Ethics in Business
The two words ‘ethics’ and ‘business’ come together in the same sentence often, although what they mean when they are juxtaposed like that depends on whom you ask. A common refrain is that it means ‘doing the right thing.’ But even that becomes somewhat complicated amid questions concerning who we are doing the right thing for. And then, there’s the matter of profit, and the question of if, when, and under what circumstances it comes ahead of ethics. To get some answers, BusinessWest convened a panel of area business leaders for a virtual roundtable discussion. The comments, as might be expected, are thought-provoking, and lead to more questions. Our panelists include Peter DePergola, chief Ethics officer, senior director of Clinical Ethics, and chief of the Ethics Consultation Service, Baystate Health — and also Shaughness family chair for the study of the Humanities, associate professor of Bioethics and Medical Humanities, and executive director of the St. Augustine Center for Ethics, Religion, and Culture at Elms College; Sandra Doran, president of Bay Path University; Tom Loper, Associate Provost & Dean in the School of Arts, Science and Management, Bay Path University, and former business owner; Mark Cutting, president and CEO of C&D Electronics; Drew DiGiorgio, president and CEO, Wellfleet; and Patrick Leary, partner with MP CPAs.
Watch the video here:
BusinessWest: Let’s start with that phrase ‘ethics in business.’ What does that mean to you?
DePergola: “For me, ethics is the philosophical study of morality, and morality, at its heart, concerns how the actions we perform contribute to the persons we become. To me, ethics in business is the way we in which we express and articulate or moral character in business transactions — not just with consumers, but with one another on our teams. We’re a little slow in western culture to pay as much attention to ethics in business as we should; there’s the classic Freeman v. Freeman debate where we talk about the distinctions between profit and corporate social responsibility, and whether we should ever sacrifice things like profit in pursuit of greater common good. So I think the opportunity for business to pause and reflect on itself in a new way is somethings that’s evergreen. Ethics is something that’s been discussed and considered for a much longer time in things like medicine, starting with people like Hippocrates. Ethics in business is no less important than ethics at the bedside.”
“To me, ethics in business is the way we in which we express and articulate or moral character in business transactions — not just with consumers, but with one another on our teams.”
Doran: “I think any discussion of ethics also has to include a discussion of morals and values, because each one of those has its own place in how we think about things. Most people think of morals as a more personal aspect of their character and how they view things, the lens through which they look at the world. And when we think about ethics, it’s often framed more as an organization; what are the rules, what is the code that people are going to operate within as part of an organization? That’s a really important consideration for any business or organization: what is the lens, what is the framework? And how are we thinking about ethics in that context?”
Cutting: “I’m in the aerospace and defense industry; we service a majority of the prime contractors across the world. Ethics for me is … we are a small, minute part of the supply chain in that industry, and our hope is that, as a small business, we can be treated fairly and ethically. We understand our competition, and we understand that, because we’re small, we may be taken advantage of at some level. Those are the things we think about as we strategize and when we work with these big firms and negotiate contracts. We have to hope that the terms and conditions that apply to us apply to others. It’s a concern, and we hope that we’re on a level playing field. We just don’t know. We’re hoping that everyone who supports that industry is ethical at some level.”
“Most people think of morals as a more personal aspect of their character and how they view things, the lens through which they look at the world. And when we think about ethics, it’s often framed more as an organization; what are the rules, what is the code that people are going to operate within as part of an organization?”
DiGiorgio: “Our business, Wellfleet, provides health insurance, intangible goods; you can’t touch what we produce, so what we produce is a trust, a bond with our members, our clients. It’s all about ethics at the end of the day. Ethics, for us, means doing the right thing, quite simply put. We have contracts and agreements, and if anyone’s looked at a health-insurance policy, it’s 60 pages long; good luck with that. But there’s a lot of faith that you will act ethically about my claim. We’re part of Berkshire Hathaway, and when you’re trying to manage a conglomerate of companies like Warren [Buffett] does, you really just do it through ‘do the right thing.’ That’s the only way to manage at that level.”
Loper: “I like to break ethics down into ‘good’ and ‘bad.’ Are we doing something that’s good for folks that are stakeholders? Are we doing things that are not so good? Are we being open and honest? Are we being trustworthy and respectful? All those things are parts of a code of ethics that helps us to deliver on our promise and not come up short. Sometimes we all come up short, we all walk with a limp, as they say, but some people do things intentionally and break those bonds, the contract they’re supposed to have with their stakeholders, and when that’s done, that’s not good at all.”
Leary: In public accounting, our job is help other businesses succeed, so we’re privy to a lot of confidential information that is not out in the public realm, and we’ve very cognizant of that. As a public accountant, we’re required to participate in a periodic ethics training specifically on ethics issues, which is interesting because it gives you a chance to pause and look at various scenarios where ethics come into play — not that it doesn’t come into play every day.
“Looking back on my career, and when I’m talking to someone about personal tax planning, I have yet to find someone say, ‘hey, how can I pay the most in taxes?’ Usually, it’s ‘how do I reduce my taxes?’ You need to be careful that you’re playing within the rules, the regulations that are provided out there. There are people that would prefer to skirt those rules, but our job is to make sure that our clients are not doing that, as best we can. We are looking out for our clients, but it’s not just the business owner. It’s the stakeholders as well. Without employees, without customers, without suppliers, you don’t have business. So our business, Mark’s business, Bay Path … everyone here, you’re built on reputation, and it’s easy to lose your reputation and very hard to get it back.”
“Sometimes we all come up short, we all walk with a limp, as they say, but some people do things intentionally and break those bonds, the contract they’re supposed to have with their stakeholders, and when that’s done, that’s not good at all.”
BusinessWest: We’ve heard the phrase ‘do the right thing’ a few times already. What exactly does that mean? Right for whom?
DiGiorgio: “You have to keep things simple from the standpoint of terminology, so people understand. You can talk to someone about ethics, and they may or may not understand how ethics works. But if you say ‘do the right thing,’ you can have a team that focuses on your customer, your member, your team. It’s about doing unto others as you would have them do unto you. It’s about treating people with respect, treating people the way you would want to be treated. There’s a lot of ways at looking at ‘do the right thing,’ but most of us understand that, at the end of the day, the ‘right thing’ is the right thing for the person you’re dealing with. Maybe that’s a member on a call with customer service, or maybe five minutes before your lunch break, and you know the call is going to take 10 minutes. Spend the 10 minutes; do the right thing.”
Doran: “At Bay Path, our focus is on the student, so we’re always talking about what’s best for the student. But the way we think about doing what’s best in terms of the customer, the student, is ‘how do we build a strong community?’ Because if we have a strong community that supports each other and is invested in everyone’s success, then people generally make the right decisions. If our students are not successful, we’re not successful; if our registrar isn’t successful, then our students are not successful. We’re really focused on this virtuous cycle of success.”
DePergola: “There are many different avenues to try to articulate the ‘right thing to do’ in a given scenario. One of the things we try to do is look at decisions to be made from a variety of different perspectives, understanding that our primary goal in that analysis is very likely, although not exclusively, to try to make the small decision 1,000 times to put someone else’s well-being ahead of our own, without sacrificing who we are as a person, what we stand for, at a base level. In the clinical world, we’re asking questions of whether what we’re doing is reasonable; we’re asking why we’re doing it, how we’re doing it — is it proportionate to the good we’re trying to accomplish? When are we doing it — is it the right time? Where are we doing it — is it the right place? We ask questions about ‘what if?’ — we project the foreseeable consequences of the decision, not just at the end of the day, but where does this leave our patient or our stakeholder or our shareholder six months from now?
“And then, there’s ‘what else?’ This is my favorite question of moral analysis because it’s the question of moral imagination. It helps us understand that, when we make a bad decision in business ethics, it’s not because we’re morally bankrupt in some way, but because we’ve been to unimaginative; we’ve focused on an ‘A’ or a ‘B’ option, and we failed to brainstorm for a ‘C’ or ‘D.’ So there are a variety of ways to get at what’s the right thing to do.”
“If I ship a bad product to a big customer like Boeing, and there’s failure, I’m destroyed in my business and in my industry. It’s a top-down, flow-down thing to make sure everyone’s on the same page concerning the ethics that you believe in.”
BusinessWest: Smith & Wesson recently announced that it will relocate its corporate headquarters from Springfield to Tennessee, a move that will presumably help the company but hurt families in this area and the region as whole. What does this case tell us about ethics and how it is often difficult deciding what it is the right thing to do?
Loper: “Smith & Wesson may have shut doors if it can’t move or cut 500 employees, and the people in Tennessee think it’s a great thing. In Springfield, to someone who just lost their job, it’s a bad thing. What is the right thing? It depends son your perspective.”
DePergola: “This is certainly my reality in the world of clinical ethics — that the good thing to do is very often, if not exclusively, the least bad thing to do. And I mean that in a very literal sense. It’s not a clear or easy decision between choosing something clearly good or something clearly bad; you don’t need an ethical analysis for that. It’s often choosing something that will have indirect and unintended consequences that are negative and that are unavoidable in pursuit of something good, like maintaining the structure of the company — somewhere. So, really, finding the good is very often a matter of trying to identify the least bad thing to do, knowing that a perfect solution is not possible.”
“You’re built on reputation, and it’s easy to lose your reputation and very hard to get it back.”
Cutting: “For the management staff at Smith & Wesson, it was a tough decision to make; you’re going to have to let some folks go, but you’re going to be able to maintain your stock value to your shareholders, which, under those conditions as a publicly traded company, is part of your mission statement. You’re there to provide the best and most absolute path to success for that company. It’s a slippery slope when we make decisions like that, and I think, unfortunately, maybe we need to look in the mirror in this state and say, ‘was that the right thing for us to? Maybe we should claw that back, re-embrace them, and change the law.’”
BusinessWest: Just how does leadership set the tone when it comes to business ethics?
Doran: “You have to show, not tell. Everything a leader does is under scrutiny — they’re being watched with a magnifying glass. But it’s equally important to have a written statement. We all have values, personal values, but it’s very important to have an organizational framework … it’s really important that everyone understands where an organization stands when it comes to things like integrity, inclusivity, and dealing honestly with everyone — in our case, students, faculty, staff, everyone in the ecosystem.
“Everyone in our university, whether you’re a trustee or alum, has a social compact to abide by a common value set and code of ethics, and that was really tested through COVID. Everyone had to support this code of conduct; it was testing, it was mask wearing, it was … maybe you have a relative in Rome and you want to visit them, but you can’t do that, because it’s not good for our community. So the code centered not on what’s good for you, but on what’s good for our community at large, and that was a really good example, I think, of this code of conduct and how leaders set the tone.”
Cutting: “When it comes to people being ethical or a company being ethical, it has to be top down. It starts at the top, and it has to flow down to everyone in the company. You talk about the reputation in the industry … it doesn’t take long to lose it. If I ship a bad product to a big customer like Boeing, and there’s failure, I’m destroyed in my business and in my industry. It’s a top-down, flow-down thing to make sure everyone’s on the same page concerning the ethics that you believe in.”
“It’s about doing unto others as you would have them do unto you. It’s about treating people with respect, treating people the way you would want to be treated.”
Loper: “The recent decision by Smith & Wesson is a great example of how challenging it can be to make decisions in the business world, and by what yardstick. You have to be able to look at yourself in the mirror every day, and there are personal convictions that you have to relate to.
“One of the things I’ve found to be helpful — I’m not sure it’s a solution, but it certainly made it easier for me to look at things when I was in business — is to pull up from the situation that I found myself in as president and think about the different stakeholders and what they were expecting of the organization that I started up or developed, and what responsibilities I had to those stakeholders. That was true whether it was to the city that helped me to get the power that I needed delivered to a place where they had never delivered that much power before, or whether it was the people supplying the material from India, or whether it was putting an ad in the paper to attract people with certain skills to work on a certain piece of equipment — and then seeing people standing in line, waiting for an opportunity to work on that machine, knowing that it hurt other people because I was taking their best.
“I was constantly dealing with matters that bordered on ethical issues, and one of the things that helped me was this concept of conscious capitalism and the idea of thinking more broadly than my own business and trying to take a long view of what value creation is all about, and for whom. And there were constant tradeoffs, and I was always trying to look at bigger issues and make the best decision I could with the information that we had.”
DiGiorgio: “We have several keys at our business — security, empathy, honoring commitments, and then, fiscal responsibility. And they all flow together. And if we do those things, that’s going to produce the right results. But you have to establish those keys and set that culture. That’s where it begins.”
BusinessWest: Finally, profits and ethics. How do we balance these two important pillars of business?
Loper: “You have to take the long view; you can’t just take the short view, as with those quarterly profits. And that quarterly review process that larger corporations, the Fortune 500 companies, have to go through, makes it very difficult to make the right long-term decision. It’s very hard sometimes to make the right decision.
“When you talk about profits, I think you have to understand that there are short-term profits and long-term profits, and it’s not all measured in dollars and cents. Sometimes it’s measured in terms of forests being destroyed that could affect the climate or natural resources being exploited that are not replaceable. This whole concept of conscious capitalism that encourages us to think bigger is not just a theory; there’s a whole collection of major corporations that are part of that whole movement of shared value and conscious capitalism that are doing better on Wall Street than companies that don’t, that historically have focused on a much narrower definition of ‘corporate profit.’ And I think that this is showing the rest of the world that you can do that, and the more global we’ve become, the more influence we’re going to have on that notion of what ‘profit’ really is. We need to have broader measures of success as companies than just profits.”
Leary: “I agree. Short-term profits are not indicative of the long-term value of a company. With most companies on Wall Street, you’re looking at quick profits, and some of the biggest frauds that have committed at public companies were for short-term profit for people — and those companies are no longer around.
“When you look at the overall value of what you’ve created as a business owner, it’s not just dollars, or profits — it’s how many families have you helped feed, or how many kids have you sent to college, or what you’ve done for the community — that should all be part of the profit equation. You can do both — you can have profits, and you can have a successful company and an ethical company. You can balance those two; ethics and profits don’t have to be mutually exclusive. In fact, they should be working hand in hand. Ethical companies have a longer-term prospect than those looking at short-term gain, and we’ve seen that through history with companies that have failed. Why did they fail? It’s typically because of some short-term decision that someone made.”
Doran: “At Bay Path, our board is very focused on ESG [environmental, social, and governance] investing, and making sure that a company’s values align with our values, and of course we’re also very focused on making sure our portfolio performs, because it’s in the interest off our endowment that funds a large part of our scholarship program. And we’ve been doing some very technical comparisons [between] companies that are more ESG-focused and others that may not have it as a stated part of their practice … and the returns are very similar. That shows that profits and ethics do go hand in hand at many places. It should not be an anomaly, it should not be the exception, and I do not believe that it is.”
DePergola: “The real litmus test would be … if the profit started to significantly slow down, would we still do the right thing? I think that confronts us with who we are. And if we’re not sure if we would do the right thing if the profit slows down, then we should take a look at that. Overall, Patrick and Sandra are right: profits and ethics are not mutually exclusive. Doing the right thing consistently over time, getting buy-in, and anchoring things to the mission — what we’re going to stand for no matter what — that’s what people want to be part of. And I think profit follows from that decision to do the right thing.” u