Business and Ethics – are they compatible?

Business and Ethics- Are they Compatible? As health care professionals, when we think of the word ethics, we are likely to think about research studies or ethical dilemmas that we encounter in our own individual practices (if you thought of something else, please post and let us know!). However, how many of us would think of ethics in the realm of business practices? It seems like a paradox to write business and ethics in the same line. A recent survey by KPMG found that there was approximately $1 billion in fraud associated losses in Australia alone. Does this mean that these businesses are committing fraud, and more importantly the leaders that run these businesses, are being unethical? Let’s explore this further.

The core assumption behind running a business is to maximize shareholder value or profitability. So then, most people would ask the inevitable question: “How can I be ethical and still make a profit?” Well, the truth is that, almost invariably, the companies that are highly successful in the present day have strong ethical practices inplace. Is this a coincidence? I doubt it!

Ethics is derived from the Greek work ‘Ethos’ which simply translates to ‘character’. Some people would create a distinction between ethics and morals, however for me they are synonyms. I would argue that ethics encompasses moral values. Ethics, in my opinion, is defined as innate value systems created by your upbringing, cultural and religious traditions. Being ethical would quite simply mean that you are concerned about the not only your own overall well being but also the well being of others. In business, however, the line between being ethical and not is very fine and is quite often challenged. Let me give you two examples:

Two Examples

Example 1: A newly graduated physiotherapist, under probation for three months, joins a private practice where the majority of his caseload comprises of individuals who have been injured in a motor vehicle accident. In order for treatment to be approved by the funder, the physiotherapist is required to send a treatment plan outlining the costs of treatment and duration. A former patient (who completed treatment for motor vehicle accident almost a year prior) calls the clinic and states that his lawyer has asked him to restart treatment for injuries suffered two years prior. When the new physiotherapist meets with the patient, he determines that the patient does not require treatment (patient reported no pain) and that the patient attended the clinic purely on the advice of his lawyer. After speaking with the lawyer (The lawyer tells the physiotherapist that if he were to help with the case, he would personally refer his clients to him only), the physiotherapist nevertheless initiates a treatment plan comprising of treatment three times per week for 12 weeks. The clinic manager takes exception to initiating this treatment plan.

Example 2: A senior executive at a large multinational bank asks his one of his direct reports (manager) to interview his nephew for a vacancy at the bank for an investment analyst. The senior executive hands the manager the resume outlining the qualifications of his nephew. As he hands him the resume, the executive states “The interviewing process is simply routine. Go through the process and document it. I expect him to get the job”. When the nephew was interviewed, it was clear that he did not possess the necessary qualifications to become an investment advisor. What should the manager do now?

The Difference?

What is the difference between example 1 and 2? I think we can all agree that in both situations, an ethical issue exists. The first example illustrates the unethical boundary that the new physiotherapist chooses to cross when he initiates a treatment plan knowing that the patient would not benefit from any treatment. He initiated the treatment plan after speaking with the lawyer possibly because he knows that he will now receive more patients, regardless of whether the patient requires treatment or not (i.e. increase revenue for the new physiotherapist). In this example, the ethical issue can be easily resolved once the clinic manager points out the issue to the newly hired physiotherapist. He can implement guidelines behind when a treatment plan can be initiated. In addition, the clinic manager may choose to bring about change in the new physiotherapist but understanding why the ethical dilemma was created in the first place and discussing these with the new physiotherapist. This would likely bring about a long-term change when ethical issues are encountered.

Contrast the above situation with the one in Example 2. Here you have an already hierarchical relationship being enforced even further when the executive states to the manager that his nephew has to be hired. What would resolve the manager’s ethical dilemma? The easy answer would be to state that the nephew is not appropriate for the job and communicate that to the executive. But let’s take a step back and re-focus on the relationship between the executive and manager. If the manager decides to hire the nephew, then all is good. No conflict arises, but we could question the ethics of the manager (of course, we have clearly established in the example that the executive is being unethical to begin with!). However, if the manager becomes a ‘whistleblower’, then the consequences could be large. At large corporations, you will come to be known as someone who ‘rats’ people out, thereby  losing trust in your colleagues. Secondly, the manager may end up losing his job as he has gone against the wishes of his direct superior.

The example 2 and the situation that arises out of it, is not uncommon in the business environment. Ethical issues are continually being paraded in the office place and few truly ethical people are either discarded or have lost confidence within the company.

Resolving the paradox between business and ethics

The answer lies within leadership. Businesses cannot run effectively in the long-run if they are not lead by an ethical leader. Being ethical is not a choice in business, i.e. you cannot choose as to when to be ethical. Your everyday decisions in business need to be ethical. We cannot simply wait for news articles to be published about corruption, greed, misuse of public funding or fraud, before we start being ethical. With increasing media exposure, businesses have no choice but to ensure that each and every individual working in the company has ethical standards.

Key Steps

  1. Understand your own ethical values and write them: How often do you sit and think about what guides you ethically in life? If you have not done that yet, it’s a worthwhile exercise. Ideally, doing this exercise every few months allows you to redefine how you run a business and what types of individuals do you want to surround yourself with.
  2. Start at grassroots level: If you have read Jim Collins ‘Good to Great’, he states that getting the right people on the bus is crucial for a successful business. Getting the right people on board, to me, would mean hiring people that share the same ethical standards as you (assuming you are ethical to begin with!). If you have acquired a business, then get the wrong people off the bus!
  3. Be honest: Being ethical also means that you need to be truthful with yourself and others about your business practices. If for a moment you question whether the decision you are making might be unethical, it may be worthwhile to shelf the idea itself.
  4. Responsibility: As I had written in an earlier post before, it always pays to admit your own limitations and mistakes. ‘Passing the buck’ to a fellow colleague is being unethical.
  5. Profitability: Odd isn’t it? I am sure most of you saw this and said, well why profitability is in the tips for resolving a paradox. Well here’s why. If you are answering to shareholders about the value of your business, it is important to communicate your business ethical practices. Corporate social responsibility (CSR) goes hand in hand with that communication. Over the last few years, you have seen a significant push for companies to adopt CSR practices and being ethical is a large determinant of that process.

Lastly, I came across an oath that was created by the 2009 Harvard University MBA graduates (http://mbaoath.org/take-the-oath/). There is no surprise or coincidence that ethical values are so embedded in the oath itself. What do you think?

This article is written by Swapnil Rege. Swapnil is a director in private health care. He is currently pursuing his MBA at Schulich School of Business in Toronto, Canada with a specialisation in Health Industry Management and Accounting. In addition, he is the Chair of the Oncology Division of the Canadian Physiotherapy Association, Vice- President of the Ontario Physiotherapy Association (Westgate District) and is overseeing the development of a leadership curriculum in the physiotherapy profession.


One Response to "Business and Ethics – are they compatible?"

  1. Jake Harry says:

    Leader must be having good quality of leadership and command.

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