What’s your company culture? Your value system? Who are you and what do you stand for? It’s important to set some guidelines to let employees and those invested in your company to know what’s what. Create a list of values, explain what they are and, most importantly, lead by example. This way everyone is on the same page and you can hold one another accountable and create a great environment for employees, customers, and yourself.
How to Create an Ethical Firm:
Firms have to follow the law and the law is black and white. Being ethical in business is a choice and the rules are often in the gray area. Understanding what it means to be ethical in business, and realizing the rewards, can start you on the road to establishing guidelines in your firm.
What it means to be an ethical firm
Take this example: A company sells bottled water and a devastating storm hits its area. People are desperate for water. If the company increases prices too much, it’ll be in violation of laws against price gouging; this is a black-and-white area. But should the company take advantage of supply and demand and raise prices at all? This is an ethical question.
Sometimes it appears that it costs more to act ethically (e.g., foregoing potential profit from a small price increase as in the previous example can be costly). However, the contrary is true. Studies have shown that ethical companies are significantly more profitable (see e.g., Corpedia’s Ethics Index for public companies). Think of the goodwill that the company in the example could engender by giving away its bottled water for free in the aftermath of the storm?
And it seems only logical that acting ethically avoids problems that would otherwise cost money to resolve.
How to create ethics guidelines
Owners must make the decision to create an ethical company and then follow through. Here are my suggestions for getting started:
Identify all of the parties (also referred to as stakeholders) to be concerned about. These include:
- Employees
- Customers
- Vendors
- Investors
- The community
Create the practices, attitudes, and actions to be applied. Steps include:
- Listing objectives
- Defining activities
- Creating a company culture that reflects the set policies
Share the company’s Code of Ethics. Provide employees with written statements about the company’s ethics. Owners should be prepared to lead by example, acting ethically and requiring the same from their staff.
Resources
The following are some sample codes that you can review and adapt to your needs.
- Code of Business Conduct from the Coca-Cola Company. Its guiding principles: act with integrity; be honest; follow the law; comply with the Code; and be accountable.
- Code of Ethics for Companies from Instituto de Consejeros-Admininstratores, Spain
- Sample Code of Ethics and Business Conduct from the Society of Human Resource Managements (Note: Must be a member of SHRM)