The Importance of Ethics in Organizations

The Importance of Ethics in Organizations

Albert Camus, French philosopher and writer, said that a man without ethics is like a wild animal loose in the world. In Organizations, there is a growing concern about the ethical stance of its employees (and it must be), because the damage caused by the lack of ethics in business can simply destroy a company’s reputation, and even close its doors.

Emblematic Cases

Enrom Corporation was one of the largest American companies in the energy business, earning around $ 100 billion a year, but it went bankrupt in 2001, shortly after the accounting and tax fraud scandal they practiced surfaced. With that, it took along to the hole the audit firm Arthur Andersen (also a leader in its segment), which ended its activities in 2002, one year before completing 100 years of its foundation.

Petrobras, the Brazilian oil giant, since it was involved in the corruption scandals reported by the Federal Police’s Operation “Lava a Jato”, has lost market value and has been involved in legal disputes with its shareholders. From 09/01/2014, when the value of the PETR4 share was R$ 23.83 until 01/25/2016, when its value reached R$ 4.20, Petrobras (and its shareholders!) saw its market value decrease by 82%. With the loss generated to the shareholders due to the loss of value of the shares resulting from the company’s internal corruption, Petrobras closed an agreement with the American shareholders, in the United States, in January 2018, in which it should pay almost 3 billion dollars, ending the collective action initiated there. Not to mention the various individual actions brought against Petrobras. And without counting, obviously, all the damage suffered by the company (and its shareholders), due to the diversion of money from its cash, over, who knows for sure, so many years. If Petrobras were a private company, most likely, it would have already broken.

These are just a few cases, but there are several others, in large, medium, or small companies, some better known, others less. What seems to be common to all is that the damage resulting from cheating, unethical attitudes, or fraud, sooner or later, takes its toll.

Ethical Leadership Is A Sine Qua Non Condition

Yes, ethical leadership is not an option, it is a sine qua non (absolutely necessary) condition, at least for those organizations that wish to be competitive, efficient, innovative. I have already written a book (Cultura de Melhoria: Levando a Organização à Excelência – in Portuguese) where I show, in detail, the importance of ethics and moral principles in the leadership of the Organization. Basically, leadership, like any employee, needs to have ethics, but, above all, because leadership is an implementer of Organizational Culture, it depends on it to spread and maintain a Culture of Improvement, and, without ethics, that leadership will not have the proper moral authority to lead. Moral authority is the authority that has the most power to inspire, direct, and guide employees, a fundamental function of management.

What Research Say

The consultancy Deloitte conducted a survey, the Millennials Survey 2017, with 7,900 people of generation Y, born from 1980 (Deloitte considers from 1982), in 29 countries, among them: Germany, Argentina, Australia, Brazil, Canada , Chile, China, Colombia, South Korea, United States, France, Japan, Mexico, United Kingdom, Russia. An interesting finding of this research shows the growing importance that millennials are giving to issues related to ethics in Organizations.

Generation Y and the Importance of Ethics in Organizations

Another survey, conducted by the UK Institute of Business Ethics (IBE), showed that younger people (aged 16 to 34) have a higher expectation of their employer in terms of responsible business conduct , than the older ones (+ 55 years). The survey, carried out in the United Kingdom, Germany, Italy, Spain, and France, also showed that employees working in organizations that provide a program with the four basic elements of ethics (code of conduct, confidential means of reporting unethical conduct , advice on ethical conduct at work, and training in ethical conduct standards) have a more positive experience of ethics in the workplace.

Ethics in Organizations

Only the ethical behavior of people committed to the Organization can lead to effective success. Fraud, corruption, unethical behavior, sooner or later, appear and destroy the image of the Organization, when they do not bury it for good. Ethics promotes a work environment that breathes freely, in addition to being a premise for a Culture of Improvement, which can lead the Organization to Excellence.