The Importance of Being Ethical

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Companies with strong ethics programs have found that these efforts can reduce potential costly fines, decrease vulnerability, improve reputation, provide access to capital, favorably influence their bottom line, positively affect their employees' commitment to work and enhance customer loyalty. These benefits are outlined below:

Potential Avoidance of Fines:Companies and their employees are required to comply with national, international, and local laws governing their operation. Failure to comply with these standards can be costly in terms of time, resources, brand image and employee and customer loyalty. In addition, the development of strong ethics initiatives can greatly reduce the chance of fines resulting from wrongful, fraudulent, discriminatory or illegal activities. With the revision of the U.S. Sentencing Guidelines, companies developing "good corporate citizenship" actions can substantially reduce potential penalties when misconduct occurs.

Decreased Vulnerability:As companies develop or enhance their overseas operations, decentralize their business functions, and empower their workforce, it is imperative for them to develop ethics practices that provide the necessary training and tools to assure that their employees throughout the world can make ethical decisions. This decreases a company's vulnerability to misconduct and the harm it can cause to profitability, brand image and management focus.

Improved Brand Image and Reputation:Several ethics awards and media lists on corporate reputation (e.g., American Business Ethics Awards, Better Business Bureau Torch Award for Marketplace Ethics, and Business Ethics "100 Best Corporate Citizens") consider a range of ethical criteria for determining the companies' rankings. In addition, a 1998 Burson-Marsteller study on the link between CEOs and corporate reputation reported that a CEO's ethical reputation enhances a company's ability to attract investment capital, recruit the best employees, and earn...
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