2/22/2007

Strong ethics are good for business

An article I recently read starts out by discussing the effects that the Sarbanes-Oxley Act had on ethics in the business world. The author states that the act really has not helped with businesses practicing unethical behaviors. The article goes on to say that even though the act did add some discipline to the business world, it will never be able to fix the problem entirely. A company will have the same ethical behaviors as its top managers do. If the top executives tend to be unethical, the rest of the company will follow. Many people in the business world tend to think that sooner or later a company will have to make an unethical decision to be able to compete, but the article tends differ. It says that if a company will have strong ethical and moral principles it will be more successful than if it were not to have them. People that do business with you will want to be sure that they can trust you. In order to keep a long term relationship with customers and suppliers you should always make ethical decisions. Every action has a consequence, for good or bad. If you are not ethical and don’t see any negative consequences right away, don’t worry, it will catch up to you someday. In other words, always do the ethical thing.

8 comments:

Eric said...

As TR stated Sarbanes-Oxley Act has done little to influence ethics within the workplace. But is that the government’s job, to ensure ethical practice? I argue no. Ethics is a standard or value system, held by an individual or group of individuals. How can a government set aside a small group of people to dictate ethics for everyone within that government? It is like trying to tell Mother Nature what temperature is acceptable. Temperature like ethics is the result of previous events and actions. You can’t change ethical behavior within a society without changing the very acts and events that incubated that society. Within a company ethical behavior starts at the top and employees will be drawn to companies that have equal standards of ethics as their own. Well that's what I think, thanks for the good post TR.

Kate said...

The Sarbanes-Oxley Act was put in place to decrease unethical behavior or rather decrease the demand by increasing the cost of unethical behavior. Another way to look at it is, some individuals are less elastic in respect to unethical behavior, and the cost would have to increase dramatically to decrease some individuals’ unethical behavior. If this act did not help for everyone it would be because some individuals’ values are different then others, their line which they draw for ethical behavior is different or they value the output of unethical behavior above the cost. The act will never be a cure-all to change individuals’ values. The important aspect to look at is whether there are more benefits then cost due to the Sarbanes-Oxley Act.

Jacob said...

I agree with you TR. So many people are skeptical of corporations and large companies that it would benefit a company to go out of its way to do the right thing. I do believe that a companies culture is established from the top-down. I do think that if managers tend to be unethical that the culture will tend to be unethical as well. Jet Blue is an example of a company that is immovably honest and ethical and as a result has won the hearts of millions of people. I agree TR that it is always best to do the right thing.

Dr. Tufte said...

I don't have much to add.

Kate - I like your description.

Jacob - do you think JetBlue has made a tradeoff of poor service for ethical values? Isn't the most ethical thing to provide decent service for what people pay?

Matthew said...

I think that a law that helps keep corruption out of the business world would actually help the economy. If stockholders can't trust companies, they won't invest their money, and then businesses won't operate as efficiently. Without whistleblowing, yes, eventually investors would see which companies they could trust more, but if you want to run with no laws, should we also get rid of all the laws and police officers in all the cities? Sarbanes-Oxley helps to insure that everyone is playing by the rules. One of my professors, Dr. Christiansen, actually said that the Sarbanes-Oxley Act has done a lot of good and has been a very effective tool in catching immoral behavior in companies before it hurts stockholders.

Jordan said...

Dr. Tufte said:

"Jacob - do you think JetBlue has made a tradeoff of poor service for ethical values? Isn't the most ethical thing to provide decent service for what people pay?"

I don't think that JetBlue has made a tradeoff of poor service for ethical values. But in some cases, JetBlue has traded low cost contracts for ethical values. When David Neeleman spoke at SUU, he talked about an experience where he turned down a low contract offer from Boeing because he had already "shaken" on a deal with Airbus. As a result, Airbus said that it would always do business with JetBlue. Sometimes, ethical behavior has costs in the short-run, but ethical behavior will result in loyal customers and suppliers in the long-run.

William said...

Dr. Tufte,
It seems to me that ethical behavior does pay. Companies that are ethically responsible seem to fare better in the public’s eye then those that try to lie and cheat. I think in this day and age with all the new laws ethics is going to play a more important role in business.

Dr. Tufte said...

I agree with William and disagree with Matthew.

I think ethical behavior pays, and I don't think Sarbanes-Oxley has helped much with that (in order to tell for sure, you'd have to have some way to separate the effect of SarbOx from the general trend towards better ethics).