The State of Business Ethics in North America
- 1. ETHICAL BUSINESS PRACTICES IN NORTH AMERICA ShannonPickering
- 2. Shannon Pickering The current state of business ethics in North America are such that organizations are beginning to realize the advantages of ethical business practices, and implementing them at an organizational level. Although there are many instances where compromises need to be made between profitability and other ethical issues, ethical practices are generally beneficial to organizations. However, unethical business practices remain, especially regarding individuals within an organization acting in self-interest. Organizations face increased scrutiny from sophisticated and informed consumers. Consumers have high expectations regarding the ethical conduct of organizations, and a highly competitive business environment gives customers the opportunity to switch products if unhappy for any reason. Changes in technology provide ease in access to information, as well as increase the speed at which it is disseminated. These factors increase the likelihood of consumers finding out, and reacting to, unethical conduct, oftentimes in the public domain of social media. Furthermore, reports unethical business practices have eroded consumer trust in business ethics, creating a need for businesses to re-build and maintain stakeholder trust. In this business environment, it is in the best interest of an organization to engage in ethical behaviour. These external forces create not only a place for ethics in the North American business environment, but also a potential need for ethical behaviour for survival and continued profitability. An increasing number of organizations are realizing the benefits of ethical behaviour, and implementing corporate social responsibility policies to reflect this newfound interest. These policies advocate business practices which consider the implications of business activities on the environment, employees, consumers and communities. Additionally, these policies have a pivotal role in terms of establishing a positive rapport with customers, and enhancing corporate image. Nike, for example, faced intense scrutiny over its labour policies in
- 3. Shannon Pickering developing nations, including the use of sweatshops and child labour in the late 1990’s and early 2000’s. Since then it has successfully implemented a corporate social responsibility policy and is now considered a leader in ethical business practices. Ethical business conduct has additional benefits internally, as an unethical business environment is likely to have negative repercussions on employee morale. Employees may be placed in situations where demands are placed on them to compromise their personal ethical codes. Furthermore, employees may be exposed to harassment or bullying if unethical behaviour is accepted within a corporate culture. This form of corporate climate may place excessive stress on employees, impairing their productivity and decision making abilities. Realization of the adverse repercussions of a negative corporate environment led to an increased emphasis on employee health and well-being, with proactive employers taking steps to incorporate employee wellness into their business strategies. Canada’s Top 100 Employers for 2015 include Cameco Corp, which actively encourages the maintenance of work-life balance; Canadian National Railway, which offers amenities such a quiet room for meditation or religious observance, fitness facility and a cafeteria featuring healthy and special diet menus; and BASF Canada, which is currently introducing a company-wide diversity strategy and a diversity awareness program (Jermyn, 2014). Organizations promoting a healthy workplace environment are likely to benefit from improved productivity, and decreased costs associated with employee illness and absenteeism. Although organizations are making strides in engaging in ethical conduct, certain ethical issues remain prevalent. The foundation of ethical conduct in an organization is a corporate culture that promotes ethical behaviour. Top-down support of an ethical practices is important to reinforce the development of an ethical culture in an organization, ensuring that both the
- 4. Shannon Pickering organization as a whole and the individuals within the organization behave ethically. To create this culture, top management needs to accept a leadership role in promoting ethical business practices. However, in many situations, this support may be lacking, creating an environment where many still act based on self-interest. Executive salaries are an example of an area prone to ethical lapses in North American businesses. Executive compensation is often disproportionately higher than standard wages, and justified by board members responsible for determining it as appropriate due to the integral nature of executive positions to an organization. However, empirical evidence suggests that executives receive vast amounts of compensation, regardless of performance. Recently, the former Target CEO Gregg Steinhafel received a departure package worth $61 million, despite Target’s botched entry, and ultimate failure in Canada (CBC, 2015). Furthermore, salaries tied to incentives may encourage people to act with little to consideration to the long-term effects or ethical implications of their actions. Those responsible for determining their salaries need to closely examine the ethical implications of disproportionately large executive salaries, especially in terms of its promotion of income inequality, and its fairness in comparison to the wages of other employees. Although the executive buy-in to changes corporate salary structure may be difficult to ascertain, it is an important issue to address in terms of re-establishing trust with organizational stakeholders. Public trust in organizations has largely been eroded, especially after the 2008 financial crisis, which resulted from unethical business practices. The public is particularly distrustful of businesses leaders. A survey by public relations firm Edelman revealed that people trusted organizations more than business leaders. While 50% of respondents trusted business to behave ethically, only 18% trusted business leaders to do the right thing. Furthermore, fewer
- 5. Shannon Pickering than one in five people trust business leaders to tell the truth when confronted with a difficult issue (Adams, 2013). The juxtaposition of an increased interest in ethics on an organizational level and the continued unethical behaviour of high-level individuals within organizations suggests that ethical conduct is engaged in to the extent to which it is profitable. Although this attitude may appear to be troublesome, it is important to recognize that remaining profitable is an important part of the ethical fabric of an organization. Numerous stakeholders are affected by the ability of an organization to remain profitable, including employees, shareholders and communities. Furthermore, economies depend on profitable businesses to grow and remain healthy, meaning that organizational profitability has broad societal implications. Improving the state of business ethics in North America is highly reliant on organizational ability to balance profitability with other ethical issues, and the creation of corporate cultures which encourage staff to act in the best interest of the organization and its stakeholders. North American organizations currently operate in a complex ethical environment. However, societal pressures and the realization of the enhanced profitability ethical conduct may offer is encouraging organizations to engage in ethical behaviour. Although profitability is still fundamental, it is becoming integrated with ethical conduct . While North American organizations continue to have ethical issues to address, it appears that many are beginning to realize that the long-term benefits of ethical conduct outweigh the benefits of prioritizing short- term profitability.
- 6. Shannon Pickering Works Cited Adams,S.(2013, 22 January). NewStudy:Trustin Both Businessand CorporateLeadersPlummets. RetrievedfromForbes:http://www.forbes.com/sites/susanadams/2013/01/22/new-study- trust-in-both-business-and-corporate-leaders-plummets/ CBC. (2015, January22). Target's packageforex-CEOmatchespackageforall17,600 Canadian Workers. RetrievedfromCBCNews:http://www.cbc.ca/news/business/target-s-package-for-ex-ceo- matches-package-for-all-17-600-canadian-workers-1.2927893 Jermyn,D.(2014, November4). Canada’sTop 100 Employersmaketheir workplacesexceptional. RetrievedfromThe Globe andMail: http://www.theglobeandmail.com/report-on- business/careers/top-employers/canadas-top-100-employers-make-their-workplaces- exceptional/article21427767/