by Nicola Featonby-Smith

Building business ethics

Improve your bottom line through ethical means

Ethics in business is paramount to succeed in today's climate
ethics.jpg

Society’s distrust for business to do what 'is right' has created a host of demands on companies to prioritise their business ethics. The King III Commission, closely followed by Unisa, defined business ethics as the ethical values determining the interaction between a company and its shareholders.

Professor Deon Rossouw, chief executive of the Ethics Institute of SA, said there were three levels of business ethics: the systemic level incorporating economic ethics and global sustainability; the organisational level including corporate citizenship and intra-organisational ethics; and the individual level that addressed personal ethical responsibilities and dilemmas.

Addressing the Unisa Graduate School of Business Leadership (SBL) Research and Innovation Day, Prof. Rossouw highlighted the emergence of regulations, social protests such as the 'Occupy Wall Street' campaign and the United Nations Global Compact initiative – all aimed at bringing companies in line with social demands.

These, coupled with investor demands, government legislation, statutory reporting requirements and self-interest considerations, have emphasised the value of a company business ethics strategy.

According to UN secretary-general Ban Ki-moon, the Global Compact asked companies to embrace universal principles and partner with the UN. The initiative had grown to become a critical platform from which the UN could engage effectively with "enlightened global business". 

"The consequence of voluntary codes, political interference and social protests has become 'responsible business', but the question remains whether business ethics – the ethical values determining the interaction between a company and its shareholders – is emerging," Prof. Rossouw said.

Investors were now screening their investments for non-financial criteria such as those reported on the Johannesburg Stock Exchange Socially Responsible Investment Index and the FTSE4Good Index Series, designed to objectively measure the performance of companies meeting globally recognised corporate responsibility standards. 

Legally, anti-corruption legislation including the South African Prevention and Combating of Corrupt Activities Act 2004 and the new Companies Act, the US Foreign Corrupt Practices Act 1977 and Sarbanes-Oxley Act 2002 (commonly called the Public Company Accounting Reform and Investor Protection Act, or Corporate and Auditing Accountability and Responsibility Act) and the United Kingdom Bribery Act 2010 had forced companies to rethink their ethics. 

Boosted reporting demands, including sustainability reporting, had also forced companies to inform shareholders about the manner in which the company met current needs without compromising the ability of future generations to meet theirs. Financial reporting was now coupled with economic, social and environmental reporting. 

Prof. Rossouw said that when companies applied a self-interest consideration to their business ethics, there was the realisation that reputation, shareholder trust, investor confidence and an access to discerning markets played a role in developing an ethical business culture. Additional benefits included attracting and retaining talented staff and the inherent loyalty from the companies' supply chains and customers.

The alternative offered scandal to the company for unethical business practices; losses from fraud, theft and corruption; shareholder alienation; a high staff turnover; litigation against the company and director liability implications.

Ethics Monitoring and Management Services managing director Cynthia Schoeman echoed those sentiments, indicating that managing workplace ethics centred on influencing the ethical choices employees made.

This translated into financial sense as those choices trickled down to the bottom line. "Your people already know what is right and wrong in the workplace. Their ethical choices are shaped by their values and moral principles, the laws governing the country and their individual codes of conduct. The benefit of sound ethics is the ability to attract and retain top staff members," she said. 

She added that ethics offered "a unique source of comparative advantage", in that it could not be copied, delegated, owned, bought, sold or traded, but rather lived every day.

Prof. Rossouw said the 2012 Global Survey of Business Ethics as a Field of Teaching and Research had provided a comparative view on business ethics in terms of terminology, prevalence of activities, themes covered in formal academic teaching and research and the major business ethical issues foreseen in the next five years. Central Asia and Latin America had emerged as regions with a low prevalence for business ethics, while East Asia, Oceania, South and Southeast Asia and sub-Saharan Africa had a medium propensity for business ethics. 

Europe and North America demonstrated high business ethics.

However, Africa had raised its profile in terms of business ethics in the past decade, with only four countries being accredited in 2000 versus 20 countries by 2010.

Looking ahead, Prof. Rossouw said business ethics faced a host of major challenges in the next five years. These included enhancing the responsibilities of business in society; a global justice and fairness in business and trade; a global rethinking of ethics in terms of capitalism and the ways in which companies could institutionalise an ethical corporate culture. 

SBL acting executive director and CEO, Prof. Elmarie Sadler, said business ethics was highly relevant in the current business and leadership environment. The school was pioneering the fields of ethics and social responsibility among business leaders.

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