Bottom-Line Ethics

Ethics in business? The idea was once a contradiction, like working moms or bluejeans in the office.

But take this latest example of how the long arm of ethics is quickly catching up with the hidden hand of the market:

Last week, eight clothing retailers, including Liz Claiborne and Tommy Hilfiger, settled a lawsuit over allegations that they were responsible for abuses against foreign workers in the textile factories on Saipan, a Pacific island in the US commonwealth.

So far, the lawsuit has forced 17 US retailers to settle (without any of them admitting wrong-doing). And factory workers on Saipan are getting better working conditions, such as relaxed restrictions on bathroom breaks.

Global corporations, like governments before them, are being forced to adopt human rights standards (see story, page 11). Many are forced to do so just to avoid court suits, PR disasters, or even to attract top executives.

In a global economy and Internet world, temptations to cheat, steal, or bribe are easier and more numerous. Buying clothes from a sweatshop in Bangladesh now carries "guilt by association" for a company. One recent survey found almost 50 percent of US employees said they had committed an unethical act related to a new technology during the past year.

And human rights activists have discovered the Alien Tort Claims Act, which was passed by Congress in 1789 mainly to help US citizens seek compensation for pirate attacks. Now the law is used to track down corrupt foreign leaders or US companies that break "the law of nations or a treaty of the United States" - outside the US.

Doing well with ethics

But sometimes outside pressure isn't the only reason for a company to adopt a code of ethics. Many find they can do well by doing good.

Business ethics has become as standard as an MBA. Much of the momentum for ethical practices started when companies decided to avoid trade with apartheid South Africa in the 1980s.

Corporations that don't have codes of conduct and effective compliance programs that detect and prevent violations of law can face big legal problems if their executives are caught doing something illegal.

And in the 1990s, federal courts began to ignore a company's "paper compliance" to a code if its actions showed it did nothing to stop an illegal act.

Ethical standards have become a necessary buffer against law breaking or to prevent such disasters as the Exxon Valdez oil spill.

Just helping company managers design ethical codes and train employees has itself become a $1 billion enterprise. Knowing whether to pay a "living wage" or a "prevailing wage" to workers in poor nations requires a long walk through moral complexities and past land-mine words like "exploitation." And knowing whether an investment in Burma helps the people but doesn't support a dictatorship takes fine-tuned ethical reasoning.

How to devise a code?

Hundreds of different codes for ethical conduct exist in businesses today. It's difficult to find a consensus for corporate ethics, especially one that works across cultures. As technology and the global economy break down traditions and a sense of community, company managers are struggling to devise moral rules that fit a diverse, often cynical workforce.

Even Adam Smith said the principle of self-interest necessary to the market should not apply to social relations, otherwise it would destroy the very morality that makes economic self-interest possible in the first place.

Just handing employees an "ethical instruction manual," however, is based on the idea that managers can discern eternal moral principles. As that claim to top-down moral authority has come into question, managers have instead tried to enable workers to come up with their own codes of behavior, often with the help of ethical "experts," in hopes of reaching a consensus.

But while self-reflection and ethical debate can help make a code of conduct more workable, many employees may just go along for the ride because "that's what the boss wants." That's been called "agreement racket" ethics.

So many companies try to combine a top-down ethical code with some democratic process of consulting employees in hopes of instilling corporate morality.

It's not an idle exercise.

As the power of corporations grows, so too do the demands for them to take more responsibility for their impact on the world. Business ethics lies at the heart of avoiding abuses and creating a world that is safe for business.

(c) Copyright 2000. The Christian Science Publishing Society