Good ethics is good business

Published: Sunday | September 25, 2011 Comments 0

Hopeton Morrison, Guest Writer

The Private Sector Organisation of Jamaica (PSOJ) in collaboration with the Inter-American Investment Corporation (IIC) recently launched a business ethics programme for small and micro enterprise organisations (SMEs) in Jamaica. The programme launch was very well attended by a wide cross section of corporate executives and SME practitioners and attracted a strong representation of national and multilateral stakeholders, including Finance Minister Audley Shaw; mission director for USAID, Karen Hilliard; and IDB executive director for the Caribbean region, Richard Bernal.

Growth and transparency

The initiative sets out to encourage growth and transparency in SMEs located in the region by way of building integrity, transparency and anti-corruption initiatives in these entities. The strong show of support for the launch betrayed the stifling business environment that most SMEs are now facing, and brought to mind one of the well-known mantras in business ethics, coined by marketing professors Russell Abratt and Diane Sacks in 1988, that good ethics is good business.

That mantra has been variously commended and criticised by both business practitioners and academics. In fact, at an earlier time, 1939 to be exact, and in a different context, a famous American baseball player and manager, Leo Duracher, professed the antithesis of Abratt and Sacks' mantra in stating that nice guys finish last. There are more than a few businessmen and businesswomen that operate on the latter mantra.

In that regard, the struggling entrepreneur might reasonably ask if business ethics is really that critical to the growth and/or survival of his SME. Indeed, is business ethics important to any type of business, micro, small, medium or large? The simple answer is yes, of course. In its outline, the PSOJ/IIC programme puts forward the rationale that business ethics matters because of a few compelling reasons.

Among the reasons is the fact that larger companies generally choose to engage SMEs in which they develop long-term trust. Another is that those SMEs that adopt ethical business practices find that employee morale improves and ultimately becomes a competitive advantage. A competitive advantage because a more satisfied and happy team delivers better customer value, which in the viewpoint of some, is the most important competitive advantage of all.

Social responsibility

A third reason, and one that has endured significant research, is that ethical companies engage in corporate social responsibility (CSR), which has become perhaps the single most important concept for competitiveness in the business ethics discussion. So much so that in 1971, economist and Nobel laureate Milton Friedman wrote what has become a seminal article in The New York Times titled 'The social responsibility of business'.

In that article, Friedman argued that the single role of business was to make profit and that any act or engagement towards social activities by paid corporate executives of a corporation was in violation of their role of maximising shareholders' profits. Further to that, they had no authority whatever to engage in these acts without the permission of the corporation's owners.

That article by Friedman continues to this day, four decades later, to generate intense debate. The debate has been fuelled even further by the collapse of some major corporations in the 1970s, attributed to ethical bre-aches and scandals, resulting in investors losing billions of dollars. The research however, although still inconclusive, has come down largely against Friedman's position with more than half the empirical research pointing to the fact that CSR in particular, and ethical conduct in business in general, result in more profitable businesses.

The experts argue that ethics in business represent more than corporate social responsibility. Ethics also speak to specific occurrences such as an organisation's written code, the degree of ethical leadership practised by the CEO who is the single most important person driving the ethical tone of the institution, and the ethical culture and climate within the organisation. Recently, organisational justice has become a new and important topic in the discussion.

In all of this, the struggling entrepreneur could argue that as important as ethics are, there are far more important and extenuating factors driving his focus in Jamaica right now. Consistent with Friedman's position, his role becomes simply one of survival at this time. On the face of the evidence, that is a very flawed position to take and will ultimately result in diminished profitability.

In that regard, we commend the PSOJ/IIC ethics initiative to all owners of SMEs in Jamaica. Among the several topics to be covered, we find three particularly important in building an ethics agenda in your SME. These are ethics development and strategy alignment, building the institution's ethical reputation, and improving the institution's ethical culture.

The verdict is out even if inconclusive at this time. Good ethics is good business, especially for your SME.

Hopeton Morrison is general manager of St. Thomas Cooperative Credit Union Ltd. Please send comments/questions to: hmorrison@stccu.com

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