Updated: Jun 22, 2021
Updated: Jun 22, 2021
Like a bridge requires structural integrity, integrity in business ethics is essential to build a foundation of trust between client and customer. Organizational structures should be engineered to this same quality of function, where load and excessive stress don’t result in catastrophic failures. Organizational structural engineering begins in an organization’s foundational values. These values should be consistently evident in its business model, relationships with stakeholders, and product and service offerings. Just as each component of a structure contributes to its overall integrity, the personal integrity of each member strengthens and safeguards an organization.
Why are ethics in business important?
Integrity is not just valued because it is viewed as a moral obligation—it makes good business sense. Acting and focusing others on an ethical code of conduct is a long-term investment in the relationships required to help a business succeed. Internally, a culture of trust promotes collaboration and teamwork, while minimizing negative conflict. A 2010 study by the Corporate Executive Board determined that companies who encouraged open communication and honest feedback from their employees delivered a 10-year total shareholder return that was 270% greater than their competitors. Externally, a reputation for integrity leads to trust, which influences others to engage in business with the organization over others.
Kirk Kerkorian, the son of a poor Armenian immigrant, found success orchestrating large investment deals in the real estate and film industries. As an 8th grade dropout, Kerkorian had no special credentials—just his integrity. According to real estate broker Jay Voorhees, “One of the ways big deal-makers make money is with their ability to raise financing for huge deals very quickly. Kerkorian could raise billions in financing faster than anyone else [because] everyone trusted him so much.” The self-made billionaire was known for his commitment to honor every handshake deal, no matter the immediate cost to him, and—judging by Kerkorian’s many casinos—it paid off in spades, which honesty in business can lead to. Successful global leaders recognize the value of integrity and why it should be an integral part of their organization’s culture.
Integrity in Business: Living Your Reputation
Plato posed the question: “is it better to be an unethical person with a good reputation or an ethical person with a reputation for injustice?” In a business setting, neither is ideal; a good person who fails to lead ethically may be perceived as weak, while a bad person who expects integrity from others is seen as a hypocrite. In Moral Person and Moral Manager: How Executives Develop a Reputation for Ethical Leadership, Linda Klebe Treviño, Laura Pincus Hartman, and Michael Brown state that a “moral person” is characterized by individual traits like honesty and equity, while a “moral manager” is known for influencing those values and behaviors within their organization. “To be perceived as an ethical leader, it is not enough to just be an ethical person”—you must be a moral person and moral manager.
Necessary integrity: A Cautionary Tale
Global businesses that recognize the importance of integrity in business avoid issues with public perception and even the law, as demonstrated by the unfortunate demise of Arthur Andersen LLP. The public accounting firm had it made—it was one of the “big 5” in the top tier of the accounting world—when it lost everything because of some smudged morals. On June 15, 2002, Andersen was convicted of obstruction of justice for shredding documents related to the Enron scandal. Many felt that Andersen had failed to do its job in the first place because it had approved Enron’s financials—deceptive accounting practices included. Although the company fired the partner who gave the order to destroy the documents, the damage had already been done: the jury sentencing (later overturned by the Supreme Court) served as its death sentence. Reputation ruined, the firm’s clients fled, and Andersen “[shrank] from 28,000 employees to just 200” (National Public Radio). The sad tale of Arthur Andersen can and should serve as a warning to all businesses: integrity in business is not an option; it’s a necessity for long-term survival.
While integrity is key to helping things go right, it also serves as a buffer when things go wrong. Companies who have been transparent in the past are more likely to be given the benefit of the doubt when they experience bad press. Because Andersen’s Enron indictment came amidst a string of other frauds committed by clients (including Sunbeam, Waste Management, and WorldCom), the public was not forgiving.
A trend of acquiescence to clients’ wishes had spread throughout the firm, overriding the auditors’ commitment to serve the public interest. The ability to proactively recognize problems and publicly address a plan to overcome them goes a long way to soothe the fear and concern that, if left unchecked, could escalate as it did with Andersen and its clientele.
The importance of morals in business
How do global business leaders develop and implement personal integrity in business? Besides adhering to a strict set of company ethics, employees should strive to be moral people. Morals are generally accepted to be a personal code of conduct that one adheres to regardless of the situation—they are a value system that is uniformly applied to both personal and professional conduct.
Individuals should consider which principles hold the most importance to themselves, their organization, and society. These may include qualities like honesty, reciprocity, compassion, and prudence. Evaluate how well these values are currently represented by personal conduct and implement an action plan going forward to habitually adhere to them. For example, if an individual wanted to develop prudence (exercising judgement and forward-looking wisdom), they might commit to one of the following action items:
I consider how possible actions will impact others before making a decision; if there are no alternatives that create a positive outcome for all, I will first consider what the law says (legally and morally) and then which option benefits the most people
I execute actions with proper due care, so that I achieve quality results; if there is an urgent need for haste in the event of an emergency, I will prioritize speed over quality.
These action items establish powerful guidelines that consider possible exceptions to the rule and how to react when the ethical structure experiences additional stress. At a corporate level, these values may be found in the company code of ethics, mission statement, or represented by the products and services provided. Employees should evaluate how well the company’s values match their own and determine in advance which actions will take precedence when they come into conflict. When it comes to personal integrity in business, honesty and reciprocity are particularly important to earning trust.
Honesty in business
The popular phrase, “business is business,” attempts to exclude business transactions from the ethical decision-making process. Perhaps members of this paradigm believe that because they can get away with dishonesty and are not directly prevented from doing so, they are entitled to manipulate the system in search of short-term profits. But what if everyone behaved this way? No one would be willing to enter into a deal because they would expect to be swindled. And what if only a handful of entities behave opportunistically? They would quickly be blackballed and bad mouthed by those they take advantage of—and everyone who hears about it. Honesty in business is critical to facilitating any long-term interaction.
Always say what you mean in a way that others can understand. In The 8 Rules of Leadership, the former chairman and CEO of General Electric, Jack Welch, calls this level of honesty “candor”: the courage to both give and receive honest feedback.
Candor requires individuals to be transparent and forthcoming with pertinent information because promoting integrity in communication—telling the whole truth at all times—is an investment in receiving the same consideration of accurate, useful information within a collaborative environment. It also requires leaders to ensure their promises remain true and information up to date. Promises must be given carefully to ensure the ability to follow through, even when the state of the world changes.
Reciprocity in business
Reciprocity in business is all about cultivating a collaborative environment. The world operates on relationships, and it is the expectation that each party will honor the requirements of the other which encourages two entities to enter into a transaction. “The golden rule” tells people to treat others the way they would like to be treated. For example, companies who are honest and generous in their relationships with vendors may experience reciprocity in business as they find their suppliers to be more flexible when it comes to accommodations like a delayed payment or rushed order. Loyalty to a vendor when they need the favor returned may even be rewarded with discounts or incentives.
The role of moral management in business ethics
A moral manager brings their integrity into the workplace, influences others to do the same, and facilitates bringing those value systems together in how the organization operates. This can be challenging in a global environment where personal belief systems differ more drastically, but managers who encourage an open discussion of values can raise awareness of the cultural disparities their team will encounter. In order to align individuals more fully with the organization, ensure that each team member is aware of the company’s mission statement and their personal role in achieving it.
One powerfully influential leadership style is leading by example: letting your actions speak to others. Strong ethical reputations encourage others to emulate them, while opportunistic leadership personalities send mixed messages that exacerbate ethical dilemmas and moral distress. A research study at Adelphi University found that various employee satisfaction metrics are positively linked to the employee’s perception of management’s behavioral integrity. The combination of personal and professional resolve sends a positive message of trust to investors, lenders, customers, vendors, and employees that they can rely on an organization and its leaders.
Management can influence individual behavior with incentives. Reward behaviors that align with company values and discourage those that are not in the best interest of the company. This includes graciously accepting others’ ideas, criticism, and admissions of mistakes in order to generate success. The use of rewards should be restricted to behavior, rather than being used as a method to gain favor with others. Performance expectations can either promote or undermine the stated values of the company.
In 1992, leadership at Sears Auto Centers inadvertently promoted dishonest sales practices. Management had given product-specific sales quotas that were rewarded with commission, incentivizing service advisors to recommend unnecessary service. Between lawsuits, customer refunds, and lost clientele, the lack of integrity ended up costing Sears $60 million. “If you deliver quality, play fair with your clients, and offer [transparency], people will keep knocking at your door.” If you don’t, you may end up with their lawyers knocking instead. This example with Sears Auto Centers demonstrates why integrity is important in business.
Integrity is the ability to act with consistency according to a value system. In business, one’s personal values can either be complemented or challenged by the priorities of the organization. Employees should seek out work environments that promote ethical behavior, while leaders must create those ethical environments. In circumstances where the organization does not promote acting in accordance with good values, individuals can create a plan to proactively practice integrity in spite of the pressure they will face. Global leaders who develop and teach the importance of personal integrity in business will find fulfillment and success in their endeavors.