Certainly the answer depends on your point of view. And for whom you are trying to create or destroy value. You could be trying to create value for your company or destroy value for your competitors (colleagues and companies). But your point of view may not be right or ethical.
Definitively, unethical practices and corruption are not correct nor acceptable. They may be convenient. They may be a short cut to ‘success’. They happen because of greed, or laziness or a combination. Sometimes, it is inherent in the character of the executives or the company (read owners). Sometimes executives are pressurised to bend the rules or the law.
Sometimes executives bend company rules, by allowing their employees to take special privileges when the rules do not allow it. As simple as flying when only train tickets are allowed. Or letting the wife travel to a destination where the husband is, instead of his coming home (no extra cost to the company, no harm done). These are minor infractions. Often overlooked. Judgment is required in these (minor) cases.
The major problem is one of being involved in corrupt practices, such as making pay offs for getting contracts, or getting ahead. No one will admit this is correct but hide behind we have to do it, others are doing it, or we have to get ahead, or it is convenient to do so; it happens because of not caring enough, a chalta hai attitude or just being cussed.
My belief is that if businesses, owners and executives decide to fight unethical practices through associations and the press, they will be successful, and value will be created for the larger population than just for the corrupt. It is interesting to read what J. Vinayan in IMJ wrote:
‘Incidence of corrupt or unethical behaviour in an organizational setting is not fortuitous. Whether we are looking at corruption in the HR function or in any other function, it is very often institutionalized, well rationalized and entrenched in the system. Extortion and bribery are much more profitable and entail much less risk when they are organized and disseminated. The vertical and horizontal integration of corruption (at different levels and in different offices) makes for optimal return, reduces the likelihood of being caught and facilitates protection. In addition, corruption is contagious: it creates complicity, it acts as a “demonstration effect” vis-a-vis the other organizational members, provides information about opportunities and the means to exploit them, and creates an atmosphere of impunity. In the end, individual corruption may degenerate into a general situation of favour-currying, subservience, and “protection.’
If the corrupt can gang up, why cannot the non-corrupt? Are we ninnies, or complacent or at heart, corrupt? Or we just don’t care, and enjoy being bullied and lorded over by corrupt people?
One step is for companies to draw up ethical behaviour rules and enforce them. Industry associations must start programs to fight corruption and corrupt people as a group. It is important for executives not only to know what is right but to do the right things.
A Starwood study suggests that 99% or executives think they are honest.
82% cheat at golf
82% hate those that cheat at golf
72% believe golf and business behaviour parallel each other
Ethical behaviour not only pays, it is the right thing to do and essential to a productive, fair and virtuous society, to paraphrase Archie. B. Carroll in his book, Business Ethics. In reverse, see the cost and destruction of value of unethical people to thousands of employees and society of Tyco, Enron, Arthur Andersen and Indian companies you all can name.
Customer loyalty and trust are linked to the Values of a company and their ethics. Create Value, not destroy it.
Would love your comments and help. We are happy to help others in education and executive education on courses in Value Creation.
Hi Gautam: Thanks for covering this topic – it’s an important one. There’s nothing more corrosive to corporate value than bad ethics. Unlike most other corporate risks, ethical lapses can be solely responsible for a company’s demise.
Unfortunately, it’s a risk that many executives don’t recognize – or don’t want to recognize. “Oh, that kind of thing could never happen here!” But no company is immune. What makes bad ethics particularly insidious is that they don’t start out that way. Managers, employees, or CXO’s don’t usually start out by saying, “this is not ethically pure, but we’re doing it anyway.” Many times, they start out small, with rationalizations for behavior. For more on this, see The Fraud Triangle http://www.acfe.com/fraud-triangle.aspx. , or my articles, Big Governance Will Thwart the Next Corporate Ethics Disaster, and Announcing the 2015 Sales Ethics Hall of Shame.
Could executives at VW have rationalized their chicanery through a belief that the carbon regulations they were mandated to comply with were unfair to begin with? This idea will not be broached in the litigation, but it’s one that I’m certain was discussed internally.
Andy, thanks.
I like the Hall of Shame.
But most business people ignore this…
Much has to do with apathy
Hi Gautam: you bring up an interesting question that is worth exploring. I am not at all certain that apathy is the overarching reason that unethical behavior spreads in companies. In many cases I have examined, employees saw dishonesty internally, and blew the whistle. That happened at one company where I worked, which I wrote about in an article, On My Honor as a Salesperson: Why Sales Ethics Matter.
In the case of Pfizer’s dishonesty in marketing Bextra, the case was exposed through a salesperson who notified the US government, which prosecuted a large settlement from Pfizer. Of course, it helps that in the US, there are whistleblower laws that enable employees to receive monetary rewards. That provision can protect the whistleblower when getting fired, which is an almost inevitable outcome from going public with allegations of corporate misbehavior. (Notably, some companies, such as Honeywell, have written policies restricting that outcome if employees expose what they consider fraud or wrongdoing.)
In other cases, such as Wells Fargo, which was one of my 2016 Hall of Shame award winners, employees are browbeaten into hitting performance targets, and it’s not always clear what’s legal and what’s not. It’s hard to expect a 30-year-old single parent to jeopardize her job over a reporting a practice that she’s uncomfortable with, but might not know is illegal – or unethical.
Do some employees exhibit apathy when confronted with unethical business practices? I have no doubt they inhabit many companies. But my experience has been that most employees want to do the right thing, and will take action. Even while the “right thing” is always shaped by a person’s circumstances and perspectives.
I think, Andy, you raise some interesting issues.
Yes, apathy is not a cause, but the consequence of apathy makes corrupt practices difficult to eradicate. One whistleblower versus a well developed set of “corrupt” people. The article talks about such an established group, making it easier to be corrupt. The good guys are not banded together…maybe apathy or something else?