Doing Well by Doing Good
by Jeff Black and Chris Cottey

As corporate ethics come under increasing scrutiny, doing well in business is becoming tied to doing what's right. With technology and competition fueling high growth, many companies are implementing ethical policies after the fact - i.e. after a public relations problem comes up.

Is it time to review your corporate policy on ethics? Today's proactive companies are reviewing their business plans with a focus on their responsibility not just to shareholders, but also to all stakeholders. The ethical horizon has expanded, and that may just add to the bottom line.

The key to implementing an ethical business strategy is to consider the ethical issues surrounding business decisions at the strategic level. Public perception is impacting stock prices and consumer behavior - reaching right into a company's balance sheet. In order to gain positive public perception, a corporate strategy that has ethical implications must be fully developed before it is implemented.

Employees take their cues from management. When corporate objectives are pursued at the expense of ethical considerations, employees tend to lower their own ethical standards. Even the "wink, wink" implicit management signal that the bottom line comes before ethical morality can weaken an organization and its reputation.

A prime example is the past (and current) issues surrounding the energy grid in California. In what has become a classic case of wrongdoing, large energy traders were taking advantage of short supplies and grid congestion to buy and resell energy at astronomical prices - causing blackouts and crippling the state. We have all seen the fallout at companies like Enron from pursuing a shortsighted strategy that places profit above ethics.

Recently a news story appeared that reported continuing use of grid congestion as a reason for companies to jack up energy rates. One would think that marketers would have learned their lesson, but the siren song of easy money is a hard one to ignore.

There is a big difference between what is legal and what is ethical. Following purely legal doctrine without ethical consideration is poison to today's corporate culture. What is required are transparency and accountability on the part of corporate management. Unless these requisites are present, there is no number of laws that can adequately regulate business managers and others in fiduciary positions who do not want to act ethically.

Ultimately, the impact of sound ethical policy will reinforce a company's bottom line. Ethical dealings with employees, customers, the media, shareholders and the public will cement a strong reputation and fortify stock prices. Utilizing a long-term approach to strategic challenges that includes ethical considerations can only help the company grow and prosper.