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10 ethical decision rules to bullet-proof business

November 28, 2016

ethics-dan-masonMany years ago I was shocked to learn that ethics is not a mandatory class in most business schools. Surely, if they quantified the cost of ethical lapses like mortgage bundling, Enron, sexual harassment suits, etc. they would see that ethics are about the bottom line? Surely, they could see that a proactive ethical practice can create value? Attract and retain employees?

Apparently, I am an incorrigible optimist.

Recently, I was chatting with a university finance professor who told me he wasn’t sure there would be enough content for an ethics course lasting an entire semester. I  couldn’t believe it so I pressed on a bit. How could he say that when there are PhDs in ethics? He countered that that is more philosophy… not business. Undeterred, I asked him couldn’t ethics be taught along with critical thinking? decision making? value creation for sustainability? He seemed unmoved.

At the heart of the matter is the perception that ethics is just “doing the right thing” or signing a code every year – sometimes more for the protection of the organization than the alignment of behaviours.  Yet ethics are a habit – a systematic assessment of all aspects of your business. They involve self-interest, risk assessment and economic efficiency as much as goodwill. At a minimum, you should find ethical discussions at the board table, at senior management meetings, in human resources, compliance, risk management, and in the public relations department. Shouldn’t there be a common framework that reflects the values of the organization to guide these discussions?

An ethical practice applies to every aspect of business.

In 1995, Larue T. Hosmer[1] synthesized ten decision rules established by the great moral philosophers that – applied in sequence – provide deep insights for organizations. By systematically taking into account the legitimate interests of all stakeholders, you can identify opportunities to build trust in your organization. The analysis does not require funding or elaborate strategies. Just the discipline and the courage to start asking the right questions. Wouldn’t an exploration of these rules along with case studies (the news is full of them) be sufficient for business students?

Ready? Explore Hosmer’s ten ethical principles.

  1. Self-interests (Protagoras). Do your actions in the long-term serve your interests and those of the organization? Where does short-term thinking create pitfalls? Is immediate activity balanced with progress on long-term plans? Does compensation reward short-term performance and long-term accomplishments? Are funds frittered away at the expense of larger long-term investments? What could improve?
  2. Personal virtues (Plato and Aristotle). Are your actions honest, open, and truthful? Are there any actions you wouldn’t want to see reported in the media? Do you report regularly on meaningful metrics? Do you share information freely? Do you encourage constructive feedback? What barriers exist to greater openness with all your stakeholders? How could you overcome them?
  3.  Religious injunctions (St. Augustine). Are your actions kind? How do you treat your employees? Describe your community relations. What actions show kindness to your customers? Can you identify opportunities internally or externally to be kinder? Are there people or communities that need your services that you are not serving? How could this change?
  4. Government requirements (Hobbes and Locke). Are your actions legal? Are you complying with the bare minimum standards or do you strive to meet the full intent of legislation and regulation? Where do you see room for improvement?
  5. Utilitarian benefits (Bentham and Mill). Do your actions result in greater good than harm to society? Do your operations cause harm in any way? Do your actions benefit many or few? How sustainable is your organization? What could you do to enhance wellbeing among employees, customers, communities and other stakeholders
  6. Universal rules (Kant). Would you be willing to see others in a similar situation take the same actions you are taking? Take the perspective of an employee, a customer, a supplier, a partner or a competitor: Do you like how you’re treated? What could change?
  7. Individual rights (Rousseau and Jefferson). Do your actions respect the rights of others? How diverse is your board? Your leadership team and workforce? Are jobs and premises accessible for people with disabilities? Do you respect intellectual property? Where could this improve?
  8. Economic efficiency (Adam Smith). Do your actions maximize profits – within legal and market constraints? Do you take into account external costs? Are employees engaged and eager to find savings and improve processes? Does everyone know how they contribute to results? What impedes maximum efficiency?
  9. Distributive justice (Rawls). Do your actions harm the underprivileged in some way? How are profits and rewards distributed? How are promotions handled? Does your success alleviate or exacerbate inequities? Externally, are some profiting at the expense of others? Does the community benefit from your presence? Where do “fairness gaps” exist? How could they be addressed?
  10. Contributing liberty (Nozick). Do your actions interfere with the rights of others for self-development and self-fulfillment? Are employees being coached to their full potential? What development opportunities do you offer? How do you encourage uniqueness? Creativity? How could your organization contribute to the self-fulfillment of employees, customers, investors, or other stakeholders?

Taking a deep dive on ethics not only builds trust within and beyond an organization, it can create new relationships, engage employees, improve processes, enhance your reputation and spark innovation. Are we only giving lip-service to these critical dimensions of business?

In this era of “post-truth” (I hate to even write that), where we favour fake news rather than real journalism, we need to vastly improve our understanding of ethics and its importance to business. We can start in the class room.

Do you have an example to share? If so, please leave a comment.

[1] Hosmer, L. (1995). TRUST: THE CONNECTING LINK BETWEEN ORGANIZATIONAL THEORY AND PHILOSOPHICAL ETHICS. Academy Of Management Review, 20(2), 379-403. doi:10.5465/AMR.1995.9507312923

 

 

One Comment leave one →
  1. November 29, 2016 1:17 pm

    When all is said and done, ethics involves the way we treat other human beings.

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