Factors that raise ethical standards in business


In the study cited earlier, the two factors that raise ethical standards the most, according to the respondents, are

1. Public disclosure and publicity and

2. The increased concern of a well-informed public.

These factors are followed by government regulation and by education to increase the professionalism of business managers.

For ethical codes to be effective, provisions must be made for their enforcement. Unethical managers should be held responsible for their actions. This means that privileges and benefits should be withdrawn and sanctions should be applied. Although the enforcement of ethical codes may not be easy, the mere existence of such codes can increase ethical behavior by clarifying expectations. On the other hand, one should not expect ethical codes to solve all problems. In fact, they can create a false sense of security. Effective code enforcement requires consistent ethical behavior and support top management.

Another factor that could raise ethical standards is the teaching of ethics and values in business and other schools and universities. The Harvard business School has come under severe criticism by its own president, Derek Bok, for the lack of teaching of human values. With the help of business executives, the school hired Dean John McArthur and faculty members trained to teach ethics to give direction to the school. While financial aspects received less attention in the revised curriculum, more emphasis was given to people skills and ethical behavior. Since Harvard has one of the largest numbers of business-school graduates holding top managerial positions, a somewhat greater awareness of the ethical dimension in managing may be expected.

The need for improvement of ethical behavior has become clear by way of some widely publicized cases. Saul Gellerman examined three in greater detail: the Manville Corporation, which apparently hid the real danger of asbestos; Continental Illinois Bank, in which some managers misinterpreted the overall interest of the enterprise; and E.F. Hutton and company, which pleaded guilty to mail and wire fraud.

In light of his analysis, Gellerman made several suggestions, such as:

1. Provide clear guidelines for ethical behavior.

2. Teach ethical guidelines and their importance.

3. In gray areas where there are questions about the ethics of an action, refrain from it.

4. Set up controls (e.g. establish an auditing agency reporting to outside directors) that check on illegal or unethical deeds.

5. Conduct frequent and unpredictable audits.

6. Punish trespassers in a meaningful way, and make it public so that it may deter others.

7. Emphasize regularly that loyalty to the company does not excuse improper behavior or actions.

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