The Importance of Business Ethics

It seems that hardly a week goes by without news of another scandal involving a prominent American business. Even organizations generally considered above reproach have had their dirty laundry hung and examined in the public square. Negative publicity, however, is but one result of unethical behavior. Others are reduction of profits; bankruptcy; morale problems; the increased costs of combating the a bad image; a decrease in employee efficiency; and public suspicion. When it comes to ethics education, the fundamental question all corporate employees must confront is not "Can I?" but "Should I?" For instance, while I "can" download music from the Internet without paying appropriate royalties, is this an action I "should" take? Generally, history has demonstrated that ethical misconduct ends careers more quickly and permanently than mistakes in business judgment. Furthermore, it is not always the true perpetrator who suffers because the one who "does as he was told", without fully considering the ethical consequences, often becomes the scapegoat when events turn sour. What's more, ethical lapses undermine the basic foundation of the free enterprise system. Lying and cheating are universally detested, and such conduct can indicate an underlying immorality that is presumed to extend to other business practices. To compensate for this lack of trust, there must be additional checks and balances, verification, and supervision that add time and cost to each transaction. Any business ethical system must also recognize that a failure to be conscientious at work can affect relationships with family and friends. Conversely, adherence to moral standards on the job can have positive influences on society by promoting strong ethical behavior in all aspects of life. Any ethics system presents a mixture of moral and economic rules and challenges. For example, while I can charge $2,000 for a generator -- that normally sells for $300 -- after a hurricane, is such an excessive charge fair? Then, of course, there is the question of enforcement and consequences. What is the appropriate penalty for an unethical act? Still another concern, perhaps the most vexing, are conflicts of interest. Should saving a company's good name have precedence over an individual's professional self-preservation? One solution is to require full and accurate disclosure of any potential conflicts to all parties prior to a transaction, thereby enabling all of the parties to scrutinize fully the terms of a deal. It has often been said that business ethics is not an attack on business, but rather its first line of defense. By building a strong set of ethics, educating employees about why they should adhere to those rules, a business can enhance its standing in both the public and private sectors. That, in the end, benefits us all. Michael Mares is a CPA at Witt Mares, PLC, headquartered in Newport News, Va. He chairs the Litigation Task force for the American Institute of CPAs Professional Ethics Executive Committee.