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Feature   December 1, 2006   by Mark Borkowski

An Ethical Road to Profitability

You Don't Have to Choose


In the “Me First” era of the 1980s, there was very little worrying done about ethics in the business world, and you would have searched long and hard to find a university that dealt seriously with the need for ethics in its business school curriculum.

A case in point concerns John Shad, former chairman of the Securities and Exchange Commis-sion. He donated $35 million to the Harvard Business School to establish an ethics department. Yet two years later, Harvard had only come up with one rather flimsy-sounding course; moreover, the university had been unable to find an ethicist to head up the department.

John Mahon, University of Maine’s John M. Murphy chair of International Business Policy and Strategy, says too many people ask the wrong question when it comes to balancing business ethics and profitability. “Can I make money and still do the right thing?” he asks. “That’s a seductive trap.”

Mahon prefers to ask, “What’s an ethical rate of return? What’s a reasonable profit? No one asks that question,” he says. “I believe you can succeed in business and be absolutely ethical. I suggest you don’t have to make a choice between doing the right thing and making a ton of money.”

When a mid-’90s group of Harvard MBA graduates was asked to comment on the barriers to ethical behaviour they encountered in their organizations, the majority felt that as individuals they held strong values, but that they often encountered pressure to behave unethically in their companies.

It appears that the key E-word for business is the word Earnings over another E-word: Ethics.

Most professionals follow a code of standards particular to their own industry and are members of a self-governing body that recruits, regulates, tests, and certifies members.

Society demands high standards from such professionals as accountants, lawyers, engineers and doctors, yet we allow business executives almost unfettered freedom to make personal fortunes and privileges without holding them to account for their personal behaviour.

Executives and middle managers should receive certification and undergo regular testing in order to be promoted or receive increased compensation, as well as to serve public notice that their behaviour is being monitored for ethical practices.

Under this model, approved members would receive the designation “CE” to reflect their “Certified Ethically” designation. The CE code must plant the seed of personal ethics, to help executives understand that their business identity is not distinct from their personal identity. Creating awareness of one’s own personal values and how those values are enacted at work can help people make some difficult decisions.

Furthermore, public corporations and larger private companies could receive tax breaks and other incentives to encourage overall corporate ethics; such tax incentives would serve to encourage proper behaviour.

Businesses could themselves be certified much like the ISO quality certification. And chief ethics officers could have the legal power to approve or deny promotions, increased compensation, and privileges based on compliance with a written code of ethics, subject to appeal to the industry body.

Schools and colleges can begin the ethics learning process by offering a continuing program of ethics knowledge at the primary level; this could progress to core ethics credit courses in secondary schools that are mandatory for graduation, and core credit courses in universities absolutely necessary for graduation. To emphasize the seriousness of these courses, the passing mark would be elevated.

Each post-primary school student would participate in a personal development workshop that would include the idea that ethical leadership requires self-reflection and introspection. Students would practice resolving ethical dilemmas in small groups and have the opportunity to analyze their own decision-making, and get insight into how their thinking compares with others.

In time, this would create a class of business leaders who would incorporate ethics as second nature into successful business management strategy, and we would all benefit.

Mark Borkowski is president of Toronto-based Mercantile Mergers & Acquisitions Corporation. Mercantile specializes in the sale of privately owned companies to strategic buyers. He can be contacted at mark@mercantilema.com or (416) 368-8466 ext. 232