Favour of Ethics in Business: The Linkage

¶ … favour of ethics in business: The linkage between ethical behaviour and performance" by Upadhyay & Singh (2010).

The article has a rather broad set of stakeholders. The first of these is the general business community -- this includes all managers and decision-makers within business. Investors and shareholders are another stakeholder, because the authors are studying the link between ethics and performance, the latter being critical for shareholders. Ethics also affect the environment and the general public, which makes both of them stakeholders. Technically, one firm's performance will also affect that of its competitor, and its supplier and customers as well, so they are all stakeholders. Governments are always keen to get their fingers in pies, so governments tend to be stakeholders as well.

The authors are discussing the issue in general terms, and in this case they do not fixate on a single business. They are discussing the concept of business ethics rather generally, and therefore their discussion pertains to all businesses. There is no one individual firm at the center of the article.

The topic of the article is important, however, in the context of my professional life as someone who expects to spend a lot of time in the business world. I see that I need to consider how I will best perform in the course of business. As a manager, I will always be pressured into investigating how I can get the best returns for shareholders, and I feel ethical issues are often framed as tradeoffs between improving profits and acting ethically. What the authors are showing here is that this classic dilemma represents a false dichotomy, and that ultimately there is a lack of understanding of the link between ethics and performance. The authors are seeking to develop a better understanding of that link, and the reality is that ethical performance is correlated with financial performance. There are instances in the short run where we feel that perhaps the trade-off is negative, but ultimately, over the long-run the trade-off is positive. For me as a manager, this is an important lesson to learn. Not because I was prone to ethical lapse, but just because when you understand this link and can provide evidence it makes it much easier to be the ethical compass within an organization. Other managers might seek to frame a choice between ethics and performance, but I will be in a better position to guide the company in a positive direction with respect to this linkage.

The organizations I have observed have tended to be ethical, at least in general. Occasionally there are people, especially managers, who seem to lack an ethical compass. For an organization, it is important to foster an ethical culture, and doing so is a means by which the company can improve its performance overall. Deep down, it is understood that unethical behavior will eventually harm the company, but for some reason we seem to need a reminder every now and again.