07 November 2008

Managerial Ethics

In The Wall Street Journal, it is not hard to find evidence of unscrupulous business behavior. However, unethical conduct is neither consistent with value maximization nor with the enlightened self-interest of management and other employees. If honesty did not pervade corporate America, the ability to conduct business would collapse.
Eventually, the truth always comes out, and when it does the unscrupulous lose out. For better or worse, we are known by the standards we adopt.
To become successful in business, everyone must adopt a set of principles. Ethical rules to keep in mind when conducting business include the following:

  • Above all else, keep your word. Say what you mean, and mean what you say.
  • Do the right thing. A handshake with an honorable person is worth more than a ton of legal documents from a corrupt individual.
  • Accept responsibility for your mistakes, and fix them. Be quick to share credit for success.
  • Leave something on the table. Profit with your customer, not off your customer.
  • Stick by your principles. Principles are not for sale at any price.
Does the “high road” lead to corporate success? Consider the experience of one of America’s most famous winners— Omaha billionaire Warren E. Buffett, chairman of Berkshire Hathaway, Inc. Buffett and Charlie Munger, the number-two man at Berkshire, are famous for doing multimillion-dollar deals on the basis of a simple handshake.
At Berkshire, management relies upon the character of the people that they are dealing with rather than expensive accounting audits, detailed legal opinions, or liability insurance coverage. Buffett says that after some early mistakes, he learned to go into business only with people whom he likes, trusts, and admires. Although a company will not necessarily prosper because its managers display admirable qualities, Buffett says he has never made a good deal with a bad person.
Doing the right thing not only makes sense from an ethical perspective, but it makes business $ense, too!

See: Emelie Rutherford, “Lawmakers Involved with Enron Probe Had Personal Stake in the Company,” The Wall Street Journal Online, March 4, 2002 (http://online.wsj.com).

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