Professional Ethics

Aristotle, the Greek philosopher advocated acquisition of two basic virtues as a must for being successful in one’s life: One, intellectual virtues which alone can confer subject expertise to an individual and two, moral virtues that keep one in good stead even under adverse conditions. Aristotle further pointed out that one could become an expert in a profession if only he practiced it relentlessly and not otherwise. Similarly, one could become just only by doing just acts and being ethical. These inimitable words of Aristotle send a wake-up call to all of us in the market to take a deep look at ethics and what all it stands for. 

Ethics, as a concept has evolved from the Greek word “ethos” meaning both an individual’s character and a community’s culture. It is a civil code of behavior considered correct, especially that of a particular group, profession or individual. The society uses it as a basis for decision-making. There is an old story that talks about a beautiful lass being hounded by a demon. In her attempt to escape from him, she tucked herself into a corner of the hermitage of a seer who was in meditation. The demon grasping for breath halted before the seer and enquired if he had seen any girl going that way.  Looking at the lust-filled eyes of the demon the seer fell in a dilemma. Assuming you were the seer, what would you have replied? Looking at the situation, would you like to direct him to a wrong side? Or, to be honest, would you lead him into the hermitage? That is where precisely ethics enters the scene and, as Epicurus defined, “deals with things to be sought and things to be avoided, with ways of life and with the telos.” Ethics, be it of professional or business, refers to measurement of professional/business behavior based on standards of right and wrong. Now, the moot question is how this relates to the business context.

Need for Ethical Behavior

It is apparent: If society perceives businesses as rapacious scoundrels and if they  function as opposing to the public good, then the message at large would be that, business is not an ethical act and that to be successful it demands the suspension of morals. It is certainly not in the interest of businesses or society. This realization could perhaps be one of the reasons why today about 40 percent of the business leaders strongly believe that a business entity cannot succeed unless it has accountability that goes beyond the shareholders.  “Social responsibility”, “ethical business behavior”, “community development”, “corporate governance”, “social justice”, and the like have suddenly become the new language of the corporate world. Signs of change can also be seen in developing and applying non-financial measurement models such as social and ethical accounting, auditing and reporting among the new age corporates. Reputation has thus become the most sought after intangible asset.  

There is yet another reason as to why a business needs to be ethical in its dealings. It is a routine affair for a businesses to take decisions whose outcome is quite often found to be dependent on the intentions of others. John von Neumann (1903-57), a physicist of immense intellectual accomplishment, proposed a new meaning to the word “uncertainty” in his game theory, where he said that, the “true sense of uncertainty lies in the intentions of others.” From the perspective of game theory, almost every decision one makes is the result of a series of negotiations in which one tries to reduce uncertainty by trading off what other people want in return for what he wants himself. In this context, John von Neumann cautions one to be careful while choosing the alternative that is likely to bring the highest pay-off to him as it can always turn out to be the riskiest decision because it can provoke the strongest defense from players who tend to lose if the decision had its way. Instances of similar nature can be quoted in galore from day to day business operations— say for instance, a bid thought to be the best in generating maximum profit being resisted stiffly by the market, is not uncommon.  It thus becomes imperative for a business to be fair and honest in its dealings with counter-parties so that it could settle for a “win-win” compromise. It also helps building up organizational reputation among trading partners, paving way for better prospects. 

Launching Business Ethics

Corporates who have introduced business ethics are perceiving it as an efficient tool to protect organizations to a great extent from significant risks such as breach of law, regulations and reduced damage to the corporate’s reputation besides helping business to grow. The success of business ethics is ultimately found to rely on the right combination of spirit and structure that has of course, to be championed and supported by the top management. Here one needs to realize that practically there is no real separation between doing what is right in business and playing fair and being ethical in one’s own life. The occurrence of despondency if any, among the staff could be more out of a lack of morale or belief in the corporate mission. Managements have to define their mission in identifiable terms and jointly work towards promotion of a common culture and their unique corporate religion.

Research has shown that moral awareness is the stepping stone for the development of ethical fitness. Moral awareness is nothing but cultivating sensitivity to ethical issues. Generally moral lapses occur when individuals fail to grasp the ethical implications of a given situation as it often happens with a dealer who, in his anxiety to appease a long-standing exporter-customer quotes a rate that is different from what has been quoted to another customer though the purpose is same.  A willingness to see the broad ethical implications of such acts must be cultivated by every dealer so as to read the moral barometer astutely and accurately. Moral awareness helps to approach the ethical dilemma as they strike, rather than waiting for an event to occur and then react.

Ethical Resolution of Tough Dilemmas

Tough dilemmas are always difficult to resolve. For instance, 30 years ago, Milton Friedman, a Nobel Laureate in Economics argued that “there is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits.” But today’s corporate world is moving towards practicing professional/business ethics. It is a dilemma that is hard to crack, although it is becoming apparent that ethics has a powerful, practical and immediate impact on profitability. Similarly, in the current complex business environment, decision-making has assumed a tough stance. To obviate the difficulties associated with decision-making, one may resort to any of the known three principles that are endowed with a legacy of philosophical thought and application, viz. End-based, Rule-based and Care-based principles.

End-Based Principle

In philosophical terms it is known as utilitarianism. It suggests that for a decision to be ethical, it should produce greatest good for the largest number. Precisely, this could be the reason that weaned away corporates from what Milton Friedman said about business to business ethics.  True, it is not always possible to be sure, ahead of time, what good will be forthcoming from the decision. Therefore, one has to consider the consequences of a decision full well before taking it.

Rule-Based Principle

This is governed by Kant’s principle of “categorical imperative”. Simply put, it means what the decision maker is about to do is what everyone else would have done under the similar circumstances. It is the “motives” behind the decision what mattered to Kant than the consequences of a decision.

Care-Based Principle

It simply means, “Do to others only what you would like them to do to you”. This kind of decision-making is always prone to be overridden by “compassion”. Yet, it would have a natural appeal to treasurers for, they have to day in and day out transact with the same market players to generate profit.

No doubt, all these three modes of decision-making are saddled with their own over-weight. Nevertheless, they help explain to others why one has taken that particular decision. Ultimately individuals have to do their part of hard thinking to seek an answer to the question, “what they ought to do?” as ethics are simply all about “what ought to be.” This way alone organizations can ensure a true “ethical-fitness.” 

Ethical-Fitness to Trust

If ethics are to be practiced by everyone right from chairman down the line, there is a need to create conditions of trust in the organization.  In today’s business context, trust means inspiring customers, brokers, regulators and the public to feel confident in and rely on a dealer/organization.  According to Charles Handy, trust inevitably requires some sense of mutuality or reciprocal loyalty and this can be imparted by top-management alone. Here it is worth recalling a Korean adage – “Pure springs make for clear rivers”. True, the upper waters have to be necessarily pure for the river to be clean. Similarly, leaders are to be clean if the followers are to be fair. In the context of treasury, if individual dealers are to be ethically disposed towards business transactions, it is not sufficient to merely train them in business ethics but the top management has to set an example of its own by practicing what has been preached under ethics.

Today, customers prefer to carry out business with people they know and feel they can trust. This develops out of a logical conclusion that the individual with whom one is dealing has the best interest of all the parties in mind and would not do anything that jeopardizes his interest for the good of another. Thus, “trust” becomes an interwoven part of a dealer’s and in turn treasury’s reputation. A reputation is earned over years of ethical, honest behavior that demonstrates trustworthiness, fairness and integrity at all times.

Trust to Reputation

Reputation is what generally believed or said about an individual or organization. An organization’s reputation differentiates it from the rest in the competition. It takes years to build reputation but it can be lost overnight. In simple terms, an organization’s reputation squarely rests on the collective reputation of individuals working for it. Organizations must therefore strive to nurse individual reputations by creating trust in the organizations. It is generally believed that wherever trust is minimal, creativity would become the first victim.

Here leaders have two important jobs to perform. The primary job is to stimulate and drive the organization toward its survival, prosperity and achievement of goals. The second and the most important towards long-term interest of the organization is to create the climate, the culture and the corporate vision that enable people to contribute willingly and effectively towards that performance.  Transformational leaders must aim at infusing purpose and values into the system. They must excite people to search for answers to questions such as –

•   Why do we exist?

•   What makes us unique?

•   What do we stand for?

•   What do we not change even if it costs us additionally in the short run?

Such questions engage people emotionally in finding their own answers and once arrived at the right answers they stay glued to the new found values by practicing them steadfastly. It also help them build their own reputation.  If need be, organizations may engage the services of a professional trainer to promote sharing of the common culture on which individuals can ultimately build their own reputation.    

 

Five Steps Towards Individual Reputation

A business man being a trader needs to have a sound reputation among the market players else they may shy away from him, which in business terms mean shrinkage of opportunities to generate profits. To develop reputation for honesty, integrity, and fairness, one need to practice the following principles:

Step-1: Align oneself with trustworthy people

Every organization and for that matter every society does have individuals who stand out for their honesty and ethical behavior. Their word is considered as their bond. One needs to cultivate relationship with such people so as to adapt and adopt their behavior as a model. It is desirable to explore every available opportunity to rub one’s shoulders with such people and seek clarification as to how and why they make decisions in the way they do. Such opportunities could also be used to reevaluate one’s own value systems and in the process build a firm footing for ethical behavior.

Step-2: Have a code of ethic

Simply put, it is a creed or statement that reminds an individual as to what he should do and not to. Such an aide-memoire emboldens one to walk away from a situation where one knows that proceeding further in the matter is neither good for himself nor for the organization. It simply works as a wall to contain and to shape one’s behavior on ethical framework.

Step-3: Know your purpose

One need to identify his purpose of functioning in a given situation. He should probe for answers for questions such as—“what is the overwhelming passion that drives him to continue as the trader?” “Is it a simple desire to serve others?” Purpose helps one to lay a path that will enable him to make right choice, right decisions and keep moving forward. 

Step-4: Practice self-discipline vs. self-indulgence

Self-discipline dictates one to think about the consequences and then take appropriate decision against self-indulgence, which says, think about how you feel and then take action (to worry about the consequences later). Self discipline helps one in effectively dealing with the issue of decision making besides helping one to bounce back quickly and not to make bad decisions that injure one’s reputation during down times.

Step-5: Focus on thankfulness rather than entitlement

There could be occasions where a feeling of entitlement can invade a business man’s attitude, more so, when he becomes more credible in the market. Nothing can perhaps destroy a trader’s  reputation faster than conveying an attitude of deserving it.  Being thankful for the opportunity the profession has offered keeps one in the right frame of mind that ultimately commands respect in the eyes of the customer. Such a behavior makes people perceive the trader as the one who is truly there to serve and not just to sell the products; who is interested in binding together with them in a spirit of cooperation, fellowship and a relationship that is mutually rewarding.  

Conclusion

Business ethics still remains a fuzzy area. There are many people who remain unconvinced by the need for business ethics. The citations above   however argue that business ethics do matter in every walk of business, for, unethical practices can cost a company its reputation and in turn its market price. It’s time businesses practice ethics at least on the premise that “virtue is sometimes its own reward.”