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Is There A Connection Between Corporate Ethics and Customer Relationships?

Dr. Johnny D. Magwood | Mar 15, 2011 588 views 2 Comments

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Every corporation should be adamant about developing and sustaining an ethical business culture. Moreover, corporate executives must demonstrate ethical examples and ensure their employees follow their behaviors. As asserted by Mulki, Jaramillo, and Locander: “there is also an increased awareness that unethical behaviors, even when they are legal, can damage a firm’s image and reputation, resulting in customer defections, lost employee morale, and employee turnover”. A firm’s actions must not only be right, their actions must also look right. Practitioners have determined that when firms observe a formal code of ethics, with high standards, the codes and employee behaviors translate into long-term customer relationships and loyalty. In particular, when effective ethical codes are in place, a climate conducive to job satisfaction and organizational commitment are experienced by sales personnel – those who have a major relationship with end-use consumers.

The cliché of “employee empowerment” should also carry with it an ethical philosophy. As such, there are several positive business results that stem from ethical and empowered employee behaviors: productivity, innovation, and consumer loyalty. Since corporate ethics have profound implications on business performance, companies should establish universal ethical behaviors to encompass every stakeholder: employees, suppliers, and consumers. Cullen, Praveen, and Victor expressed the works of Schwepker; who “found that stronger enforcements of ethical rules and codes were positively related to organizational commitment”. Consequently, the best performing firm’s practices are: maintaining the appropriate ethical organizational climate and motivating members to believe and act in a manner that fosters good decision-making throughout the enterprise. To effect good moral and ethical change, top management must commit to establishing an environment where ethical behavior is the norm and is valued. Why? Because consumers can and do send a message to unethical firms by partitioning their relationships with immoral companies. So, is there a connection between corporate ethics and customer relationships – you bet!

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2 Responses to Is There A Connection Between Corporate Ethics and Customer Relationships?

  1. Andrew Rudin March 16, 2011 at 9:48 am (861 comments) #

    Johnny: great that you bring this up. Ethics–or their lack–is one of the greatest selling risks a company faces. Otherwise smart executives who inherit great brand equity, or build it themselves, can demolish it overnight through just one wayward, misguided employee. Sometimes customer goodwill and trust can never be recovered. Sometimes it can take many years to resurrect. I have written many blogs on the topic of ethics, but two that might be of particular interest to your readers are:

    1. Pfizer’s Ethics Violations Hurt All of Us, and

    2. On My Honor as a Salesperson: Why Sales Ethics Matter

  2. Dr. Johnny D. Magwood March 16, 2011 at 3:20 pm (1 comment) #

    Hello Andrew,

    Thanks very much for your thoughful comments and associated blogs. We are definitely aligned on the values and consequences of corporate ethics or lack thereof. I plan to post more on corporate ethics – thanks for the engagement.

    Johnny

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