Ethics

Ethical leadership, decision-making, and organisations

ethical decision-making and leadership are the basis of ethical organisations, corporate social responsibility, 'fairtrade', sustainability, the 'triple bottom line', and other similar concepts

This article introduces the concept and reasoning behind ethical leadership and ethical organisations.

Ethical principles provide the foundations for various modern concepts for work, business and organisations, which broaden individual and corporate priorities far beyond traditional business aims of profit and shareholder enrichment. Ethical factors are also a significant influence on institutions and public sector organisations, for whom the traditional priorities of service quality and cost management must now increasingly take account of these same ethical considerations affecting the commercial and corporate world.

The modern concept of ethical organisations encompasses many related issues including:

• corporate social responsibility (CSR) - or simply social responsibility
• the 'triple bottom line'
• ethical management and leadership
• 'Fairtrade'
• globalization (addressing its negative effects)
• sustainability
• social enterprise
• mutuals, cooperatives, employee ownership
• micro-finance, and
• well-being at work and life balance
  

Ethical business and ethical investment

As previously stated, the purpose of this article is not to define or describe ethical business in an absolute sense.

The explanation thus far should demonstrate why such a pronouncement is impossible.

Ethical business - as other ethical issues - are a matter of individual and collective judgement.

It is possible to go so far only in outlining ethical considerations, and to give some modern examples of interpretation which seem generally to be accepted.

Ethical investment is a useful aspect for considering ethical business, since large scale investment is ultimately subject to market forces, which largely reflect public opinion. As such ethical investment criteria and examples tend to be a good guide towards ethical attitudes of large sections of people and society, rather than the 'expert' views of leaders and gurus.

Ethical investment has been a growing aspect of business investment since the 1970s, although arguably the first types of ethical businesses can be traced back to the Quaker and Methodist movements of the 1800s.

Then as now ethical business and investments regard socially responsible activities and aims with far greater priority and emphasis than the traditional profit and free market business approach.

Traditional profit-based business models, which arose and came to dominate global commerce from the beginnings of industrialisation, inherently do not require a socially responsible element, other than compliance with the law, and a reflection of public reaction for pragmatic marketing (and ultimately profit) purposes.

Ethical business or investment is concerned with how profit is made and how much profit is made, whereas traditional profit-centred free-market based business is essentially only concerned with how much profit is made.

Traditional profit-centred business seeks to maximise profit and return on investment with no particular regard for how the profits are made and what the social effects of the business activities are.

The ethical approach to business and investment seeks to maximise profit and return on investment while minimising and avoiding where possible negative social effects.

In this context 'social' and 'socially responsible' include related factors such as:

• the environment
• sustainability
• globalization effects - e.g., exploitation, child-labour, social and environmental damage anywhere in the world
• corruption, armed conflict and political issues
• staff and customers relations - for instance education and training, health and safety, duty of care, etc
• local community
• and other social impacts on people's health and well-being

Typically the above are interpreted within ethical investment so as to regard the following sectors and activities as being difficult to reconcile with profit and investment. As with other perspectives on this page, this is not a definitive list or set of absolute criteria. It's a set of examples to illustrate typical (modern Western) concerns of ethical investors and ethical business people:

• tobacco
• armaments
• nuclear power
• animal experimentation
• oppressive or corrupt national regimes

This is not an exhaustive list and is subject to change - as the world changes.

As stated, this is not a pronouncement of what's unethical. It's a reflection of current attitudes, which you can use in your own way alongside the other information on this page to develop your own ideas as to what's ethical and what's not.

Also as stated, things change with time and situation. For example if technology is developed enabling nuclear power to be safer and less impactful on the future then obviously concerns in this area would reduce and the ethical implications would decrease or disappear.

Standards of what is considered ethical change over time, and generally these standards become more humane as humankind develops greater tolerance, awareness, and capacity for forgiveness and compassion.

Humankind's - or any society's - capacity for ethical behaviour increases with its own safety and confidence of survival and procreation.

Hence the human tendency to become less ethically flexible when under threat.

Thus ethical behaviour is a relative judgement, as well as a subjective one. We cannot impose one society's moral code onto another society with different needs and demands.

Interestingly what is considered unethical in present times, commonly becomes unlawful in the future. The leading ethical thinking of any time tends to pioneer social and civilization change.

And so here lies substantial advantage for corporations and other groups and bodies which anticipate such changes. They adapt quicker, and are seen generally to lead rather than follow. They also manage change more successfully, since they have time to do it.

Organisations and institutions which fall behind public ethical expectations find catching up a lot more difficult.

Organizational outcomes and benefits from ethical leadership

More and more leaders of businesses and other organizations are now waking up to the reality of social responsibility and organizational ethics.

Public opinion, unleashed by the internet particularly, is re-shaping expectations and standards.

Organizational behavior - good and bad - is more transparent than ever - globally.

Injustice anywhere in the world is becoming more and more visible, and less and less acceptable.

Reaction to corporate recklessness, exploitation, dishonesty and negligence it is becoming more and more organised and potent.

Employers, businesses and organizations of all sorts - especially the big high profile ones - are now recognizing that there are solid effects and outcomes driving organizational change. There are now real incentives for doing the right thing, and real disincentives for doing the wrong things.

As never before, there are huge organizational advantages from behaving ethically, with humanity, compassion, and with proper consideration for the world beyond the boardroom and the shareholders:

competitive advantage - customers are increasingly favouring providers and suppliers who demonstrate responsibility and ethical practices. Failure to do so means lost market share, and shrinking popularity, which reduces revenues, profits, or whatever other results the organisation seeks to achieve. 

better staff attraction and retention - the best staff want to work for truly responsible and ethical employers. Failing to be a good employer means good staff leave, and reduces the likelihood of attracting good new-starters. This pushes up costs and undermines performance and efficiency. Aside from this, good organizations simply can't function without good people.

investment - few and fewer investors want to invest in organizations which lack integrity and responsibility, because they don't want the association, and because they know that for all the other reasons here, performance will eventually decline, and who wants to invest in a lost cause?

morale and culture - staff who work in a high-integrity, socially responsible, globally considerate organization are far less prone to stress, attrition and dissatisfaction. Therefore they are happier and more productive. Happy productive people are a common feature in highly successful organizations. Stressed unhappy staff are less productive, take more time off, need more managing, and also take no interest in sorting out the organization's failings when the whole thing implodes.

reputation - it takes years, decades, to build organizational reputation - but only one scandal to destroy it. Ethical responsible organizations are far less prone to scandals and disasters. And if one does occur, an ethical responsible organization will automatically know how to deal with it quickly and openly and honestly. People tend to forgive organizations who are genuinely trying to do the right thing. People do not forgive, and are actually deeply insulted by, organizations who fail and then fail again by not addressing the problem and the root cause. Arrogant leaders share this weird delusion that no-one can see what they're up to. Years ago maybe they could hide, but now there's absolutely no hiding place.

legal and regulatory reasons - soon there'll be no choice anyway - all organizations will have to comply with proper ethical and socially responsible standards. And these standards and compliance mechanisms will be global. Welcome to the age of transparency and accountability. So it makes sense to change before you are forced to.

legacy - even the most deluded leaders will admit in the cold light of day that they'd prefer to be remembered for doing something good, rather than making a pile of money or building a great big empire. It's human nature to be good

Reference:http://www.businessballs.com/ethical_management_leadership.htm