and sustainable business solutions -
The Role of Ethics in Building
Successful Businesses - Part One
This paper is in two parts -
part one, here, introduces ethics and business, and explores
a primary requirement for any business which aspires to be
successful - trust. Part
two covers the contribution ethical insights can make
to the creation of trust and therefore business success.
Introduction - Ethics and
Ethics is a branch of philosophy
concerned with human behaviour, particularly with what is
right behaviour and what is wrong behaviour, how we decide
between the two, what we mean by "right", "wrong", "good",
"bad", what reasons we can give for classifying something
as these things, and so on. It also considers whether something
can be right or wrong at all, or only right or wrong for particular
people or at particular times or in particular contexts.
There is a sub-branch of ethics
known as business ethics, where the object is to think about
what is right and wrong in the activities of businesses and
the people in them. For example, it is concerned with the
morality of profit, morality of shareholder-owned businesses,
the right way of relating to employees and customers, the
wider responsibilities of businesses (if any) in terms of
a business's impact on the local community, local environment
and even on the global environment and people living in other
parts of the world. Business ethics also shades into Corporate
Social Responsibility, by informing the attempts by business
to address needs and issues outside the normal concerns of
While all of the above concerns
are legitimate and worthy of investigation, our approach here
is different. It starts from the point of view of businesses
themselves, their experiences and their concerns. It asks
what the key issues are for businesses in terms of the ethical
behaviour of businesses and those who work in them. In other
words, what sort of behaviours which fall into the sphere
of ethics are conducive to generating more succesful businesses?
And what sort of behaviours militate against success? We then
put these answers into an ethical framework which allows businesses
and people working for businesses to understand the sorts
of actions likely to contribute to business success and the
sorts or actions that are not.
This approach does not mean that
there is not a purely ethical approach to businesses, asking
the deeper questions of why, but this is not covered here
other than as far as is necessary in order to better understand
how businesses can achieve success by referring to ethical
Creating Trust - a Primary
From a phenomenological
perspective, one of the most significant ethical concerns
in business is trust. The need for trust, the trust deficit,
the behaviour of ourselves and others in the presence or absence
of trust, are key abiding concerns for anyone working in a
business. In other words, trust looms large in our experience
of almost all aspects of working life.
Without trust there is no basis
on which businesses can conduct business, as almost no business
transaction between companies or within companies can be undertaken
without one or both parties trusting that the other party
will honour the obligations incurred by that transaction.
For example, any business buying
anything must trust that the goods or services bought are
as described and are fit for the purpose intended, that warranty
terms will be adhered to and after-sales care will be available
And for example, any business
selling anything must trust that the purchaser will pay fully
and promptly, that the intellectual property (if any) of the
seller will be respected, and that the purchaser will be honest
when requesting warranty or after-sales services.
Transactions needing the least
trust are face-to-face transactions of simple items of low
value, which can be counted and examined before handing over
Transactions involving complex
or expensive products or services, supplied or supported over
long periods, where payment is made by cheque or electronically
at some future date require more trust.
Those transactions carried out
at a distance without personal contact, over the internet
for example, require a great deal of trust. And those transactions
where there is no possibility of recourse to legal proceedings,
such as transactions across borders between parties with a
great disparity in financial resources also require a great
deal of trust.
Within companies, employees must
trust that they are going to get paid at the end of the month,
that commitments about work and the circumstances surrounding
work will be honoured, and that they will be treated fairly.
And employers must trust that employees will do what they
are asked to do, will not defraud the company and will carry
out their roles in the best interests of the company.
There are plenty of ways of reducing
the amount of trust required between parties to a transaction,
for example by checking the credit rating of new customers,
taking up references, monitoring work, and so on, and many
of these ways are built in to companies' operating procedures.
Nevertheless, risk in any transaction can only be reduced
and never eliminated and so the need for trust is always present.
Some Methods for Creating
The extent to which trust can
be created in the minds of employees and other companies is
a key determinant of whether current and potential employees,
suppliers and customers will deal with you. And, if they choose
to deal with you, will determine the terms on which they deal
with you, and their level of commitment they bring. (Not to
mention the degree of honesty and integrity with which they
deal with you - people who think they may be cheated are likely
to take any opportunity they can to gain advantage before
they are cheated themselves.)
Therefore, the creation of a
trust is a key business goal. There are a number of ways in
which trust can be created deliberately (i.e. as a matter
of policy rather than a side-effect of good business practice),
and I will mention a couple of them here.
People normally have more trust in people and businesses
deemed to be successful, presumably on the basis that
successful businesses and people could only have been
successful by being trustworthy - no one would want to
deal with someone untrustworthy, and so success is a good
indicator of trustworthiness.
Hence the money spent on good offices in premium locations
and on high quality web sites and marketing communications
generally. And also hence the money and care spent by
individuals in dressing well and looking the part for
their business roles.
It is obvious that this approach cannot be relied upon
on its own, but it is an indicator in which people often
put their faith. Therefore, businesses and individuals
should project an image of success in their dealings with
other businesses and individuals, as one element in a
number than can contribute to the creation of trust.
Another way in which companies and individuals can
create trust is to spend time and money on activities
which are not in the direct self-interest of those companies
and individuals but which are deemed to be worthy in some
way - which achieve some social good over and above the
generation of profit through supply of goods or services.
The thinking is, presumably, that only "good" companies
and people (i.e. those concerned with "doing the right
thing", concerned with sometimes putting others before
one's own narrow interests) do good things, and if those
companies and people have done good things in the recent
past and are committed to doing them in the future, they
can be trusted more to do the right thing by you in your
transactions with them.
Corporate Social Responsibility (CSR), which encompasses
activities as diverse as supermarkets charging for carrier
bags to running overseas aid projects, has become more
central to business life at least partly as a result of
this need to be seen to be more trustworthy, and for the
same reason charitable work is often seen as a good thing
on a potential employee's CV.
Again, it is obvious that this approach cannot be relied
upon on its own. This is particularly the case because
businesses and individuals who understand that doing "good"
things contributes directly to business success will engage
in doing "good" things because those things contribute
directly to business success and so they cease to be "good"
things (i.e. done for the sake of the recipient rather
than the sake of self).
Sorting out the businesses and individuals with the "right"
intentions from those with the "wrong", self-interested,
intentions becomes ever more difficult when companies
start competing to be "good" in order to foster trust,
in order to be more successful.
On the other hand, it is often the case that those who
are most likely to let you down will have a short-termist
approach to business - that is, they will measure business
success mainly or purely in terms of the achievement of
short-term goals. This may partly be because those who
are most desperate are the most likely to cut corners
morally as well as in other ways, and the most desperate
can only focus on the immediate future.
That is not to say, of course, that all those focused
on short-term goals are untrustworthy, but in general
trustworthy businesses tend to put more emphasis on long-term
Investment in CSR demonstrates a commitment to long-term
goals, as such activities can never have an immediate
impact on levels of trust. Therefore, a strong commitment
to CSR (by companies) or involvement in charitable activities
(by individuals) is at least an indicator that they are
probably rather more trustworthy, other things being equal,
than others in identical situations.
Another notorious problem with CSR, though, is that what
companies hold themselves out as doing (or lead people
to think that they are doing) often does not bear serious
scrutiny; and so the value of doing CSR is devalued.
The conclusion is that investment in CSR contributes to
the creation of trust, and as one element in a range of
initiatives it can be worth investing in. But it is not
enough on its own to achieve the goal of trust in a business.
There are other ways in which companies can deliberately
create trust among particular groups, such as employees,
suppliers or customers - for example by being seen to be
(or purpotedly being) transparent and open rather than secretive,
so that you look as though you have nothing to hide and
therefore must be trustworthy.
A Sustainable Method of Creating Trust
However, the creation of trust does not really come down
to the image you project through corporate branding or CSR,
or any of these other ways. Underlying these means of creating
trust is the brute fact that the creation of trust, in the
medium- to long-term at least, comes down to being trustworthy
in all or at least most of one's dealings with others (or
at least most of one's dealings that impact upon the groups
one is most interested in creating trust in).
In other words, if corporate branding or CSR is not backed
up by your actually being trustworthy in your day-to-day
dealings with staff, customers and suppliers, these initiatives
are likely to fail, or at least have their success blunted
in the long run. This is even more the case nowadays as
the internet is an unregulated and highly effective means
of spreading messages, including those which oppose the
official messages companies put out about themselves - if
those official messages are not in line with actions.
Trustworthiness ultimately means two things:
people are confident that you will do and say what you
say you will do and say. In addition to the things outlined
above, this depends two things:
the extent to which you can convince others that
you have done and said what you said you would do
and say in the past; and
the extent to which you can convince others that
you will continue to do and say what you do and say
in the present and future (at least in those areas
which impinge on current transactions).
"convince others" element has been partly addressed above,
but clearly there are other ways in which you can convince
others that you have done and said what you said you would
do and say in the past and will continue to do so in the future
- for example, by lying and deception. This is often used
by companies and individuals, but is prone to be highly self-defeating
if detected (and, in some cases, of course, illegal).
there is only one fool-proof way to convince others that you
are trustworthy, and that is to be trustworthy - to
always, or as far as is possible, do and say what you commit
to doing and saying. In other words, as far as is possible,
keep commitments, do not lie, and
do not mislead or deceive.
will deal fairly and reasonably
with people even when you have the legal means or power to
do otherwise - in other words, you can be trusted to take
others and their interests into account even if it does not
fit your narrow interests in the short term.
the creation of trust is a primary business goal for all businesses
and all individuals in business life. Without trust there
can be no business, and the more trust there is the more business
there will be to do.