Firms Say Good Ethics Make Business Sense

COMPANIES have become key teachers of ethics. ''The workplace is now the most important arena for moral development in the United States,'' says Ronald Berenbeim, a senior research associate at The Conference Board in New York.

A relatively large percentage of Americans go to church, synagogue, or mosque each weekend compared with other industrial nations. But, in Mr. Berenbeim's view, many religious adherents ''don't organize their life around the church as they did 40 years ago. They go, listen to the sermon, and they leave. I don't see the same kind of adhesion to these institutions. There is not the same opportunity for moral growth or decline.''

Some families also fail to provide adequate ethical training.

Corporate executives, seeing ethical weaknesses, have moved to fill the gap. ''They feel uncomfortable with this,'' notes Berenbeim. ''Companies are not organized to do the same thing as churches and synagogues.'' But most men and women now work in business institutions that ''create moral dilemmas.'' Employees must make decisions involving ethics that their bosses hope will not get them or their companies into trouble.

Berenbeim sees several bits of evidence of growing corporate interest in maintaining high ethical standards.

1. Business ethics issues, once delegated to the human-resources department, have moved to the executive office.

The Conference Board, a business membership organization that does research and conducts conferences and seminars, has held an annual meeting on business ethics since 1990. Attendance has grown each year, reaching 225 last year. Where those attending used to be personnel officials, a rising percentage are chief executives, general counsels, auditors, or finance officers.

''Senior executives now recognize that expertise in ethics is necessary in most areas of business,'' Berenbeim notes.

2. Almost all the Fortune 1000 large companies have drawn up and distributed codes of ethics for their employees and maintain hot lines for whistle-blowers and others facing ethical quandaries. Ombudsmen to deal with employee complaints are fewer.

3. More executives are becoming interested in game-theory analysis that shows a company can get an advantage in the marketplace by setting high standards of ethical performance.

In 10 years, this will be accepted wisdom, Berenbeim says.

And over the past 10 years that he has been observing the field of ethics, notes Berenbeim, ''We have gone from an interest in pronouncements [of ethical standards] that would preempt third-party interference, namely by the government, to genuine interest in developing ethical decisionmaking processes.''

One motive for executive interest in ethics has been the Foreign Corrupt Practices Act (1977) that outlaws bribery of foreign government officials and the more recent (1991) Corporate Sentencing Guidelines. If a company employee commits a crime, the latter act provides for the mitigation of fines and penalties against the company if it has in place an effective ethical compliance program for its employees involving training, codes, and so on.

Those laws, says Berenbeim, have caught the attention of corporate counsels. They want to be able to tell a court that the company has made a ''good-faith effort'' to communicate high corporate ethical standards to its employees.

Another factor behind the growing interest of both executives and their employees in ethics has been the growing mobility of the work force with rampant downsizing and the resulting decline in employee loyalty to companies. Employees expect to move from company to company during their careers. Those with specialized training in such areas as human resources, marketing, information technology, and corporate communications want to be regarded as professionals, like lawyers and accountants. ''These managers recognize that a code of ethics is the hallmark of achieving professional status,'' notes Berenbeim. Companies hiring new employees in these areas welcome the greater assurance of ethical conduct arising from such standards.

Rand Corp.'s Francis Fukuyama indicates that ethics are essential in his 1995 book, ''Trust'' (Free Press): ''One of the most important lessons we can learn from an examination of economic life is that a nation's well being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in society.'' Business depends on a high degree of trust between seller and customer, boss and employee.