Is business ethics a mere slogan?

Copious literature exists on business ethics. However, many organizations in Nigeria have, in diverse ways, considered ethical behaviors as precepts hidden in the corners of the academic environment; or as one of those ‘nice-to-have’ principles. Business ethics/ethical behavior or lack of it, have costs, either implicit or explicit; and implications. 

As a background discourse, I would like to highlight some of the costs of non-adherence to ethical practice in business.

First, persistent unethical behavior affects an organization’s credibility. However hard it seeks to mask its credibility deficit through new advertising campaign, enhanced corporate social responsibility, etc, it may likely lose key customers and lose revenue/market share, in addition to huge expenditure required to restore its battered image.   

Second, organizations that encourage the “win-at-all-cost” mentality, especially through ‘crazy targets’ and employees adopting extreme measures to win business (where controls and procedures are ignored) tend to lose brilliant employees who play by the rules, but who are frustrated and lack motivation on account of the reward of so-called ‘high performers’ who behave unethically.

Third, an organization where unethical behavior is encouraged creates an atmosphere of distrust, anger, and mutual suspicion among employees. The unrestrained form of competition that pervades such environments breeds these anti-social and anti-progress behaviors. How such an organization seeks to attain long-term optimal performance would likely remain a mirage.

Fourth, promoting unethical business practice may likely create what I have termed “the greed sepulcher”. By this, I mean the creation of galloping layers of greed, where on account of making personal gain to the detriment of the sustainable existence of the organization employees throw caution to the wind and turn the organization to a bottomless via their crass acquisition and personal aggrandizement. The failure of certain commercial banks in recent Nigerian history, especially in 1995 and 2009, are pertinent instances.

Fifth, unpleasant legal battle is another fall-out of unethical behavior. In the USA, or instance, federal and state governments indicate rules for business engagement and defaulters are usually punished via heavy fines and penalties. An example was Beech-Nut Nutrition Corporation, which, in 1987, bore a cost of $25million in a combination of legal expenses, fines, and revenue loss for selling adulterated juice. In Nigeria, several companies across diverse sectors have had to pay regulatory fines resulting from unethical behavior, which almost crippled their organizations.

Also, an organization’s products could be boycotted on account of unethical business practices.

Seventh, stocks of companies noted for bad behavior could also drop as a reaction to their undesirable conduct. This was the case of Worldcom which led to its 2002 bankruptcy declaration after a persistent drop in its stock price on account of securities fraud and filing false regulatory returns.

In highlighting the benefits of upholding ethical behavior in organizations, I would use an existing Nigeria-based multi-disciplinary consulting firm, KPMG Professional Services (formerly known as Arthur Andersen) as case study. Having started my career in that firm, I could explicitly affirm that the organization had always carried aloft the flag of business ethics.

As a starry-eyed, young consultant in AA (as the firm was called at the time, being the acronym of Arthur Andersen), business ethics was reinforced right from the selection process. You needed not to know anyone in the organization to be employed after the rigorous selection process. Countless of employees at the time also did not have any ‘internal influencers’.

The fully-residential training regimen for new hires was also an avenue to inculcate business ethics in the staff. From the diverse lectures and talks delivered by internal and external facilitators, ethics was at the forefront.

Most importantly, for me, were the actual activities I conducted as an employee of the firm. For instance, when competitor-firms, especially those locally-owned, indulged in obvious malfeasance to win business, an AA staff was condemned to behaving ethically and losing the business! The partners and the entire firm made no fuss about losing lucrative business leads owing to the resistance to “play ball”; rather we strictly “played by the rules”. For this attitude, which was a firm-wide culture, the firms’ employees were the butt of jokes among certain stakeholders. But the firm stuck to its principles.

There was a period in the life of the firm when core public sector projects were a ‘no go area’ owing to the unusual demands of that sector. Yet, the firm never buckled in its avowed commitment to ethical behavior.

The firm never adopted the ‘join them if you cannot beat them’ cliché, which most organizations give as an excuse for engaging in unethical behavior. Some organizations even suggest that our (Nigerian) operating environment was peculiar, so they must pay bribes to get things done. Adopting that approach is not sustainable; however rosy the journey might initially appear.

Today, that firm has maintained its status as the leading global consulting firm based in Nigeria, just as it has continued to attract the best talents available. It has also maintained its wholesome integrity, has remained a bastion of business ethics; and has since expanded its business to wide-ranging areas including core public sector.

Using Arthur Andersen/KPMG in Nigeria as a basis, it became so clear that whereas adhering to business ethics in the face of pressure in the operating environment might be painful and inconvenient; in the long term, it is rewarding, as it enables assured profitability and time-tested performance for the organization at a time when unethical organizations may have gone into oblivion.

Overall, an organization that promotes and adopts ethical business practices is likely to have better goodwill and publicity, attain enhanced share price, be run in a sustainably profitable manner, accrue competitive edge resulting from brand differentiation, enhance the legitimacy of management; and achieve a higher possibility of sustainably maintaining its going-concern status.

Tajudeen Ahmed