Business ethics can prove to be a moving target to define. Largely depending on your industry, ethical behavior in business is often seen as a relative concept, a concept defined by the accepted norms of your business and the tolerance of your market segment. Because of ethical relativity our economy and our society is in a bind now. Ethical relativity is partially to blame for our current economic crisis. Large corporations who too easily become drunk off the ideas of profit lose perspective on the social and long-term financial cost of short term gains. The mortgage industry and the broader financial industry failed to consider the impact of their unscalable trades, loans and product bundles–particularly around sub-prime loans. If they considered the actual well being of the consumer and smaller lending institutions (and ultimately themselves), we might be in a better position today in the US.
Ethical relativity also plays out in how a company defines its steps to right-size costs to cover loss of revenue in bad times. Often, short-term value driven or profit driven goals get in the way of making better choices that have a positive effect on community and national economic fronts. The trend in the late 1990s through today to “off-shore” and outsource core and even sub-core business functions might appear to save money on quarterly financial reports, but the long-term impact is usually an increase in time to market, increase costs and loss of quality. Moreover, the loss of US income to circulate within the economy has a long-term negative impact as shipping jobs to offshore workers exports financial capitol without guaranteeing that money recirculates in local economies. If US workers are being cut, there are less US consumers to buy your goods and services. This is ultimately self destructive to a local and national economy. Companies that off-shore hurt themselves in the long run.
I do not question US based, global companies that have consumer bases in other countries that engage in core business functions off-shore. If Company X sells products to consumers in New Delhi, open shop there to service the consumer base. That is actually importing capitol into the US economy while providing jobs to the local economy where consumers live. But, the “outsource because India is cheaper” argument is not a justifiable reason to do so.
Also, ethical relativity fails to establish a benchmark for when to make tough choices to for the greater good of the company. Many times businesses preemptively over hire and ultimately force the hand to cut jobs. Moreover, many companies also cut for the wrong reasons. Cutting jobs can have a long-term negative impact on a company’s reputation and ability to take advantage when events shift in their favor. Re-staffing is very expensive and ramp-up time for new employees is time consuming, costing opportunities that may not come again.
Corporate ethical relativity is dangerous to consumers as well. Insurance companies depend on “breakage” for profit. Therefore (specifically in healthcare) it is in the their financial interest not to be transparent about benefits and to create barriers to access those benefits. Healthcare for profit seems to be an inherent and unresolvable conflict of interest. Profit driven ethical relativity is not compatible when it comes to life and death decisions on services and care. The health care industry should be nationalized like other public services such as military, police and fire.
Affinity marketing is another industry not guided by innovation, value or the greater good to society. It is an opportunistic business that seeks to broker loosely integrated services to establish a “smoke and mirrors” model to mask its lack of integration, support and value. Affinity marketing looks to extract cash from customer databases by selling very high margin products, often masked in 30 day free trials or “free” products with fine print or absurd shipping. Examples of this include Verizon Premium Technical Support, American Express Travel Insurance, Lifelock and “membership” clubs like Consumer Club and 250kfirstyear.com. Multi-level Marketing companies like Amway are also part of this industry and in general staying clear of such business is good for the soul and the wallet. From big players to the small-time scammers, getting easy revenue is the principle goal for affinity marketing firms. But these industries just move money around without consideration of social progress. Nothing is created and ultimately the end consumerand small busineses are swindled out of money in exchange for terrible products and unfulfilled promises.
If business was guided by a code of ethics, similar to doctors and public service professionals, then perhaps our economy will become more stable. While revenue may be harder earned, all business would produce or make something of substance. Such a code could guide our hiring and managing practices as well. Considering the end result of decisions might lead to more thoughtful and deliberate decision making, ultimately leading to less volatility in labor and economics markets.
Profit and improving society can co-exist and it should.
~DK
