2013

Business Ethics
Creativity in Business Consulting
The purpose of this work is to inquire on business ethics, to what extend it is possible to be fully ethical in the business world and in management. In the second part of this essay I will show the main ethical problems and pressures that the consultancy industry is facing and how they can be answered, addressed and overcome.

Ancuta Morarasu University of Bucharest 11/16/2013

ETHICS IN BUSINESS CONSULTING

CONTENTS
To what extent is it possible to be fully ethical in business and in management? ..................................................... 3 What is ethics? ................................................................................................................................................... 3 What are the main aspects you have to address for business ethics? .................................................................. 4 What are the main aspects you have to address for ethics in management? ....................................................... 6 What are the main ethical pressures facing the consultancy industry and how might these be addressed and overcome? ............................................................................................................................................................. 8 Conclusions ............................................................................................................................................................ 9 Is the ethical path good for business? ............................................................................................................. 9 Bibliography ......................................................................................................................................................... 10

TO WHAT EXTENT IS IT POSSIBLE TO BE FULLY ETHICAL IN BUSINESS AND IN MANAGEMENT?

WHAT IS ETHICS ?
The term ethics has a lot of meaning s and especially a lot of nuances. Any discussion about ethics will always have a very strong relativity and subjectivity to it, as everyone understands it differently and no clear and unanimously accepted definition of ethics exists because right and wrong varies widely. Ethics has been defined, however, as the study and philosophy of human contact with an emphasis on the distinction of what is right and what is wrong 1. The American Heritage Dictionary offers these definitions of ethics The study of the general nature of morals and of specific moral choices, moral philosophy and the rules or standards governing the conducts of the members of a profession.2 When talking about ethics, there some basic coordinates: decision making, conduct, values and judgment. One difference between a usual decision and an ethical one lies in the point where the accepted rules no longer server and the decision maker is faced with the responsibility of weighing values and reaching a judgment in a situation that is not quite the same with their previous experience. The field of ethics has a lot of prolific authors who articulated theories on right and wrong behavior, moral behavior and moral language. Socrates, the Ancient Greek philosopher 3 focused on answering the What is the greatest Good? question, whilst a more modern great thinker, Immanuel Kant 4 argued that the right and wrong are focused on Duty which iss ues a command, the categorical imperative, that must always be obeyed. Based on my life experiences, many decisions, no matter if they are taken for our personal or professional lives, are driven by a certain fear of negative consequences. Without doubt, at least several times we have had one of the following questions in our minds:

Odies C Ferrel, John Fraedrich, Linda Ferrel, Business Ethics: Ethical Decision Making and Cases, Houghton Mifflin Company, 2009 2 http://www.ahdictionary.com/word/search.html?q=ethics&submit.x=51&submit.y=20 3 Wikipedia article on Socrates --> http://en.wikipedia.org/wiki/Socrates 4 Wikipedia article on Kantian Ethics --> http://en.wikipedia.org/wiki/Kantian_ethics 3

What if Ill get in trouble? What if its against the law? Will this get me fired? What if people wont like me?

There are also situations in which people are left with a free choice and none of the consequences of the paths they choose has a particularly negative outcome attached to them. Are people egoists in these kind of situations, if they try to pursue a personal benefit? Should they have a more utilitarian approach and try to maximize the benefit of the groups of people who are also impacted with these decisions? These are ethical dilemmas, when someone is left to do what they feel.

WHAT ARE THE MAIN ASPECTS YOU HAVE TO ADDRESS FOR BUSINESS ETHICS ?
As ethics is the code of moral standards by which people judge the actions and behaviors of themselves and others, I believe that business ethics bring those morals standards into the workplace or, as the consulting firm Applied Corporate Governance explains, business ethics is: the application of a moral code of conduct to the strategic and operational management of business.5 Ethical conduct has become a major concern in the business world. Abusive behavior, harassment, bribery, accounting frauds, conflicts of interest, defective products or employee thefts are a major evidence of a declining ethical behavior. The consequences of such actions and conducts are more than obvious, as you can see the case of Enron 6 for instance. Business ethics is relevant both for the conduct of individuals and to the one of an entire corporation. Through the passing of time, ethics in the business world has been influenced by the norms and regulations of each historical period, and thus has evolved. Companies in the modern era have started highlighting their ethical rules especially in the late 1980s and early 1990s in order to distance themselves from the business scandals of that period such as the savings and loans crisis. The ethics of a company apply to each and every functional business area and department of that specific company.

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www.applied-corporate-governance.com

http://content.time.com/time/specials/packages/article/0,28804,2021097_2023262_2023247,00.html 4

Fairness in trading practices, sales and marketing practices, internal or external audit or trading conditions are related to ethics in finance and accounting whereas issues as fair compensation, discrimination by age, sex, sexual orientation, race, religious beliefs, weight or physical attractiveness fall under the umbrella of human resources management. I strongly believe that companies, disregarding of their sizes should have official documentation on their ethics and corporate policies or corporate statements. They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters7. It is also true that many entrepreneurs that find themselves at the beginning of their road in the business world may find themselves taking decisions regarding product quality, product pricing, marketing and advertising, hiring practices or sales techniques or even pollution control and the values that they learned from home, school or religion may not apply or may not provide specific guidelines for these complex business decisions. A very interesting fact is the one that some companies have formally appointed ethics officers called compliance or business conduct officers. A very important catalyst for the creation of this role in companies was the series of scandals that the United States faced in the mid 1980s, scandals related to frauds, corruption and abuse. This also led to the foundation of Ethics and Compliance Officer Association. 8 As business consultants it is critical to bear in mind that companies with great ethics enjoy great customer retention and loyalty on the long term, which obviously translates into good sales, return and profit. Loyal customers become unofficial sales representatives for a company referring the companys products to family, friends and acquaintances. Business ethics are often guided by law, while other times provide a basic framework that businesses may choose to follow in order to gain public acceptance. With the raising globalization it is important for companies to have ethic guidelines that are applicable to different countries regardless of the religion or juridical system of those specific countries. Everything a business does affects someone, somewhere and I am not only talking about its shareholders, and that someone deserves consideration from the business that affects them and impacts their lives.

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http://en.wikipedia.org/wiki/Business_ethics http://www.theecoa.org/imis15/ECOAPublic/ 5

Also, lets not forget that ethical behavior and corporate social responsibility can bring a lot of other benefits as making employees wanting to stay with the firm, reducing recruitment costs or enabling the company to attract talented employees and therefore increasing productivity. Investors are also attracted by a trusted source of sure income and they keep the firms share price high, and thus protecting the business from being taken over. Following the same track of logical assumptions, unethical behavior or the lack of CSR 9 will surely damage a firms reputation and make it less appealing to its stakeholders 10. Another important aspect of business ethics is the one that, while different industries and different companies have different ethical concerns 11, there are also ethical questions that know no boundaries irrespective of the location, size or industry of the company. Some of the general ethical concerns are the conflict of interest, marketing tactics, public or government relations or dealing with the companys employees, from the top management to the newest hires.

WHAT ARE THE MAIN ASPECTS YOU HAVE TO ADDRESS FOR ETHICS IN MANAGEMENT?
Ethics in management may refer to the ethical treatment of employees, stockholder, owners and/or the public by a company. This is a key part of healthy management. From the point of view of an internal customer, ethical behavior improves the atmosphere at work, keeps the employees motivated and sets a good example for them. From the point of an external customer, ethical behavior improves the public image of the company and adds to the overall development of ethical behavior in the society12. As I wrote at the beginning of this paper, ethics are evoked with a great deal of importance, when taking decisions, and the following criteria must be considered when taking an ethical choice: Legality; Fairness; Effectiveness.

Corporate Social Responsibility Cadbury Schweppes case study in The Times 100 business case studies http://businesscasestudies.co.uk/cadbury-schweppes/ethical-business-practices/#axzz2kp1enF2n 11 Manufacturing industries may have issues with clean energy, for example, while retailers may have problems with ensuring that their supply chains live up to their ethical standards 12 http://en.wikipedia.org/wiki/Ethics_in_management
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Almost every decision that is made on a daily basis involves an ethical decision. Managers must keep this in mind at all times. By setting a good ethical example for other employees, managers can easily encourage all employees to follow the same ethics. Some companies offer managers specialized management ethics courses that must be completed prior to job acceptance. 13 Managers are also responsible for upholding the ethical code of a company and instructing its employees how to do as well. Whenever a compliance or ethics problem is detected within a company, most probably the management is held responsible and are asked to respond quickly and appropriately in order to minimize the impact the problem could have on the bu sinesss profit or public image. A compliance or ethics program has the benefit that it usually easily identifies the boundaries legal and ethical behavior. Such a system inside a company can alert the management when the organization is getting close or crossing the boundaries established by the legal and ethical norms. 14 In my opinion, following ethical practices is a continuous process and not an action, its a matter of values and associated behaviors, they do produce deliverables as policies and procedures, codes, meeting minutes or budget items, but the most important outcome of these deliverables is that the produce processes of reflection and dialogue. For a manager it is crucial to make ethical decisions in groups and to make them public too. Including diverse interests in the decision-making process will deliver a higher quality decision and will ensue a sense of participation and adherence to the involved employees. The role of ethics in management is also dependent on the level of responsibility the company is willing to take. The pro-active mode would characterize a company that believes strongly in its mission as moral (or at least for the benefit of society). It would respond as a trend setter to some of the ethical dilemmas. The re-active mode, would be the companies though aware of social responsibility, respond to immediate situations rather than anticipating them. The passive mode leads the company to deviant behavior by refusing responsibility 15. The task of creating a business that has ethical integrity is no small one. In order to do so, managers must recognize the companys stakeholders: employees, clients, the owners of the
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https://www.boundless.com/management/ethics-in-business/maintaining-ethical-standards/managers-role-inethical-conduct/ 14 Dean Bredeson, Applied Business Ethics: A Skills-Based Approach, South-Western Cengage Learning, Mason, Ohio, 2009
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http://www.philodialogue.com/12.html 7

companys stocks, its competitors an even the community at large. An aspect a good manager needs to take into account is that sometimes profit needs to be sacrificed for the greater good of the companys stakeholders. 16

WHAT ARE THE MAIN ETHICAL PRESSURES FACING THE CONSULTANCY INDUSTRY AND HOW MIGHT THESE BE ADDRESSED AND OVERCOME?
Ethics have a great deal of importance when giving consultancy services because of the high level of trust that organizations grants to consultants and because of the access that many consultants have to the confidential and proprietary inner workings of the firms that employ them. Good and ethical consulting services d it generates antecedents of trust in third parties antecedents because trust is more technically related to the belief in operative capabilities and of actual behaviors. When studying ethics in business consulting we ask ourselves: Is the business world in which consultants operate becoming increasingly unethical? It is hard to give a correct answer although it certainly seems like it, part of this is because public awareness on the subject, media reporting etc. In the next paragraphs I will highlight a few guidelines, which, in my opinion should be taken into account by every successful consultant, a consultant that understands that ethics means a healthy path in the business world. A consultant should never make promises they cannot keep even though they want to impress a potential customer with their capabilities. Not only this is not ethical, but it also sets themselves up for failure. If promises are made it is only ethical that they should be addressed as established. If the consultants promises cannot be kept the only best way to solve this dilemma is to inform the customer and try and find a cure for the bad outcome. Honesty in business consulting is a fundamental value. The truth should never be sugarcoated as the results of your work as business consultant are only based on facts and figures. Also, the customer pays a lot of money for your experience and knowledge, the only correct and ethical thing to do is not lie to them. Under no circumstances should a consultant misuse confidential information. Part of a consultants work is to analyze and process proprietary information which, if released, could lead to serious financial damage for the client. The trust a client placed on the consultancy firm should never be violated.
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Norman E. Bowie, Meg Schneider, Business Ethics for Dummies, Wiley Publishing Inc., Hoboken, NJ, 2011 8

Last but not least, never break the law. At times, it may be possible for a client to ask the consultant to do something that not only is not ethical but also blatantly illegal. The only right thing to do in these kind of situations is to terminate any contract and/or relations with the respective client. 17

CONCLUSIONS
IS THE ETHICAL PATH GOOD FOR BUSINESS? One way to answer this question is to measure and explore the link between companies known as good, socially responsive and financial performance. Before someone invents an alarm that buzzes whenever you contemplate taking a unethical decision, people have to rely on their judgment, which is particularly hard in the business world when dealing with pressure from inside and outside the company. From my perspective any unethical and amoral actions, beliefs and behaviors will only have a negative impact on a business in a long run. New companies need to accept and learn from the companies known for their corporate responsibility and ethical decision-making. After all, ethics in business are more than just a moral compass, they are a recipe for success. As a final guideline for ethical behavior in the business world, no matter if you are an entrepreneur, manager or business consultant, you should always take responsibility for your own actions. Nobody likes to play the blame game so taking responsibility involves the following of some very important steps: Acknowledge the problem; Offer a sincere apology; Repair the damage; Take steps to avoid the repeating of the problem.18

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Bob Nelson, Peter Economy, Consultancy for dummies, Wiley Publishing Inc., Hoboken, NJ, 2008 Norman E. Bowie, Meg Schneider, Business Ethics for Dummies, Wiley Publishing Inc., Hoboken, NJ, 2011 9

BIBLIOGRAPHY
I. Books
1. Bob Nelson, Peter Economy, Consultancy for dummies, Wiley Publishing Inc., Hoboken, NJ, 2008 2. Dean Bredeson Applied Business Ethics: A Skills-Based Approach, South-Western Cengage Learning, Mason, Ohio, 2009 3. Norman E. Bowie, Meg Schneider, Business Ethics for Dummies, Wiley Publishing Inc., Hoboken, NJ, 2011 4. Odies C Ferrel, John Fraedrich, Linda Ferrel, Business Ethics: Ethical Decision Making and Cases, Houghton Mifflin Company, 2009

II. Web links

1. http://www.ahdictionary.com/word/search.html?q=ethics&submit.x=51&submit.y=20 2. http://en.wikipedia.org/wiki/Socrates 3. http://en.wikipedia.org/wiki/Kantian_ethics 4. www.applied-corporate-governance.com 5. http://en.wikipedia.org/wiki/Business_ethics 6.http://content.time.com/time/specials/packages/article/0,28804,2021097_2023262_202324 7,00.html 7. http://www.theecoa.org/imis15/ECOAPublic/ 8.http://businesscasestudies.co.uk/cadbury-schweppes/ethical-businesspractices/#axzz2kp1enF2n 9. http://en.wikipedia.org/wiki/Ethics_in_management 10.https://www.boundless.com/management/ethics-in-business/maintaining-ethicalstandards/managers-role-in-ethical-conduct/ 11. http://www.philodialogue.com/12.html

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