Business ethics and long-term profitability in competitive markets

¶ … survival within the competitive enterprise system requires the abandonment of personal moral standards. Underlying his thesis is the belief that profitability is somehow contradictory to individual morality. While there may be some validity to Grant's thesis for short-term profitability, the reality is that virtues such as honesty and courage, to name a few, are necessary to achieve long-term success, the ultimate goal of any business.

Companies can easily lie to win business, misleading prospects about product functionality and service. However, these misrepresentations are soon evident to customers as they begin using the product or service. This quickly translates into dissatisfied customers who can destroy the reputation of the seller by giving poor references and initiating law suits to remedy the situation. As the word gets out, the seller has greater difficulty attracting new business. If the customer abandons the product, the seller has problems generating a maintenance revenue stream that is necessary for ongoing profitability and in selling additional goods and services to the existing customer. The cost of customer churn can be quite high.

Numerous case studies in crisis management have shown that companies that have the courage to acknowledge fault and to act quickly to resolve the situation have a far better chance of getting beyond the crisis more quickly and economically than companies that deny responsibility. In the information age, it's increasingly difficult to avoid discovery of misdeeds. Sooner or later, the market will find out about the cover up. As a result, the company's reputation is more adversely affected and the liability for the situation is often times higher for sellers that did not have the courage to behave ethically.