CHAPTER 4
Does Virtue Pay? SHARPNESS
DOES NOT EARN ONE MONEY, AND HONESTY
WILL NOT LOSE MONEY.
– CHINESE PROVERB
to this question. In business as in life, virtue is sometimes its own reward. Perhaps one of the unfortunate global realities of business ethics is that the bad do not always do badly and the good don’t always do well. However, there is research that supports what appears to a clear trend. Simply put: being ethical in business provides no guarantee of superior profits or stock performance, but it certainly doesn’t hurt the bottom line. Finding a solid, clearly-defined direct link between ethical behavior and increased profits or shareholder value is the Holy Grail of academic research on the subject. There is research that shows companies’ stock prices decline after reports of corporate unethical or illegal behavior. Companies that make a clear commitment to ethics in their annual reports have a higher share value than competitors that do not. On a micro scale there is research that shows that sales teams in the United States who exhibited more ethical behavior than competitors perform better. (But this was not the case in several Asian countries that were studied.) While all this evidence may sound great on the surface, none of these studies really address, metaphorically speaking, what came first: the chicken or the egg? That is, do more prosperous companies with greater resources brought on by their business success become more socially responsible; or are these companies more prosperous because they are socially responsible? Or more succinctly: is virtue a rich person’s prerogative?
THERE IS, OF COURSE, NO CLEAR-CUT ANSWER
Having No Ethics Policy Can Be Costly There are three broad categories that explain the reasons corporations are motivated to act in an ethical manner. Two of them have to do with making money. MORALITY
As part of the social contract between business and society, business has certain obligations to improve people’s lives and the environment in exchange for the privilege to operate. Corporations act to fulfill this contract because, quite simply, it is the right thing to do.
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