by Donna Sockell
Director, Center for Education on Social Responsibility
University of Colorado – Boulder
Manipulating LIBOR rates, continuing mortgage scandals, alleged violations of the Foreign Corrupt Practices Act, new prosecutions for insider trading… Every week seems to bring another set of business scandals, despite the increase in business ethics courses on campuses and the proliferation of corporate codes of conduct and social responsibility reports.
On campus, the focus typically is on sweeping ideals. In companies, corporate codes of ethics are primarily about regulations and creating compliance cultures while CSR reports tend to be about grand strategies and philanthropic investments, often lacking tangible measurements of effectiveness. There’s value to these efforts, but it seems they are disconnected from everyday business behavior.
Corporate culture must support all employees to think critically about every decision and action, every day: “Is this ethical? What would this behavior say about the kind of person I am? What is the impact of this decision or behavior on my colleagues, my community?” Those seemingly simple questions create more resilient, internalized standards than written codes of conduct can possibly do on their own. They also protect companies and entire industries. Being motivated simply to avoid prosecution is not the same as behaving ethically—and it’s often not even a good way to avoid sanctions.
In the 1980s, as a consultant to commodities exchanges in New York and Chicago, I worked with traders to consider responses to situations that can arise in trading pits – a chance glance at someone’s trading deck, or an order deck that had fallen to the floor. Whether traders got this information accidentally or not, they still had to learn to ask themselves ethical questions: Did this give me an unfair advantage? If I act on this information, what would that say about me as a person? From a pragmatic perspective, if everyone engaged in these behaviors, how would my career, my peers, and the commodities exchange be affected? Since floor trading was nearly regulated out of existence, this was no academic exercise. Many got the point.
Likewise, in accounting, Generally Accepted Accounting Principles are guidelines for preparing financial statements. What truly is “material” such that it likely would influence investors’ decisions to buy or sell stock? An accountant can rationalize reporting decisions for clients’ interests—or ask the critical question, “How does my decision serve the public interest,” which is the intent of those guidelines. Accountants who think about the numbers on financial statements as representing people – and their jobs or their life savings, or their homes – might be less likely to cut ethical corners.
At the Leeds School of Business, the Center for Education on Social Responsibility (CESR) is set up specifically to equip students to take ethics out of isolation and into the daily decision making of future business leaders. We begin this process on Day One and integrate ethics into all of the functional areas of business. We also accustom students to the idea that issues of ethics and social responsibility will confront them every day—that they’re not someone else’s responsibility. There are lessons here about how companies can close the gap between their stated principles and everyday actions of employees. We have seen that this education can make a difference in post-school behaviors.
Take, for example, one of our young graduates who attended a sustainable enterprise meeting during her very first year on the job at a sporting goods company. The company had its products on the table – individually wrapped in plastic – a waste of resources contrary to company values…and unnoticed until she pointed it out. That “aha!” moment in the room marked a small victory for closing the gap between principles and action.
Another young alumna observed and was deeply affected by sexual harassment in a workplace that prided itself on being a values-driven, progressive company. Her parents told her that such experiences were common for women in business and suggested she let it go, but she spoke up and chose to leave a company that tolerated such behavior.
The goal of our educational model is to make sure every graduate, every day thinks critically and recognizes that ethical issues are inherent in all business decisions. For we believe recognizing the implications of everyday actions is the true meaning of social responsibility – and can often be difference between a company’s creating or avoiding lapses, or even seizing an opportunity to create great good for themselves or the broader community.One whistleblower asking the right questions can bring a scandal to light, but imagine how transformative a workforce – management and employees – who have discovered how to ask the right questions, and thoughtfully consider answers, could be. Companies must not simply tell their workforce to be ethical and socially responsible; they need to encourage and reward broad thinking about the consequences of actions. It’s more than saying “we’re an ethical company.” It’s about re-defining ethics and responsibility, beyond just the visible (like volunteer days) and into the everyday and otherwise invisible actions of people: the lifeblood and DNA of American business.
Photos: © Regents of the University of Colorado