Let's start talking about business ethics with an example: in the early 1980s, the American pharmaceutical company Johnson & Johnson experienced a nightmare. Someone spiked their painkiller Tylenol with cyanide; seven people died. Chairman James Burke did something radical at the time: he put the welfare of customers first, took all capsules off the market, and dealt openly with the case.
I did the Harvard business case as a young MBA student, but did not really understand the magnitude and full story until I heard it directly from the close family of Mr. Burke.
His handling of the crisis can be attributed to Johnson & Johnson's company credo, written in 1943. It says: 'We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services.‘ For the company, this is more than just a moral compass: 'We believe it’s a recipe for business success', Johnson & Johnson state on their website.
In terms of ethics, organizations can learn a lot from pharmaceutical companies and the healthcare sector in general. These industries have managed these challenges for decades, from board level to daily operations. Ethics have to do with corporate responsibility, with the perspective of giving something back, doing something for the environment, making a difference, setting a grander example.
But that’s only half of it.
Because business ethics do not only refer to the larger responsibility a company has towards society. They also apply to the organization itself and seep into the company culture. And there, too, it starts with the board.
As we all know, values must be more than vague rules on paper. They must be an authentic, tangible, continuous part of the day-to-day business – internally as well as externally, on all levels.
The most crucial basic rule based on good business ethics: manage by values, not instructions.
What Is The Rationale for Investing in Business Ethics?
1. Internal: a transparent, authentic, and value-based company culture improves morale. When employees experience daily that business ethics is taken seriously and not just an empty phrase, they will be more involved. An engaged workforce in line with the organization’s values is decisive for a company's success and growth. According to research by the Institute of Business Ethics, companies that teach their personnel codes of ethics outperform their competitors financially.
2. External: positive customer relationships lead to a better reputation and a stronger brand – which not only impacts business, but also recruitment. With the current talent war, change of values in younger generations, and increased transparency due to solutions for employer branding, this is crucial to attract top talent.
How To Implement Business Ethics in Your Company:
Define Core Values.
Overarching ethical values are the thread that connects employees and decision-makers. This, in turn, contributes to aligning practices within the company towards the achievement of an objective. Every decision – every day, by every member of the organization – is determined by underlying values.Implement an Ethics Program.
This should include a code of ethics that articulates expected behaviors and brings the organization’s values to life. When formulating your ethical guidelines be specific enough, but don’t get lost in details. A 2017 US study suggests that targeted and workshop-based training programs are the most effective way to implement business ethics.Have Clear Expectations.
Leaders have to ensure that their staff understands the expectations and that they are achievable. Clear communications and reasonable expectations are key. If people are not sure what’s expected of them or they feel overwhelmed, they can become frustrated and disengaged.Pay Attention to Management Practices.
Again, it’s the deeds that matter – not just words. When you implement an ethical code, you have to ensure that it’s being respected. If leaders within the organization are not behind it, those values are worthless. This, too, begins with the board.Business Ethics in HR
HR practices in particular should be based on ethical principles such as transparency and equal opportunities. This starts with recruitment and selection, continues with training, compensation, assessment of employees’ performance, and is reflected in every aspect of management.
After all, a company is not made up of a logo and shares – it is made up of people who have countless interactions every day. And it is here that business ethics and company culture show.
At Nordic Minds, for instance, we try to learn as much as possible before starting a project. We visit the manufacturing sites even if it is a CXO search, interview key people and ask for examples where the corporate culture and ethics have been a guiding star in people's behavior. Then, we bring this into the in-depth interviews. Because culture is crucial and we value openness, respect, and integrity.
Yes, business ethics play an important role at the societal level, as the case of Johnson & Johnson shows. But they are also crucial at the employee level. This is why they should be at the heart of every company. And in both cases, it begins with the board.
Christopher heads up the US operations of Nordic Minds in Atlanta, but can often be found in our Stockholm office, too. You can reach out to him via mail here .