Ethics and Contract Management, Part 1

In recent years, the American public has been forced to endure a number of high profile corporate scandals that have shaken confidence in both the private and public sectors. From the Enron scandal to the Bernie Madoff Ponzi scheme, a culture of unethical conduct has consumed corporate America wherein the pursuit of profit at any cost is given prime importance.

While the government has attempted to respond with public policies that discourage unethical behavior, many companies have continued to look for exploitable loopholes. According to the Society of Human Resources, in 2012, companies paid out nearly $8 billion in fines for poor conduct. The same report estimated that nearly half of organization employees noted witnessing unethical workplace behavior. In many cases, this behavior was not reported.

Increasing diversity in 21^st-century workplaces brings additional challenges for establishing ethical norms. Some workers may have differing cultural views on what constitutes ethical workplace behavior, or on whether negative behavior should be revealed to outside authorities. In an effort to fit in with coworkers and workplace culture, workers may find themselves condoning unethical behavior in the name of organizational success. What follows is a company culture where workers may remain silent and choose to ignore, or even participate in, deplorable practices.

Corporate Social Responsibility

While it may seem that we have reached a low point in corporate culture, many corporations are making conscious efforts to reverse this trend through corporate social responsibility (CSR) strategies. CSR is an approach to business management that requires adequate attention be paid to the economic, environmental and social impact of corporate practices — specifically on ways that corporations can help improve their ethical image and the legacy they leave in society. Motivations for doing so are not only philanthropic; some studies have suggested that consumers may be more likely to view a corporation favorably and utilize its services if it can demonstrate a clear set of ethical practices.

As consumers place new demands on corporations to be ethically responsible, corporations are forced to change their cultures. Where ethical behavior was previously viewed as secondary to the pursuit of profit, it is now an important component of remaining profitable. Unethical practices tarnish the corporate image, repel customers and reduce company morale. In order to attract qualified candidates for new positions and maintain a positive, efficient working environment, it is important for corporations to actively demonstrate ethical conduct.

Current trends indicate an increasing government role in enforcing CSR, as well. In response to the various corporate crises the American public has experienced in recent years, Congress has passed a number of acts that mandate corporate transparency and ethical conduct. A newfound public interest in corporate behavior has companies that would have previously tried to avoid compliance instead moving to embrace government rules and show the public that their organizations can be trusted again.

Company Image

As companies recognize that their image carries significant weight in the economy, both for their customers and employees, they should move to improve their ethical behavior. There are a number of different approaches on how to do this, and different organizations may find some strategies more effective than others. The second article in this series illustrates some steps that can be beneficial for organizations.