How business ethics can drive positive change
As an academic discipline, the field of business ethics has been around for 40-odd years. It emerged in the 1980s through the establishment of journals and conferences. At that time, businesses were beginning to take notice. Many companies created a code of ethics, a manual to employee morality. Despite this explicit definition of ethics, a swathe of corporate crises and scandals from Enron to WorldCom underpinned how important it was to put the theory into practice. Muel Kaptein, Professor of Business Ethics and Integrity Management at Rotterdam School of Management, Erasmus University, about business ethics and the coronacrisis: “The longer the coronavirus crisis continues, the more business ethics will be placed under pressure.”
'From the 2000s, we saw organizations focus on establishing an ethics programme to implement their codes of conduct. Companies cultivated an ethics committee, while many also pioneered a new role: the chief ethical officer. Organizations also put on ethics training, introduced ethics screening and an ethics hotline. This did not go far enough, however. The global financial crisis of 2007-08 that was sparked by the collapse of Lehman Brothers and plunged the world economy into chaos, exemplified a failure of corporate culture. Lehman Brothers had a beautiful code of ethics and a great ethics programme, but this failed to prevent the lack of ethical behaviour among its bankers and executives, at great cost to society.
Following a public outcry, regulators began to clamp down on ethical malpractice. As public opinion shifted, we witnessed a pivot away from the shareholder primacy doctrine, pioneered by the late economist Martin Friedman, to a cuddlier form of capitalism in which all stakeholders – employees, customers and suppliers – are considered in business decisions. Profit at all costs was going out of fashion, a trend compounded by growing social unrest over a potential climate catastrophe. This boded well for the once fringe discipline of business ethics, which was rapidly rising up the corporate agenda.'
Read on in RSM Discovery Magazine.