Business ethics: dealing in the gray areas.

• Author: Skeddle, Ronald W.

Business ethics: dealing in the gray areas

The subject of business ethics is becoming an increasingly important challenge to the senior staffs of North American companies. Unfortunately, it is a soft issue. It's not clearly measurable. It often deals in the gray area, not in the pure black and white. So, there are no clear-cut, straightforward measures that we can apply to ourselves or our companies to determine whether we are in fact doing business in a highly ethical way.

But I believe the solution is very simple: we first must accept some very basic beliefs; support those beliefs with a series of clear, concise, and precise principals; and then, most important, live by those beliefs.

Why? Because large companies don't learn. People learn. And the people in our companies tend to change, so the only way that companies can develop and maintain a strong and consistent sense of good business ethics is to apply similar standards over and over again through their people. Even though the situations will be different and the people will have changed, this philosophy establishes a basic culture within our business lives.

Where's the fire?

Why is it that applying business ethics is becoming so important? It's because we all face pressures on a day-to-day basis.

For instance, in business today, senior executives are being pressured to take a shorter- and shorter-term view. Not too long ago, a friend of mine who is CEO of a large corporation asked me if I knew the three most important expectations of a CEO today. When I responded negatively and asked him his view, he said, "Very simply, they are profit, profit, and profit."

In this country, more than in any other place in the world, business executives and their staffs face increasing pressure for short-term results that in fact are largely measured in terms of earnings, and this heightens the prospects for poor business ethics. But I am absolutely convinced that, as we do business in a more ethical way, we improve our chances, not hinder them, to increase our earnings, and this is particularly true over the longer term.

Another reason it's difficult to maintain a high standard of business ethics is that the growth of demand for all products in all industries, in particular those in North America, has slowed. At the same time, there has been a dramatic increase in the sources of supply into North America. With our aging infrastructure, our increasing unit-cost structure, and our aging population, it may on the surface appear to be good practice and economically more efficient if we begin to cut corners in how we do business, or fix prices, or shade the quality of our products, even cheat our own people a little. And there are many companies that have moved their company culture in that direction, eschewing any more upright approach as being too pure, or too black and white, too goody goody. But in doing so they have undermined their basic corporate strength--their own people's credibility and trust base--and reduced as a consequence their chances for business success.

Companies also want to increase service to their customers, to make dramatic increases in product quality and performance. Of course, we'd like to do that at decreased cost. But that often means diminishing the morality in the way we do business, by such actions as reducing the opportunities for fair and competitive earnings for our wage earners, eliminating people without regard to skills and performance, raping the research organization, eliminating the audit department, or reducing the number of people in finance so no one has a clear measure of the way business is being performed.

In almost all cases, if you carefully study those organizations that have gone out of business or that are in the process of going out of business--and I can use my own company as an example, when we were on the verge of going out of business nearly one decade ago--these changes are seen as necessary for survival.

On top of all that, we now have the pressures of LBOs, takeovers, sellouts of entire sectors of companies or even whole companies, plus the introduction of multiple ownerships of major corporations. Again, my own company is a good example.

We are now 20 percent owned by a...