Good ethics is also good business

In the first decade of the 21st century, many businesses learned firsthand
the moral and financial risks of focusing exclusively on short-term financial
gains. Consider the example of Lehman Brothers, which, after 158 years of
successfully doing business , went bankrupt in the space of a single weekend.
The causes: horrific mismanagement and a reckless disregard for moral
hazard.
The results: the worst global recession in decades. The Lehman Brothers debacle is only one of a long and growing list of recent
business-management scandals that now includes Arthur Andersen, Enron, Bernard Madoff and Parmalat.


In his latest book, ''Management Ethics: Placing Ethics at the Core of Good
Management' (Palgrave Macmillan , 2012), Domenec Mele seeks to shift our gaze
from short-term gains at any cost to a deeper, longer view of management. Mele
argues that good management should take ethics into account because management
is about people, and dealing with people requires ethics. A business is not a
machine. It is first and foremost a human construct.
Those who run the firm are free individuals who cooperate within an
organisation with common goals, and the decisions and actions a manager takes
have the potential to benefit or hurt other people. Thus ethics is not an
artificial add-on to business, but an intrinsic aspect of good management.
Companies should, therefore, resist seeing people as resources or as simply a
means for profit. Ethical management is about recognising what people are,
treating them accordingly and fostering their development.
Ethics are embedded in management - first through decision making, second
through the ideas that drive the practice of management and third through the
moral character of the manager him or herself. Making and acting on ethical
decisions help to humanise a business, generating trust, fostering loyalty,
encouraging responsibility and helping to develop a strong moral culture.
Respect for human dignity is a principle Mele proposes, along with the
necessity to contribute to the common good of the communities to which one
belongs, and to society . He holds up three basic values, and their
corresponding virtues, as critical to ethical management: justice, truthfulness
and intelligent love. Justice renders to all what is rightfully theirs.
Truthfulness refers to the observance of truth in speech and behaviour, and a
disposition to search for the truth.
Intelligent love, understood as love driven by knowledge of the needs of the
other , goes beyond justice and entails care and benevolence. Having an ethical
sense pushes one to act in the best way for the purpose of efficiency. In turn,
a company's efficiency contributes to the common good.
Business managers always face a trade-off between generating profits and
being responsible to their firm's many stakeholders . Shareholders, employees,
customers, suppliers and the local community all have a stake in the success or
failure, sustainability or loss of the firm. In a nutshell, while making a
profit is necessary and important , it is not the sole purpose of business.
Moral competencies, including character and virtues, have a particular
importance in leadership. Character shapes the leader's vision, goals,
strategies and perception . As Peter Drucker said, "It is character through
which leadership is exercised."
While ethics may not be a cure for all the ills affecting the economy, they
are vital if we are one day to move beyond the current crisis to a sustainable
recovery. As Mele contends, by helping managers choose the best possible
alternative in each situation , ethics offer a sure path to better business
practice and even to a better world.