This paper examines the importance of ethical conduct in business, tracing the consequences of corporate ethical failures — including the Enron, Tyco, and MCI scandals — that led to costly compliance legislation such as the Sarbanes-Oxley Act of 2002. Drawing on foundational definitions of ethics from scholars such as Josephson (2001) and Lichtman (1998), the paper explores cross-cultural core values identified through empirical research. It then analyzes studies connecting ethical behavior to measurable job performance in sales and real estate, demonstrating that ethical conduct functions as an effective business strategy. Finally, the paper considers how organizational accountability and employee ownership of objectives can reduce unethical behavior and foster a culture of transparency and trust.
There has been a crisis of confidence in corporate ethics over the last ten years, and as a result, legislation continues to be used as the primary mechanism to restore trust in business. Many argue that the Sarbanes-Oxley Act (2002) has significantly raised the cost of doing business, enriching Indian Business Process Outsourcing (BPO) companies with 30% revenue growth in the process (Economist, 2006). The issue of corporate responsibility — the extent of its existence and what corporate ethical responsibility should ideally look like — is examined in this paper. Simply put, the lack of business ethics has introduced compliance-based initiatives at both the national and global level in an effort to legislate confidence and trust back into business. The high costs of Sarbanes-Oxley compliance could have been averted, as could the billions of investors' dollars lost from the Enron, Tyco, and MCI scandals, to name just a few.
There are as many definitions of ethics as there are academicians, researchers, and scholars studying the topic. To align ethics exclusively with a specific religion is erroneous; many religions in the world embrace honesty and truthfulness yet do not provide sufficient impetus for followers to willingly adopt these ethical approaches in their interactions with others. One scholar, Josephson (2001), suggests that ethics involves, first, the ability to discern right from wrong and, second, the commitment to do what is good and to align one's conduct with ethical standards. Ethics therefore requires action; to be ethical is to act in a consistently transparent and honest way. Josephson (2001) is specifically referring to the values a person holds as shaped by their cultural, economic, religious, spiritual, and social interactions accumulated over a lifetime. Ethical choices, according to Josephson (2001), place equal weight on the values of an individual and their decision to behave ethically or not.
In a study conducted at the Institute for Global Ethics (1996), 272 individuals were asked to identify the five values they considered most important from a list of fifteen. Researchers found that truth was by far the most frequently chosen value. The top three values to emerge were truth, compassion, and responsibility. When individuals were asked to identify the single most important value, compassion was chosen far more often than any other. The research further demonstrated that this small set of core values is cross-cultural and universal.
Lichtman (1998) conducted parallel research in this area, suggesting that the eight core ethical values that guide behavior should include loyalty, honesty, fairness, caring, respect, tolerance, duty, and moral courage. When comparing this list to the Institute for Global Ethics (1996) findings and then applying both to the series of corporate scandals of which Enron was the largest, it becomes clear that a persistent lack of ethics continues to force many corporations to drastically cut back their operational plans or, in cases of major ethical lapses, to discontinue operations altogether. Being ethical is good business, and the body of research correlating ethical decision-making with increased job performance is addressed in the following section.
"Studies linking ethical behavior to sales outcomes"
"Accountability and objectives reduce unethical behavior"
"Transparency and ownership drive ethical organizational culture"
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