Tuesday, October 13, 2015

The Crossroads of Ethics

“It takes less time to do things right, than to explain why you did it wrong.” – Henry Wadsworth Longfellow

Quite aptly, the statement above sums up the importance of doing the things right, what we call an ‘Ethical Business Practice’. Ethics in business can be compared to the Sun in our solar system. Like all the planets revolve around the Sun, businesses must revolve around, and absorb the energy from Ethics; else they’ll fall into a Black hole of defamation and losses. With the world becoming a marketplace, and the competition growing day by day, following the path of business ethics has become all the more imperative. While it is quite easy to slip into unethical practices, which many businesses resort to in order to grow, sustainability of a business is directly correlated to the moral values and promises the brands carry towards their consumers.

Reputation is one of a company’s most important assets, and one of the most difficult to rebuild, should it be lost. There are examples of blatant, non-ethical behavior, and probably one of the most high profile ones, is the Enron collapse. Enron, once a sleepy natural gas pipeline company, grew to become the nation’s seventh largest publicly-held corporation. But its shoddy business practices, aided by bankers and advisors feeding from the gravy train, brought down the company in December 2001. Their stock dropped from $70.00 a share to $0.25 a share within a year. Altogether, 16 former Enron executives including the then CEO Jeff Skilling had been sentenced to prison (Source: Forbes.com).

Enron’s heyday has long ended. But its lessons will long endure. Surely, if there are profits to be made, some type of scheme that attempts to skirt the law or even cross boundaries will occur. It’s been that way throughout history. But with each passing scandal, new rules and codes emerge that surpass those of the past. And while Enron won’t be the last case of corporate derelictions, its tumultuous tale did initiate a new age in business ethics. Another example from our very own country is the loss of face and worth Nestle India had to suffer recently, following a row on adulteration. Struck by an exceptional item charge of INR 451.6 crore on account of withdrawal of stocks of Maggi noodles, Nestle India reported a net loss of INR 64.40 crore for the second quarter ended June 30, 2015, — its first quarterly loss in at least 17 years( Source: The Indian Express).

Ethical behavior and corporate social responsibility can bring significant benefits to a business. For example, they may:

  • Attract customers to the firm’s products, which means boosting sales and profits
  • Attract good talent and retain employees, reduce labor turnover, and therefore, increase productivity
  • Attract investors, keeping the share price high, thereby protecting the businesses from takeovers
- Mr. Sumit Chakravarty
  Faculty, INLEAD 

Images Courtesy: Google Images 

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