corporate form of "the business corporation," its structure, prerogatives, and procedures, leads to ethical problems arising, or being difficult to resolve. Ethics in business has always seemed to be a struggle, because the main purpose of a business is to turn a profit, and for some businesspeople, that may be at any cost. However, after scandals such as Enron, WorldCom, and Bernie Madoff, among others, business ethics has emerged as an important part of a healthy business environment. The smart business corporation knows ethics and corporate social responsibility (CSR) are an important aspect of their daily operations, and yet, businesses still seem to overlook that ideal at the most inopportune times.
The Business Corporation
What is a business corporation? To begin a discussion on ethics, it is important to first define a business corporation. A business corporation is a company doing business that enjoys certain legal protections as a corporation. Usually, it is assumed to be a for-profit corporation, founded by three or more members, who sell shares of stock in the corporation to gain capital to operate. Of course, there are also non-profit, charitable, and even religious corporations, but for the most part, corporations are in the business of making a profit as their main business endeavor. There are some expectations for corporations besides making a profit, however. One business ethics writer notes, "The good corporation is expected to avoid perpetrating irretrievable social injury while focusing on its purpose as a profit-making organization" (Duska, 2006). The key to the successful business corporation is the ability to blend ethical and socially conscious operations with profit making, and as history indicates, that has been difficult to maintain for some corporations.
Historically, the first large-scale multinational corporations began in the late nineteenth century, which corporations such as John D. Rockefeller's Standard Oil. These corporations were not regulated by the federal government, and so, they turned to unethical practices such as monopolizing their businesses and driving smaller companies out of business, buying up their competitors, and buying other industries (such as the railroads) to keep prices high and their competitive advantage. The Securities and Exchange Commission formed to regulate and forbid these business practices, and laws were enacted to control corporate responsibility and business practices.
Two other author notes ethics and morality have wavered throughout modern history, and the attention paid to them by corporations has wavered, as well. They write, "By the late 1970s/1980s the emphasis focused again on morality, but with the social commitments of business corporations being a lesser part" (Mullerat & Brennan 2005). Today, ethics is an important aspect of many businesses, and consumers are becoming increasingly aware of how ethical companies are before they choose to do business with them. However, businesses still have many loopholes, as the many recent scandals with Wall Street, finance, and investors have shown. Throughout corporate history, there have always been scams, Ponzi schemes, and corporate ethical violations that indicate all businesses corporations do not feel the need to act ethically and morally as long as they are making a profit.
Ethical Foundations for Leadership
Ethical leadership lays the foundation for an ethical business corporation, because the leaders set the moral and ethical tone of the corporation. Leadership is all about being responsible and making tough corporate decisions, as well as managing the affairs of the corporation in its day-to-day operations. Ethical leadership is based on understanding the morals and ethics of the corporation and its stakeholders, but it also is based on decision-making, especially in situations of stress or corporate wrongdoing. Leaders must be willing to make difficult decisions and the process must be clear-cut and transparent, so there is no question on who made the decision and why it was made. Two authors note, "It must be possible, both during the decision-making process and after the fact, to see clearly who made what decision, whether decisions were made at the right level, and whether questions should (or indeed could) have been handled differently" (Bomann-Larsen and Wiggen 2004). Good leaders are never afraid to make a decision, or attempt to hand off the decision to someone else to shield themselves from blame.
Their stakeholders, stockholders, and staff also trust ethical leaders. The two authors continue, "Competent authority is also closely linked to the issue of trust. The more serious and difficult the situation, the more one needs to have trust in the persons and institutions making the key decisions on how that situation is to be handled" (Bomann-Larsen and Wiggen 2004). Trust is one of the keys to ethnic leadership, and it is a key part of forming a value-based culture in a corporation, as discussed below.
Ethical leaders must be trustworthy, not afraid to make tough decisions, and they must insist on these values in others throughout the corporation. They must have a strong sense of social responsibility, in that they recognize the environmental, political, and human aspects of doing business, and they make all attempts not to violate the rights and morals of anyone or anything they do business with or influence. For example, many corporate leaders demand exacting standards from their sub-contractors, especially if they are doing business in other countries. As an example, Levi-Strauss, the clothing company, has a code of ethics for all its foreign contractors that they must follow, including wages, workweeks, use of child labor, and other elements of business. If the contractors do not adhere to these standards, Levi-Strauss will not do business with them (Bomann-Larsen and Wiggen 2004). This is an example of a socially relevant corporate policy, but it also reveals the ethical leadership within the company who demand high standards for their own company and those who do business with them.
Creating Value-Based Cultures
What does it take to create a value-based culture in business? Ethical leadership, as noted above, is a necessity for creating an ethical, value-based culture in any organization. However, a corporation must operate with certain values and ideals in order to create an ethical culture, and some of these values include integrity, trust, and openness. If a corporation embraces these values and shares them with others, they are on the way to creating a value-based culture within the organization that will eventually trickle down to others who engage in commerce with the organization, somewhat like the Levi-Strauss example discussed above.
Part of the ethical business climate is recognizing that some business decisions or situations may have dual outcomes. Authors Bomann-Larsen and Wiggen define this aspect as "double effect." They write, "Double effect refers to the fact that actions often have more than one outcome, i.e. actions may produce side-effects. The phenomenon of double effect becomes a moral problem when the side-effects are not desirable, and especially when they are harmful for those affected (Bomann-Larsen and Wiggen 2004). Therefore, part of developing a value-based, ethical culture for a business depends on making ethical decisions, but it also depends on anticipating negative side-effects and reacting to them accordingly.
Developing a value-based corporate culture is more than simply developing a company code of ethics. It is ensuring that the company actually adheres to that code, and that the staff and business associates know and understand the corporate values at all levels. Part of this is communicating those values, but the corporation also must strictly adhere to those values in all its dealings. If it does not, the integrity of the corporation will suffer, and its trustworthiness will be questioned. A code of ethics can be modified if necessary, but modifying the ethics of a business to serve some questionable purpose is how corporation get in trouble with public perception and their own morality.
Ethical communication is a vital aspect of the ethical corporation, because it is through communication that outsiders perceive the corporation, and how leadership communicates the values and morals of a corporation to stakeholders and staff. Ethical communication, like ethical leadership, depends on a core set of values and best practices. For example, ethical communication depends on good listening techniques, which are a vital aspect of communication. You cannot address an issue if you do not understand it, so good listening is key. A written communication policy is also necessary for transparent communication, and it must be standardized between all the operations of the corporation, no matter where they are located. Most experts also recommend that the written policy must cover both external and internal communications for the most ethical and transparent communications possible.
Even more important, the corporation leadership must understand and support the policy, and make it clear they support the policy. Another author notes, "It goes to the top. It must come from the culture of the corporation, which is set by its executives" (Dilenschneider, & Salak, 2003). Communication is the root of any organization, so any ethical organization must develop a sound, ethical communication policy if they want to be taken seriously as an ethical and moral organization.
When Businesses go Bad
The list of corporations who flout business ethics…