MGT 312

Business ethics-- it's a hot topic now all around the world, and here to give us an introduction to the topic is psychologist Peter Quarry. Peter, what are ethics and why should organizations be interested?

Well, ethics, really, is a system, if you like, that tells us what's right and wrong. And Socrates was the famous philosopher who lived in Greece in about 500 BC who asked the question, what ought one to do? So I guess it's really about trying to work out the right thing and the wrong thing to.

But why should business be interested?

There are a number of reasons for this. The most obvious one is that there is a lot of government regulation now that is telling business what they can do and they can't to. And an obvious example would be things like environmental and safety issues.

But there are a number of other reasons why ethics are becoming important for business. The rate of technological change is throwing up all sorts of ethical questions. I went to a seminar the other day, and somebody was saying that one of the big ethical issues that we're going to have to face-- not now, but not too distantly in the future-- is having a choice about when we're going to die. Because technology is going to be such that we can choose the point of our own death. I mean it's extraordinary when you think about it.

And a lot of organizations are embracing the idea of corporate social responsibility-- the idea that they have a responsibility to society, not just to their stakeholders. And so you hear, for, example, talk about the triple bottom line. That the things are important for companies are not just how much money they're making, but also what sort of impact they having on society and what sort of environmental behavior they're exhibiting.

And of course they can evaluate that with a balance scorecard.

Precisely. And I guess there's another thing. And that is that a lot of organizations are also realizing that they can become more successful if they start thinking about ethical issues. For example, they can attract more staff because if you think about the younger workers, they're very much tuned in to ethical issues and they very much care and they would be more attracted to an organization that displays good ethical behavior.

Also, there's a lot of evidence the customers and clients are interested in buying from organizations that behave ethically. In fact, there's been some research that shows that customers are more willing to pay for goods that they know have been produced ethically. I guess another thing is that organizations that behave ethically can often be more efficient, for example, in the way they use resources. So there's a whole range of reasons why business these days are getting increasingly interested in ethical issues.

Have they always been interested or is this really a new thing? Because I've just heard so much said recently.

Well, it's been on and off over the years. Back in the '70s there was a lot of concern about environmental issues. In the 1980s, there was a lot of talk about greed is good. So there were some ethical issues about business practices. In more recent years, there have been, of course, a lot of big corporate scandals. And I guess Enron is one of the classic examples there. And that's raised issues about how businesses are run, governance issues, and so on.

But it's very interesting because I think we're starting to see organizations getting a little more proactive now, rather than just reactive. For example, the fast food industry is starting to think about the obesity issue, and you're starting to see them selling salads and healthy food. Bono, I think his wife recently launched a new fashion label that is all about making sure that they don't use child labor and using environmentally friendly fabric. So you're start to see a lot of organizations that are thinking, let's not just react, let's be proactive in terms of dealing with this.

So what are some of the situations where we business ethics are relevant?

OK. There are many examples. And let's break them into two categories. Let's start off with talking about low-level ethical issues. And I guess here, an example would be people are probably watching a DVD. Have you made an illegal copy of this DVD given that that is against copyright? Have you kept promises? Have you breached confidentiality in some way? Have you let out some secrets that you're not meant to? Do you steal supplies from the office? It just might be a little bit of paper here and a few pens or a few blank CDs. What are the sorts of things, if you're sales person, that you say to make a sale? Do you always tell the truth or do you fib a little bit? Do you share the credit for work that you've done with other people or do you take all the credit yourself?

Now these feel like pretty small things, but these are, in fact, ethical considerations because there is a right and a wrong here. The problem is that most people don't really want to have a discussion about that kind of ethical issue because they often say, well, everyone does it. I'm not really hurting anybody. And I'd really be stupid to not do these sorts of things. But of course, they are ethical issues.

They really want to just justify it because it feels like it's just a small thing.

That's right. That's a rationalization. The problem is, though, that once that sort of thing becomes part of the way we do things, it often grows, and grows, and grows. And the same sort of attitudes start appearing with higher level ethical problems.

And let me give you some examples of higher level problems. Paying bribes to people in foreign countries because you're trying to get exports. In fact, in Australia recently, where we live, there's been a huge controversy with the organization that exports wheat. And the problem has been that there's been some suggestion that bribes have been paid to certain countries to make sure that we can get that wheat exported. Is that the right thing to do or not?

What about if you have a company and you have a supplier and you know that that supplier breaks certain environmental rules in order to produce whatever it is they're producing. Should you buy from them or should you just, well, turn a blind eye? It's not our problem. We're not breaking the rules, it's them. What about if, for example, your boss tells you to not pay certain bills-- to make sure that we can keep the money for as long as we can. That's another example of an ethical situation.

So I guess there are minor ethical problems, there are major ethical problems. The difficulty is that often our attitude for how we deal with minor start creeping up to also dealing with how we deal with major ones, and we just turn a blind eye because, well, everyone does it.

Some of these are real ethical dilemmas, aren't they? Are they the hardest?

Well, yes. An ethical dilemma is where you're in a situation where, in a sense, there are two principles operating here, and you have to work out, well, which way do I go? And often the way people resolve that is to take the least of two evils. And let me give you an example. Loyalty, to, often, your organization and your team, and honesty-- in other words, telling the truth-- are two principles that sometimes we face a dilemma about. And if you look, for example, at some of the military scandals that have happened recently. I'm thinking, for example, of the prisoner abuse scandal at Abu Ghraib in Baghdad.

There's a dilemma that some people may see that what is happening is wrong and they feel that they should report it, but on the other hand, they want to exhibit loyalty to the team and not actually squeal on somebody else. So that is a classic example of an ethical dilemma and the question is what do you do in that situation?

Now, it's very interesting because surveys have found that it in that type of situation, people usually go for loyalty to their friends, to their team, to the organization over honesty. Even though they often say, oh, it's terribly important to be honest. They'll actually go for loyalty first. And that's why, of course, many people don't report those sorts of thing, because they feel they don't want to squeal, they don't want to let the team down.

So how can individuals decide what is the right thing to do in these ethical dilemmas?

Yeah. It's very difficult. And I don't want to make out that this is easy. This is quite difficult stuff. But I think very often there are laws or there are organizational procedures that will guide your behavior. And if there are, then that will tell you what it is that you should do. But often, there aren't any, so you have to try and work it out yourself. I think that there are a number of questions that you can ask yourself that will help you decide what is right and what is wrong.

For example, would I be happy if my actions were open to public scrutiny? In other words, if the whole public knew what I was doing, would I feel happy about that? Now, if the answer is no, then chances are I shouldn't be doing it.

That's a great question.

Yeah. Another variation on that is how would my family feel if they knew? How would my children feel if they knew what I was doing? If they're happy, then probably it's OK. But if they're not happy, that's telling me that probably I'm doing the wrong thing. Another variation on that, which I really like, is the idea of the hero. Now, most of us have a hero in our life. And it may be a parent, a teacher, a coach, and mentor-- someone we look up to. And the key question there is what would my hero do in this situation?

Another way of looking at this, which I really love, is to what extent is this behavior that I'm talking about, that I'm dealing with, to which extent does it match the values and principles that I talk about? We go down to the pub and have a few beers or we're at a dinner party having a few wines and we're talking about our opinions and we're saying, I think the environment is really important. And we should be looking after the environment more. Well, to extent is our behavior actually matching that? To what extent do I drive down to local DVD store rather than walking? To what extent do I use plastic bags every time I go to the supermarket? To what extent do I not switch off lights when I leave the office? To what extent are my actual day to day behaviors matching the talk? So it's how much do I walk the talk.

It's a little bit about evaluating yourself, isn't it?

Absolutely. Self-evaluation, looking at yourself in the mirror, is a lot about what ethics and business ethics is a little bit about. And that's terribly important.

Now, what if you see somebody else doing something that isn't quite right, but you're doing the right thing? And perhaps you work with them or they're a friend.

That's a very difficult situation. And I'm glad you asked it. I think they are probably a few levels of intervention. I think the first one should be to try and talk to them about it. And you should do that in a way that doesn't accuse them. Don't just say, well, you're acting really immorally. You're being very unethical. You want to try and talk to them in a calm way. So try and state your objection, but without some great big deal.

So you might say something like, look, Eve, I've got very serious concerns about what you're doing and I'd like to talk with you about ago. Or I honestly believe what we're doing here is wrong. Or maybe you want to propose some alternative action. Look, I know what it is you want to accomplish, Eve. I think there might be another way in which we can do this. So you're proposing an idea that is more ethically appropriate.

You might want to try and ask for the person's help. Look, I know that we're trying to do this, but help me out here. Can we try a different way? So talk to the person and try and resolve the problem, but don't be too accusing because otherwise the person will back off.

It may be that if that doesn't work you actually need to report this situation to the management. It may be that there is some independent ethics person or committee in your organization. They may be an ombudsman, for example. It really depends on where you work and what the organization is. And it may be that you can do this anonymously. But making some sort of report is the next level up.

It's interesting. There's one organization that I have been reading about recently that says that if anybody sees another person breaking one of the code of ethics, you have to report that person. And if you don't report that person, you are breaking the code of ethics. And I think that's a really interesting idea. So organizations are really moving in this direction.

But you have to realize that if you do start reporting people, particularly if it's not anonymous, there's a risk that you pay. You may be punished by other people.

Being a whistle-blower.

A whistle-blower. You y be bullied. You may be ostracized. You may be looked over for the next promotion. So it can be difficult. I guess the final thing you do if you see things that people are doing, as you say, is to whistle-blow, and typically that means going to the press. Hopefully no one will be in that situation, but of course, that does happen from time to time, and that is the ultimate way you deal with this.

So what are organizations doing at the moment to ensure that people do behave ethically?

There are a number of things. A lot of organizations are setting up what are called codes of ethics. And really, they are a statement of principles that they believe are important in the way we do our business. So, for example, one might talk about being honest in all dealings with customers, saying the truth, reporting honestly financially, and making sure all of our communication is honest. And some organizations can take that a step further by coming up with a code of conduct. And a code of conduct is a little different because that spells out much more specifically behaviors that are allowed and not allowed.

For example, there's one supermarket chain that I'm aware of that has in its code of conduct a rule that says that its employees are not allowed to accept any free gifts from suppliers or would be suppliers, just to make sure that there is no problem there.

A lot of organizations conduct audits of their ethical behavior. Sometimes these can be legal-type audits. Increasingly, organizations are turning to ethics training. And, obviously, we hope that this DVD will be used as part of getting people to understand what ethics is about.

And how do they deal with a violation?

Well, if there is any sort of violation, they deal with it in a consistent way according to certain procedures. So all of those are sort of the ways in which organizations these days are attempting to actually get a handle on this ethical problem.

And does it really make a difference?

Well, the evidence is that it does, actually. There's been a big survey that shows that where there is some sort of ethics program, as the sort of one that I've just outlined, that it actually is associated with increased reporting of misconduct by employees-- in other words, people will be more willing to report a problem if they see it-- there's also a higher perception among employees that they will be held accountable for any ethical violation, and also there is a lesser pressure on employees to compromise standards. So the evidence seems to be that ethics programs do actually result in results, and that's great.

And the role of senior management, where do they need to fit?

Well, senior management, need to, once again, as I said before, make sure that they walk the talk. And there is evidence that where managers do four particular things-- and that is, first of all, they talk about the importance of ethics. Secondly, they inform the employee about what their expectations are. They keep promises, that's terribly important. And also they model ethical behavior, they walk their talk.

The evidence seems to suggest that there is less misconduct in organizations like that. So the role of senior managers is terribly important.

So for the people watching this program right now, what would you like them to mainly take away?

Well, realize that ethics is a growing area of interest. And I believe it's going to grow even more. That organizations that do attempt to deal with this along the lines I've indicated actually tend to do better, not just in terms of reporting, but also do better organizationally in terms of relationships with staff, relationships with their customers.

But at the end of the day, it all boils down to you and me, because organizations are people. And as we said before, at the end of the day, you and I need to talk about our behavior. Is it ethical? I need to consider myself and I also need to talk with you. So make sure that all of us start thinking about it, talking about it, reflecting. Because that's what leads to behavior change.

So let's make it a priority.

Absolutely.

Thanks Peter.