Q&A talks about business ethics with
Q: What prompted you and Meg Schneider to co-write “Business Ethics for Dummies”? Have business ethics become too complicated or too commonplace?
A: I cannot speak for Meg but as an academic who had written either for academics or college students, I wanted an opportunity to reach a broader public using the format of the Dummies series. Meg had done four Dummies books before doing Business Ethics for Dummies, so she had the style down pat. One of the main goals of the book was to address some of the cynicism regarding business ethics — the notion that business ethics is an oxymoron. We argue that unethical behavior can destroy a company and that a good reputation for ethics can provide competitive advantage — other things being equal.
Q: Your book covers the topic of insider trading. That seems to be a well-defined legal issue. Should a company approach it from an ethical viewpoint so legal consequences never occur?
A: In the book, we point out that some economists believe that insider trading is not unethical and should not be illegal. These economists argue that insider trading brings information to the market more quickly and thus makes the market more efficient. This efficiency or utilitarian argument is challenged by some other utilitarians who dispute the empirical assumption of their opponents. Ethicists who emphasize fairness think that insider trading is wrong because it is unfair. It provides information to some market players that in principle is not available to others. We think that argument is extremely important. Also there are gray areas in the law, so in many cases the decision on whether to act on inside information should be made on ethical grounds.
Q: How does open communication encourage good business ethics?
A: It creates trust among the various business stakeholders. In a high trust organization, members of the organization treat each other with respect and work cooperatively together for common goals. For examples, employees in a high trust organization tend to work harder and to need less supervision.
Q: Why is it companies with good reputations can charge higher prices?
A: To answer that question, I would go to marketing theory about brands. For many, the well known brands such as Heinz ketchup, Scott, Proctor and Gamble, etc., can charge more than the store brand because of their reputation for quality. A good reputation gives you a brand as an ethical company — Miller furniture or Target for example
Q: Your book also advocates strengthening your governance structure. What are some ways a company can identify if a governance structure is weak before a problem happens?
A: The key to good governance is an independent Board of Directors and a CEO who takes ethics seriously. I personally recommend separating the CEO and the chairman of the board. Also the compensation committee must be free from CEO influence. There needs to be diversity on the board. A firm needs a good code of ethics that is enforced even against people who are good producers but violate it. Also there needs to be effective ways for anyone in the organization to voice concern about ethical issues. Large companies might have an ethics ombudsperson.
Q: You address drug testing as a business ethics issue. What, in particular, makes that a business ethics concern? What does personal use of recreational drugs have to do with business ethics?
A: Personal behavior off site becomes an issue of business ethics when such personal conduct could reasonably affect the success of the business. Many companies encourage non-smoking campaigns because smokers add to the companies’ health costs. Companies encourage exercise and may provide gyms on site. If the use of drugs off site could affect the behavior of an employee when he or she returns to work, one could argue that a company has a legitimate concern here. Many companies routinely test for drugs even when the use of drugs would not affect performance. Some feel that this is an unjust intrusion in an employee’s private life. Controversy around these issues makes such issues matters of business ethics.
