Why Professional Ethics Makes Smart Business Sense.
Never have ethical principles been as under threat as they are today.
In a world dominated by appalling headlines of war, human suffering, and general societal decay, you could be forgiven for wondering if a discussion about professional ethics is still relevant.
Ethics as a foundational structure of civilised society dates back to the times of the ancient Greek, Indian and Mesopotamian cultures. It has survived through the millennia, helping to guide past and present generations across the globe and inspire them to create a secure and harmonious society.
As AI worms its way ever more insidiously into our lives, it’s not unreasonable to ask whether the intrinsically human values of ethics, morality and a basic good conscience have become somewhat surplus to requirements.
We’ve even recently seen industry giants like Amazon significantly downsize their team tasked with ensuring “responsible AI,” while Microsoft has laid off its entire ethics and society team.
Then, of course, there’s all the talk about “ethics-washing,” the practice of feigning ethical considerations to improve how a person or organisation is perceived by the general public. In what must surely be the most ironic of ironies, instead of embedding ethics into our decisions so they can be used for good, they’re being misappropriated for selfish gains.
And yet, despite all this, it is precisely because of all these things that we need ethics more than ever. In fact, it’s not an exaggeration to say that they have likely never been more relevant.
As Joel H. Rosenthal, President of the Carnegie Council, says, “In light of growing partisanship, flagrant violations of international law, and the deployment of transformative and sometimes harmful technologies, it is essential that we recognize ethics as a vital tool for responsible leadership and public policy.”
And that’s all very well, but what does that translate to for the average business? What, exactly, do we mean when we talk about professional ethics?
What are professional ethics?
Professional ethics are essentially a set of principles that regulate individual or group behaviour in a business environment. They should embody the vision and values of a business.
Rosenthal describes them as “a practical tool used to make decisions, rather than a static set of principles to be taken off a shelf.”
I love that description because it very neatly encapsulates the essence of ethics – they act as a guide, not as a set of hard and fast rules. They form a kind of moral framework that teams and organisations can use to help them behave appropriately and make the right decisions.
Sometimes, as with the financial and healthcare sectors, the law dictates how people behave at work. In other professions, there’s more reliance on individual adherence to, and application of, ethical principles.
The good news is that research consistently shows us that organisations with strong ethical values outperform those without. In fact, according to a 2021 survey by Edelman, companies with high ethical standards are 10.7% more profitable.
The reasons are easy to see – stronger stakeholder support, greater customer loyalty and better employee retention.
In other words, adhering to a strong code of professional ethics is more than simply “the right thing to do,” it makes smart business sense.
The role of ethics in professional trust and business reputation
Ethics is often referred to as the foundation upon which trust is built; an essential part of the success and sustainability of any business.
Any business that operates openly and with integrity builds trust with its employees, customers, and the greater community as a whole.
I know I would much rather do business with an organisation that behaves honestly, fairly, responsibly and with respect for the rights of others. And I’m not alone – research shows most customers need to trust an organisation before they feel confident enough to buy from it.
Unethical behaviour, on the other hand, can very quickly do irreparable damage to your reputation, eroding trust that will be nigh-on impossible to win back. 43% of consumers say they’ve stopped buying from a brand they consider unethical, and 71% say they take corporate values into account before making a purchase, and prefer brands whose values align with theirs.
The difference between professional ethics and legal compliance
This is an area that can get a little grey, so it’s useful to make a distinct differentiation.
There are many definitions of both these topics, but I think Carol Tate, Director of Ethics and Legal Compliance for the Intel Corporation, sums it up extremely well.
She says, “Compliance is table stakes. It involves following the laws and rules that apply to your company’s business. Ethics goes beyond what the law requires. It involves doing the right thing and following both the spirit and not just the letter of the law.”
And that is, I think, the key: to follow the spirit and not just the letter of the law.
In my career, I’ve spoken and written a lot about ethics, and I always like to describe it thus:
Ethics involves judgment. It’s about making choices about your behaviour that reflect right and wrong, good and bad. It is, however, possible to be ethical but not compliant. Imagine, for example, you break into a locked house to save someone whose life is in imminent danger. Breaking in is not compliant with the law, but saving someone’s life is the right thing to do.
What’s in it for me – the personal and career benefits of adhering to ethical principles
Ethics has everything to do with management and is as much an organisational as a personal issue. As a manager, ensuring your business operates ethically has benefits that ripple throughout the organisation.
It’s usually impossible, though, to lay all the blame for corporate misconduct squarely at the feet of one person. Most often, unethical business practices happen with the cooperation – tacit, if not explicit – of several others.
The hard truth is that managers who don’t provide proper leadership or implement systems that facilitate ethical conduct are as complicit as those who knowingly and directly benefit from corporate misdeeds.
Adhering to ethical principles means:
Your employees feel confident and comfortable.
Customers are happy with the appearance and reputation of the business.
Your stock prices will generally be higher.
You don’t have to suffer the financial and reputation cost of an ethical scandal.
Although there is an undeniable “feel-good factor” about working for a company that operates ethically, there are also definite, tangible, bottom-line and balance-sheet benefits too.
You only have to read on to see what happens when things go south…
The bad, the worse and the downright ugly
Unfortunately, there’s no shortage of examples when it comes to individuals and organisations who’ve completely ignored their personal and business ethics and defrauded companies and people to the tune of many millions.
Enron
Enron’s downfall, and the subsequent imprisonment of several of its managers, will surely go down in history as one of the most shocking violations of professional ethics of all time. The fallout was catastrophic.
Enron went bankrupt, a staggering 20,000 employees lost their jobs – and in many cases, their life savings – and investors lost billions of dollars. Their auditors, Arthur Anderson, one of the largest audit firms in the world at the time, collapsed.
The charges related to executives knowingly manipulating accounting rules and masking the enormous losses and liabilities of the company.
Kenneth Lay, MD, Jeffrey Skilling, CEO, and Andrew Fastow, CFO, were among many high-ranking employees investigated for severe accounting practice irregularities.
Lay and Skilling were jointly tried on 46 counts, including bank fraud, insider trading, money laundering, and conspiracy. Skilling was convicted on 19 counts and sentenced to 24 years in prison. This was later reduced to 14 years, and he was released in 2019. Lay died of a heart attack shortly after being sentenced.
Steinhoff
This probably rates as the biggest case of corporate fraud in South Africa’s business history. The company was a hotbed of toxicity – no Board diversity, a toxic Board culture, complete non-compliance with standardised corporate governance, an unsustainable corporate strategy and strong non-compliance to external regulations were just some of the reasons touted for the company’s downfall.
I’ve written at length on this example, and you can read more here (link to article).
SAA and Nkonki
It’s doubtful whether our once-proud national carrier will ever fully find its wings again. In the past 12 years, the state has spent more than R50 billion on bailouts to SAA, and, after it was placed under business rescue, it announced that 2 700 people – around two-thirds of all its employees – were to be retrenched. Many have since lost their homes and savings due to SAA not paying them the packages they were promised.
Much of the blame for SAA’s demise can be attributed to a systematic breakdown of internal and external controls on transparent and lawful procurement systems at the airline. In 2012, PwC and Nkonki jointly took over from KPMG as auditors of the airline, despite a complete lack of any proper processes.
Between 2013 and 2016, Nkonki failed to flag many incidents of procurement irregularities – to the tune of many billions annually – such as inflated pricing, overpayment and non-delivery of paid-for goods.
Instead, they simply signed off SAA’s financial statements without qualification or concern every year during this period.
The former CEO of Nkonki Auditors, Mitesh Patel (who was funded by an associate of the Gupta family) was later found guilty of misconduct by the Independent Regulatory Board of Auditors and fined R2.9 million. He will no longer be allowed to practice as an auditor.
Mirror Trading International (MTI) and CEO Johann Steynberg
This is another South African-based corporate scandal with international ramifications. Steynberg was found to have misappropriated funds by soliciting them for trading and then retaining them in his personal E-Wallets instead of segregating them in a pool account to trade on behalf of participants as promised.
In what (in Rand terms) is the highest civil monetary penalty ever ordered in a case involving the Commodity Futures Trading Commission (CFTC), he was ordered by Judge Lee Yeakel of the US District Court for the Western District of Texas to pay $1.73 billion in restitution to the defrauded victims of his unconscionable scheme.
Unfortunately, there are two problems:
There may not be enough money in the company to pay the victims.
Steynberg was arrested in December 2021 in Brazil, and is still in jail there, awaiting an extradition hearing. (The National Prosecuting Authority submitted an extradition request in April 2022).
Tongaat Hulett
Former CEO Peter Staude, and a group of former executives (including Deloitte audit partner Gavin Kruger, who was responsible for auditing Tongaat’s books) were found guilty of backdating sale agreements by Tongaat’s property division to the value of R2.5 billion between March 2015 and September 2018.
They made millions in productivity bonuses based on the fraudulent sales, with Straude alone raking in R94 million.
Their greed cost nearly 8 000 workers their jobs.
What do ethical dilemmas look like for different professions?
The above examples are all corporate in nature, but what about people in specific professions?
An ethical dilemma refers to a situation in which an organisation (and/or its management) is forced to choose between doing what is most beneficial to them (financially or otherwise) and doing what is just, fair, and ethical for its employees, stakeholders, and customers.
Here are just a couple of examples of how this might play out in different professions:
Lawyers/Advocates
Lawyers, advocates, and the legal profession in general depend on trust. Unethical behaviour can harm public confidence in the company and the legal system as a whole. This is why they typically adhere to a code of ethics that exists independently of the company they work for. It’s designed to avoid any potential bias or favouritism and ensure professionalism.
Possible breaches of ethics could include:
Backdating property documents to avoid a late registration penalty.
Not carrying out proper due diligence on investment schemes or focusing on the interests of the scheme promoter (for possible financial gain) instead of protecting the interests of consumers.
Medical Professionals
Like solicitors, medical professionals are expected to uphold a universal code of conduct. Possible ethics violations could include:
Criminal prescribing of opioids.
Performing unnecessary procedures that benefit physicians financially.
Sexual abuse
Teachers
The code of ethics for teachers may vary between different institutions and different countries, but essentially, teachers are required to remain unbiased at all times and behave appropriately with parents, students and colleagues.
Some of the most common violations include:
Sending personal emails and text messages that are non-school related and might include sexual innuendos.
Giving students lifts to and from events and behaving inappropriately while doing so.
Hugging/touching students under the pretext of offering comfort or congratulations but turning it into something inappropriate.
Attack is the best form of defence – why training and education are the best way to promote professional ethics
By helping employees make consistently good decisions that are consistent with your company’s culture when dealing with customers and colleagues, ethics training helps to keep your company profitable.
Remember, though, that it’s not just a “one-and-done” exercise. Regular refresher training, or training that responds to a particular incident, is always very helpful.
Useful areas to focus on include:
Familiarity with the company code of ethics
Regulatory and compliance training
Diversity training
What ethical conduct looks like – in and out of the office
Customer privacy and data protection
Common ethical dilemmas
So, what now?
Ethics is a little bit like embarking on a new healthy living regime – in order for it to work, you have to work at it. Consistently. Until it becomes so habitual you don’t even think about it anymore.
Studies show around two-thirds of managers want to be seen as ethical – yet over 80% of workers don’t think their manager sets a good moral example.
Just as “a fish rots from the head” good ethical behaviour starts at the top. Managers must lead by example – it can’t be one rule for management and another for everyone else.
Take time every day to think about your professional ethics and behaviour. Are they aligned? If not, what can you do to change that?
Because at the end of the day, chickens always come home to roost. Behaving ethically every day means never having to worry about the consequences of doing something you shouldn’t have done.