Is it financially rewarding to conduct ethical business?
In these exceptional times the financial health of companies is put to test. The very unpredictable environment that we have inevitably leads to short sighted decisions and prioritization. Which may be well warranted. But having a short-term perspective, in a crisis, is never an argument for not considering the longer-term ethical aspects.
Ethics in business is not only about wider considerations, such as considering the wider society and environment, but also about a longer time horizon. Many scandals originate from conduct that has happened a years ago, and this is what we, as business ethics professionals need to advocate for. The longer term and wider perspective. Because I firmly believe that ethical business is both profitable and financially rewarding business, from a holistic perspective.
A POSITIVE BELIEF IN BUSINESS ETHICS
In the recent Nordic business ethics survey we wanted to know how the 4.000 respondents from Denmark, Finland, Norway and Sweden felt about ethical business and financial rewards. And I have to say that at least I was positively surprised.
A majority of the respondents do believe in that ethical business is or will be, within five years, financially rewarding. Less than 10 % believed that it never will be financially rewarding to conduct ethical business. Employees in a top management level, or that had been in the working life for more than 25 years were most positive. Which gives an indication of the belief in that ethical business and financial rewards are not mutually exclusive.
THE CRITICAL ROLE OF INVESTORS
The questions are how companies really are integrating this, and perhaps more importantly how investors and the financial markets view this. If the financial markets continue to reward short term results it will be challenging for companies to make longer term decisions, prioritising long term ethics over short term gains. What we do know however is that unethical conduct may become very expensive and destroy shareholder value in the blink of an eye. It is not uncommon to see billion dollar settlements with authorities, especially US authorities that have wide jurisdiction, for illegal and unethical conduct. And this is only the fines, additional downside regard cost for legal fees and remediation, diverted management attention and loss of customer and employee trust.
JOIN OUR SESSION ON MAY 28 with Carnegie
Having investors appreciating and understanding how to assess ethical business practices is key to securing financial rewards. Niina and myself will explore this more in a discussion with investors and Carnegie Head of Research in Helsinki, Tom Skogman, on May 28th at 2pm EEST. If you are interested in participating please register at firstname.lastname@example.org
I promise it will be an interesting discussion!