Vivek Wadhwa has written a powerful LinkedIn posting: Corruption in Business, and the Importance of Ethics. The entrepreneur, now a Fellow, Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University, points out that solid ethics can certainly correlate with business success; and sloppy ethics, with failure.
Business executives need to start by spelling out and communicating their values. Then they need to lead by example. This means getting rid of the bad apples and declining opportunities to sell one’s soul for instant wealth.
Corporate culture is built from the top down. Employees embrace the ethics and values of their leaders. You simply can’t have one set of standards for management and another for staff. Every executive and employee needs to be held accountable.
Employees need to be encouraged to speak up when they see wrongdoing: to “speak truth to power”. And when a mistake is made, it is better to deal with the immediate fallout than to allow it to build its own momentum. A corporate culture that doesn’t allow for mistakes is destined for disaster. The best strategy is to encourage employees to come clean and learn from their errors.
The worst approach pressures employees to hide information. A company can usually survive short-term snags; covering up a problem is likely to create even bigger problems later on. No truth remains hidden forever.
Ultimately, long-term survival is about tying reward to behavior. The best organizations build ethics into their management and compensation systems. They reinforce corporate values by making them an integral part of how success is measured and rewarded.
Remember that doing the right thing doesn’t automatically bring success. But compromising ethics almost always leads to failure.
I think we’ve seen plenty of crash and burn examples where sloppy ethics descended into criminality, and ultimately disaster for everyone involved. The problem of course is that executives pay the price for being bad, but even more, innocent people are cast into the net, losing their life savings or (in case of product or environment failures, their health or lives.)
Wadawha speaks from a place of purity. I cannot say that I am so good, and have to admit to taking shortcuts, copping out of ethical responsiblity and failing at the basic ethical values many times in my career. Maybe I’m fortunate that the weaknesses didn’t totally trip me up. The ethical road often requires more distance and effort, but increasingly I’m seeing how it can get us to our business destinations in a much safer and effective manner.