The Herald (Harare)

10 December 2013

Zimbabwe: Ethics Impacts the Bottom Line

opinion

Establishing a positive relationship between ethics and financial performance has been a long-standing pursuit of researchers in business.

This is justifiably in response to the inquiry whether there is any proven link between ethics and the bottom line. The investigation, pertinent as it is, has significantly contributed to the growth of business ethics as a practising subject, and tremendous progress has consequently been made. In fact, business ethics has become a management science, and corporate ethics is clearly the new frontier for competitive advantage.

Indeed, business leaders are right when they seek to understand the quantitative worth of business ethics. Because leaders are the ultimate custodians of company resources and reputation, they bear responsibility for the impact of any intervention whether positive or negative.

A thorough cost-benefit analysis by leaders should order the acceptability or non-acceptability of corporate ethics as a business strategic tool.

Will business ethics increase company productivity and profitability?

How does corporate ethics processes help to improve employee motivation?

Do ethical cultures enhance shareholder value?

Truly these are some of the pertinent questions business leaders must ask before deciding to attach formal ethics to business operations.

To shore up the business case of ethics, there is now in existence increasing and compelling evidence both qualitative and quantitative that links financial performance to the ethical standards of a business.

The first empirical research on the impact of ethics on business performance was conducted by Baumhart in 1961.

And a study carried out by the UK Institute of Business Ethics from 2003 to 2007 established a positive relationship between business ethics and financial performance.

At Wall Street, studies and ethics surveys that have been carried out from time to time have always validated a direct relationship between ethical business practices with the strength of business success factors such as stock prices, customer purchasing patterns and employee retention. Perception surveys across the globe reveal that ethical companies are more successful than those that are not.

In response to this empirical evidence, businesses the world over are witnessing the rapid growth of corporate ethics, and Zimbabwe cannot be an exception.

The country should be seized by the need to grow an ethical business culture in the economy, and businesses must stampede to embed business ethics processes in their operations.

Apparently, proof of the existence of corporate ethics structures in business operations is now a significant measure of a firm's competitiveness on the global market place.

With effective corporate ethics processes, companies are sure to set themselves apart from their competitors. Ethics helps to influence every employee's pattern of thought, choice, and action, and ethics ensures employees engage in sound decision making.

Ethics intrinsically creates a unique ethical character that quietly guides what staff think, say, and do in their dealings with the business of the organisation.

Through formal ethics, acts of misconduct such as theft, embezzlement of funds, abuse of company property and cheating on customers will be drastically reduced.

Sound ethics help to reduce costs, attract and retain competent staff, secure community good will, and attract both foreign and local investment. Other benefits include increased employee job satisfaction and increased productivity and company profitability.

While a harsh economic environment tends to justify unorthodox means of conducting business in the eyes of some people, the futility of doing so cannot be overemphasised.

Recent events in the banking industry where we saw shareholders and senior executives dipping their long fingers in depositors' funds for personal gratification resulting in the demise of these banks are a telling example.

Indeed, there will never be a trade-off between ethics and business performance because the two are mutual. Its either the business upholds ethical practices and succeed, or it is unethical and there goes under.

Even where short-term profits are made, these still don't guarantee that they will continue to be made in future. Companies that have sought to depend on such a myopic strategy have always found it difficult to run the full race. They have collapsed along the way and perished.

Emerging responsible business practices demand that businesses must embed effective ethics management processes in their operations. An ethical culture improves productivity, and an investment in ethical business practices brings forth a good return on investment.

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