Originally published in CommPRO.biz

Business Ethics Is Not 

An Oxymoron

 

Every day all but a few of us go out into the world and try our best to do the right thing. That’s true in our personal life; that’s true in our workplace. Why then does it seem that all we hear about are the bad things? The Enrons, the Adelphias, oil spills in the Gulf of Mexico, bribes at Walmart, reckless bankers destroying the world economy. Given all that and more, how can we say “Business Ethics is not an Oxymoron?”

It has to do with what we human beings consider news. By and large we aren’t interested in the good stuff. Quiet day-to-day happenings occasionally make for an interesting feature story, but the front page headlines tend more toward mayhem, treachery, and such. We don’t go to the race track to see the drivers make left turns; we go to see the cars crash. We don’t head for the movies to see ordinary life. We don’t pick up novels about good folks doing well, but in real life good folks doing the right thing and doing well is actually the norm.

Several years ago two academics and a writer published Firms of Endearment documenting their research into business ethics. They set out to find companies that maintain the highest ethical standards. Companies that deal with all their stakeholders at the highest ethical levels: their customers, their employees, their vendors, their community, the environment and finally their bottom line, their lenders and shareholders. They found them, great examples, nice outfits to deal with and have around. However, the remaining question was, do they make any money?

It turns out that over the ten years prior to the Firms of Endearment study, the public companies that met their ethical bar returned eight times the Standard & Poor’s average. Not eight times the worst, eight times the average return. 

That’s pretty impressive. It shows that if you take care of everything else your bottom line will take care of itself. It doesn’t mean that it’s always easy to follow this path or that everyone who follows it will succeed. There are times when the right thing is not clear. Unforeseeable factors come into play, such as economic downturns, competitive issues, market trends; even a natural disaster like Super Storm Sandy can wipe out a thriving enterprise.

It takes smarts. It takes hard work. It takes courage to succeed. You have to be lucky and you have to follow the oldest of moral guides, the Golden Rule. That’s what ethics is really all about. Nor is it writ large that cutthroat bad guys won’t succeed. It just means that all things being equal, an ethical business model will dramatically outperform any alternative. Instinctively we know that; it’s why the vast majority of us are out there trying to do the right thing every day, enjoying the great feeling that comes from that effort win or lose.

Not for Sale

Not for Sale

There are –and always have been– so-called “pay for play” print and broadcast deals. That’s why federal law requires them to be labeled “advertising” or “paid programming”. Unfortunately, there is no such law covering internet content. So it should come as no surprise that web based news sites are being targeted by those looking for a plug for one thing or another.

While we understand legitimate efforts to gain media exposure, when there is money involved the ground rules need to be crystal clear.  Apparently, with no legal firewall, some of the slime that inhabits the fringe of every sector of media and marketing will attempt to slip over the ethical wall that protects most all of the world of commerce.  

Hamilton Nolan, who writes for the popular blog Gawker, recently received an email from a marketer suggesting an easy way to earn a little extra money. All he had to do was drop in a website link for one of their clients, only –of course– if it “fits naturally in the context of the article.” In a series of emails this solicitation was identified as coming from a so-called “marketing agency” specializing in this kind of placement. Payment offered began at $130 and escalated quickly to $175. Not bad, as Nolan noted, for five seconds’ work.  

The “agency” claimed to represent a number of “major” clients, Motorola, Dell, and T-Mobile, all of whom denied any connection. The agency also told Nolan that they had writers taking their bucks from a wide range of top ranked internet sites including The Huffington Post. You can guess Huffington’s response; it was mirrored by the other sites where writers and/or editors were said to be on the “take”.

Who knows how many clients these guys really represent? Or how many writers and/or editors at internet sites have succumbed to this siren call? There is always a certain amount of slime on both sides of the ethical wall. Sadly, one cannot exist without the other.

The Bottom Line

Dog Eat Dog, nothing but the bottom line matters. Surprisingly there are those in business who still buy into this myth. Understand, it works. Goldman Sachs and many of the other Wall Street types come quickly to mind. It is always those who get away with playing dirty and breaking the rules who make the headlines. As the saying goes, “Good News is not News.”

Truth is, from the days of the industrial revolution businesses that treated their stakeholders well– their employees, their customers, their community, their suppliers, and the environment– found that the bottom line took care of itself.   Does that mean the good guys always win? Of course not. It does mean they have a better chance of winning.  And when they do, they win bigger than those who choose the alternative path.

The problem is documenting this truism. A few years ago a writer and couple of  college professors set out to do just that. Their book, Firms of Endearment, showed that those who took care of all their stakeholders returned eight times as much as the Standard and Poors average over the ten years prior to their study. That’s not eight times the worst, that’s eight times the AVERAGE return; that’s the kind of bottom line every company dreams of.

A massive research effort, 10,000 consumers in ten countries, The Cone/Echo 2011 Global Corporate Responsibility Study, shows that consumers not only support those who follow this business model, they will punish businesses that focus solely on the bottom line. The margins surprised the researchers as they did us. Over nine out of ten respondents said that to win their business companies must go beyond the legal requirements and that they need to look at their practices and make sure their overall impact on society as a whole is as positive as possible.

Their number one concern is a company’s efforts to support and expand the economy. Nearly all the respondents (96%) placed economic development at the top of the list they expect companies to strive for. The environment comes in at the same level (96%), followed by human rights, education, health, and poverty, all above -or just below- the ninety percentile mark. That’s pretty dramatic.

And it’s widespread; the study covered a lot of geography: Canada, China, Brazil, France, Germany, India, Japan, Russia, The United Kingdom and The United States. Nations that house almost half the people on the planet and by far the majority of enlightened consumers. Consumers who told the researchers that they would switch brands to be assured of their makers’ devotion to high ethical standards.

Pack that all together and it makes for an overwhelming argument for the ethical business model. It makes sense; who would want to do business with someone or a company that is trying to rip you off? Who wants a company that does not care about you, your community, the air you breathe, the water you drink? Who needs those kind of people? You can no more run a company by focusing on the bottom line, than you can win a ball game by focusing on the scoreboard. 

© 2011 GLG