stakeholders including, staff, customers, investors as well as the public.  However, there are many instances of questionable ethics that have recently been highlighted, giving rise to the question of: how can companies protect their reputation and ensure that the organisation is steeped in unwavering integrity?

We are experiencing a wave of scrutiny where ‘watchdogs’ are uncovering acts of corruption and fraud.  Although listed companies are heavily regulated and are also answerable to their shareholders, most often it is considered that as long as an organisation is generating a satisfactory profit, the ways and means it uses to do so are left relatively ungoverned.

It is often tempting for executives to leverage the likes of nepotism, connections and bribery for personal gain. Greed is one of the largest motivating factors behind unethical decision making. However, the short-term gains to be had from such dealings lack long term sustainability, and negatively impacts the business on the whole. Not only is an organisation’s reputation on the line, for exposure would severely damage their credibility as a trustworthy institution, but their future sustainable growth is damaged, too, as hardworking employees bear the brunt of poor decisions.

Ethical behaviour in business benefits more than the shareholders and general populace - it’s critical to ensure that employees of a business continue to work in the interests of that business. Managers need to lead by example, and need to be seen as trustworthy in their leadership roles, for employees to flourish. Happy employees are productive employees, and few things can bring company morale lower than when employees perceive top management to be increasing their wealth through unethical means.

So what constitutes ethical management?

Managers are typically chosen by the board to run the business in a sustainable, profitable - and ethical - manner. However, there is often a lack of clarity about what business ethics are that can lead to confusion over management’s responsibilities and where the limits of those responsibilities are.

Simply put, using business assets or the business itself for personal gain is unethical. Managers have an obligation to manage the business in the business’s and owners’ best interests, putting these interests above the managers’ own, and to disregard that obligation is to cheat the business and owners, which is unethical.

In any instance where the company, the owners and some or all of the employees do not directly reap the benefits of a manager’s decisions or deals, and the manager is the sole beneficiary of those decisions or deals, it is unethical.

Ethical leadership promotes innovation, creativity and passion as employees are not consumed by fear, tyranny and a skewed rewards system. An organisation where managers lead by example to encourage talent and skills, using them to benefit the business, its employees and the community as a whole, build on a reputation of trust and ethics.

How can businesses ensure that management remains ethical?

The board has a judicial responsibility to take accountability for any identified unethical behaviour, and to take action accordingly. Managers found to be acting in their own interests should be held responsible and face the relevant disciplinary action. However, it is not always possible for the board to be aware of unethical behaviour, particularly when a business seems to be profitable and there are no immediately obvious red flags to highlight unethical activity.

Many companies have clearly defined values displayed on walls or written in their overviews, however, they are often not put into real practice. Often, managers are scored on their targets and not on their values - something that needs to change. Boards should rate their managers with ethics and values lived as an embodiment of the organisation’s culture, too.

Private enterprises should have strict policies in place regarding what constitutes unethical behaviour, as well as clearly defined consequences - and managers need to uphold these in practice. Business leaders are the embodiment of the organisation’s value system, and what they do sets the cultural practices for the entire organisation. Their actions pave the way for the rest of the work force to follow suit, and should be without blemish or fault, to the best of their ability.

Maintaining ethical business policies can also be driven from the bottom up. Employees should be comfortable enough to be able to question possible unethical business decisions, and to bring these to the attention of the right people. However, it is often the case that employees simply stick to their own work and don’t speak out against managers. Whether due to fear or simply being employees who are not interested in the greater good of the company, instances where employees ignore questionable dealings should be investigated. Usually, their silence can be traced back to a work culture that does not encourage an “open door policy”, which can stunt business growth altogether.

Ethics is a business culture

Ultimately, ethics, values and basic integrity in a business exist because of a consciously developed ethical mindset, irrespective of individual culture or background. They are practices which are entrenched within a business environment from the top down. Unethical behaviour can only exist in a business where it is accepted and/or promoted. In a country where the economic climate is still in flux, businesses and their boards need to ensure that ethics form the backbone of their business’s culture. In brief the golden rule applies in ethics “Do to the others as you would like them to do unto you”.