Business Ethics and Philosophy

The Society of Business Ethics held their annual conference in Atlanta in August this year. Nearly 5 years since the collapse of Enron, ethicists still find their work in demand. Interestingly, most of these ethics professionals have philosophy backgrounds and more and more companies are adding ethics or compliance officers to their ranks. Pay for the top ethics officials at the biggest companies averages nearly $750,000 (according to Kieth Darcy of the Ethics & Compliance Officer Association).

In 2002, The Sarbanes Oxley Act was passed to establish new or enhanced standards for accounting in response to the corporate & accounting scandals affecting the likes of Enron, Worldcom, and Tyco International. However, these regulations have done more economic damage than it prevents (especially with smaller companies under $100Million in revenue where applying the law is particularly costly). On the other hand, some believe that SOX is essentially modest compared to the heavy rhetoric accompanying it.

Thus in 2004 the Federal Sentencing Guidelines mandated that companies "promote an organizational culture that encourages ethical conduct and committment to compliance with the law". These guidelines go beyond purely legal compliance. Companies must recognize and honor the spirit of the law. Thus, the growth in ethics training in all shapes and sizes.

According to Paul Voss, President and Founder of Ethikos, any approach to improving business ethics must be seen as a strategy and a system, and that all ethical systems require a philosophical foundation.

This gives businesses of all sizes an approach for building an ethical culture that will ultimately result in a system that will make SOX compliance easier (and less costly). And this is what I find of value for improving your compliance processes. It is all about getting to the foundational, value-added, day-to-day ethical activities that will result in compliance.

But how to you get to this? Paul Voss has a well established process around this. For the purposes of this article, I will pose his ten questions that every executive should ask about corporate ethics and ethical culture. These are questions that applies to any business executive or owner, regardless of the size of the business.

1. What is the relationship between ethics and other performance metrics in the company?
2. Have we, as required by the 2004 Federal Sentencing Guidelines, offered ethics training for all our employees? What should that training look like?
3. What is the relationship between ethics and profits?
4. Have we conducted a "risk assessment" to determine our exposure to real ethical damage?
5. How can we be pro-active in the area of ethics, culture, and corporate citizenship?
6. What tone should Executive Leadership set regarding ethics, integrity, and transparency?
7. What does management need from the Board of Directors and Senior Executive Leadership to enhance and buttress corporate ethics?
8. Who is driving ethics and compliance in the company?
9. Do we have consistency between and among the board, the CEO, executive leadership, and associates in terms of ethics and culture?
10. What impediments and roadbocks do we have that preclude ethical conversions and implementation of ethical practices, procedures, and protocols?

Any ethics initiative may seem "fuzzy" when compared to "harder" business process improvement initiatives. However, many business owners have learnt that SOX compliance is bigger than just changing their accounting processes. They have learnt that SOX compliance depends very much on the behavior of people as they carry out their business activities every day. THIS is where the "softer" side of ethics is key - and this is why it is important to look for solutions for driving ethics initiatives. The solution is in crafting a plan with a philosophical foundation coupled with a logical process. Ethical companies can be more profitable, competitive and sustaining.