Ethics in the workplace

While the question of "what is right?" has long been at the heart of religious and philosophic debate, recent high-profile corporate scandals have pushed it to the front of the business world.

Tighter regulations and growing evidence that good practices are good business have led some to question the real motives behind changing attitudes. Regardless, business people are discussing ethics more often and in greater depth ? a significant and positive change, many professionals and academics said.

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"I believe it's something people are really taking to heart," said Jack Cotton, chief executive of Madison-based accounting firm Suby, Von Haden & Associates.

He said it is much more common now for clients to ask the firm for advice on ethics and internal-control procedures ? such as how to define and communicate core values or how to manage personnel issues ? than it was just a few years ago.

"In my interaction with other business people, I see more awareness of doing it right, taking care of business, and being highly ethical," Cotton said. "And they're aware that the public is demanding that of us."

UW-Madison Business School Dean Michael Knetter also has noticed an increased interest in ethics, both from students and the general public.

"What's changed is people are asking us about it now," he said. "Students bring a heightened awareness of that coming in, relative to where they were before."

Another measure of the rising profile of ethics in the corporate world is increased activity in professional organizations. The Ethics Officer Association (EOA), based in Waltham, Mass., has mushroomed from 14 members at its founding in 1992 to more than 1,200 today, interim Executive Director Keith Darcy said.

Part of that growth is driven by a desire among people in the business community to improve and formalize the way they consider ethics in day-to-day decision making.

"I'm hopeful that over time, as we collectively begin to have a framework ... it can't help but lead to better decisions and more robust conversations, which I think is in itself a very positive outcome," said EOA member and Alliant Energy Vice President Dundeana Doyle.

Indeed, much of the current conversation about business ethics emphasizes the potential benefits of better long-term decision making. In that sense, industry's increased concern for ethics could be considered enlightened self-interest.

The proliferation of values statements, for example, was prompted by a 1991 change in federal sentencing guidelines that eased penalties for companies that published ethics guidelines and promoted them among their employees.

More recently, federal lawmakers have sought to curtail corporate malfeasance with sweeping legal and regulatory reform, much of which places a greater emphasis on internal controls and fostering a culture that supports and encourages ethical behavior.

At the same time, there is a growing body of research that suggests companies that are among the most ethically responsible outperform their peers financially.

While academics have debated how best to measure ethical and financial performance for as long as they have researched them, a 2003 analysis of 52 studies published over the past 30 years led researchers at the University of Sydney in Australia and the University of Iowa to conclude there is a "highly positive to modestly positive" correlation between socially responsible corporate behavior and strong financial performance.

"The basic principle has been that companies that are run ethically tend to be long-term good investments," said Tom Plumb, president of Wisconsin Capital Management, a Madison-based investment firm.

While the Sarbanes-Oxley Act and other reforms are routinely held up as proof that the U.S. government has become serious about combating unethical behavior, many ethicists wonder whether the recent focus on regulatory compliance is actually hampering the advancement of ethical debate by encouraging people to substitute a legal definition of ethical behavior for one based on broad moral principles.

"As a society, we've gotten very lazy in terms of thinking about this stuff," said Thomas Eggert, who teaches a business ethics course at UW-Madison. "The easy answer is, 'What does the law require? I'll do what the law requires.'"

In that sense, Eggert, who has two young sons, believes elementary schools and the corporate community suffer from the same problem.

"I don't think the schools do a very good job of creating the framework as to how do you make the right decisions. They'll tell you what the rules are, but we want our kids to be thinking, not just following the rules," he said.

"We want them to understand why doing something is not the right thing to do. And the answer to that question can't be just 'Because it's against the rules.'"

The EOA's Darcy also thinks society needs to do a better job of teaching people to weigh ethical issues.

"We're a legalistic society, and we've created a lot of laws," he said. "We assume that if you just knew what those laws meant that you would behave properly. Well, guess what? You can't write enough laws to tell us what to do at all times every day of the week in every part of the world.

"We've got to develop the critical thinking and critical reasoning skills of our people because most of the ethical issues that we deal with are in the ethical gray areas."

Darcy believes we are now entering the second phase of the corporate ethics movement: culture.

"We're moving beyond compliance for a very simple reason: because culture trumps compliance," he said.

"Virtually every regulatory body in the last year has come out with language that has said in addition to law compliance, businesses are also going to be accountable to ethics standards and a corporate culture that em-braces them."

The increasing pressure to create a corporate culture that promotes ethical behavior is leading many business leaders to ask themselves a question ethicists and educators have been wrestling with for centuries: Can ethics be taught?

The consensus among some of the country's leading business ethics professors, ironically, is no.

Jeffrey Seglin teaches ethics and writing at Emerson College in Boston and writes a weekly ethics column for The New York Times. Asking if ethics can be taught, he said, is "sort of like asking whether you can tell somebody to have the values you want them to have."

His answer: "You can't."

"What I think you can do is you can help people by giving them tools to use in making ethical decisions," such as those that help them identify their values and consider the effects their actions will have on other people.

"It's navigating the gray areas on a day-to-day basis that becomes critical, because we all know the stark differences between extreme wrong and extreme right," Seglin said. "What we don't know how to do and we don't always do a good job of is navigating our way through the gray areas."

Eggert agreed.

"I tell (my students) during the first class, 'I can't teach you ethics,' " he said.

"Everybody has their own set of values before they come into the class, and I'm not going to change those values."

"That is the framework, the ground that they're going to build on as they make decisions in a corporate setting as they get out into the working world. And if they're pretty confident about who they are and what their values are, that will make making ethical decisions easier for them."

Experts say it's hard to predict exactly what will be expected of the next generation of business leaders and the companies that employ them. Most agree there will likely be a more ethically conscious work force and a greater focus on improving corporate culture.

"I'm a big proponent of the school of thought that says pendulums swing, and I think we're on one end of the pendulum right now ? not as it relates to the importance of ethical behavior, but as to the role of regulation and legislation in being the impetus for ethical behavior," Alliant's Doyle said.

"I can't imagine that in this area we'll be at status quo for very long, but I think it's a little bit too early to predict what might happen next," she added.

"I think we've gotten a lot better," Darcy said. "As long as the light of awareness continues to shine, I think we'll continue to see improvements.

"I also think ? for the very reason that information is fundamentally and abundantly available ? we're going to continue to see scandals."

Plumb, from Wisconsin Capital Management, agreed.

"There are certain times in cycles that people tend to forget their ethical roots, but then you swing back and are always reminded that fundamental principles are, by their nature, fundamental, and they can't be tampered with or ignored," he said. "This is one of those times that's reminding everyone of that."

Dick Kwartler, who follows trends in business education as editor and publisher of The MBA Newsletter out of Floral Park, N.Y., believes business ethics is more important today than ever.

"The fundamental question of what is good and what is evil takes on added importance, I think, when so much of the life of this country in particular is determined by corporations," he said.

"It's crucial to the very future of this country in many ways, so it's not a simple question of philosophy; it's a very practical question."