To the average person, business ethics sounds like an airy-fairy concept with limited relevance to the real world. The practice of business is to buy cheap and sell dear, and not to bother whether the cheap price obtained or the dear selling price is ethical or not. To the average person, business ethics is a public relations stunt employed by large successful companies to look good. It is believed that large companies only talk about business ethics and that in real life they are even more cut-throat than small companies, practicing total war on a more refined but more vicious scale.

The pace, scale and complexity of modern business has forced a change in how business is done. While it is accepted that it is foolish to do business with someone who is not trustworthy, the question arises whether you can trust someone who is not ethical in all of his or her behaviour. Short timelines, tight supply chains and narrowing margins mean that chances cannot be taken that suppliers or customers will not perform their contracts as expected. Suppliers and customers are becoming partners and stakeholders, and relationships with them are becoming more and more underpinned by trust. Trust is built on expectations of truth in words and consistency in behaviour. It is impossible to do profitable business with someone who says one thing one day and does something different the next.

There is also exposure to legal penalties. Companies involved in international trade have to make representations about their products based on representations made by suppliers of their inputs. A company that is involved in illegal activities, or that falsifies information on inputs supplied, can create serious problems for its business partners. A company with a good reputation and solid brands has much to lose and should not take chances.

Another issue challenging the practice of good business ethics is the values which employees bring to the work environment. Much has been said over the years about the deterioration of employees’ work ethics. The impact of poor work ethics results in low productivity owed to high levels of absenteeism, lateness, theft and acceptance of bribe taking. Unfortunately many employees do not understand the concept of conflicts of interest or see anything wrong with it. The result of this is highlighted in the World Economic Forum’s Global Competitiveness Report 2010-2011 rankings. Though Trinidad and Tobago ranks at 43 (out of 139) in the area of “Reliance on Professional Management”, we rank at 83 in “Willingness to Delegate Authority” and 126 in “Co-operation in Labor-employer Relations”.

A company that wishes to be efficient and competitive in the future cannot accept this state of affairs. There is a strong business case for the introduction of structured programs to support ethical behaviour in companies, size notwithstanding. These programs should be more than a mere encouragement to be honest, and they should be based on clearly articulated values that are linked to the overall vision and mission of the company. The Manual of Business Ethics for Small and Medium-Sized Enterprises prepared by the Inter-American Investment Corporation (IIC) and the US Department of Commerce describes the following benefits among others:

o Enhanced Reputation and Goodwill: A reputation for integrity is important for securing the loyalty of customers, for recruiting and training the best staff, for winning community acceptance and for accessing bank and supplier credit.

o Risk Reduction: The process of developing a business ethics program involves the company in identifying and assessing the factors that could pose risks to reputation and financial performance and in developing and implementing the business processes that reduce those risks.

o Reduced Costs: Providing employees with clear guidelines of how to conduct day-to-day business such as where and when to obtain quotations, how to carry out tenders, how to conclude contracts and how to avoid conflicts of interest can reduce transaction costs and improve the supply chain function.

o Protection from Unethical Employees: A program would include clear guidance in respect of the misappropriation and unauthorised use of company resources, and the consequences that could flow from violations-information that employees with undeveloped values may not fully appreciate.

The methodology of the implementation of the program at the company level is very similar to that of an ISO series business process implementation. There is also considerable overlap with the introduction of a strategic plan if one has not been done before. First, a diagnostic assessment (gap analysis) is performed of the current state of the company. An ethics program, a business code of conduct manual and an ethics reporting mechanism are then prepared based on the results of the assessments and the requirements of best practice. Company staff is trained to implement the business ethics program while collateral support components are being prepared. These components include a communications strategy and material and a monitoring and evaluation element.

The IIC has worked with grant funding from the Government of Korea to successfully introduce formal governance programmes in several countries in Latin America and has turned its attention to the Caribbean. In August 2010 representatives from Barbados, Jamaica and Trinidad and Tobago attended a two-week training course at the IIC’s headquarters in Washington D.C. Attendees then worked together to tailor training material for use in their three countries, bearing in mind the local environment. Formal launches of the programme will take place in all three countries in September 2011. Following the launches, there will be pilot programmes involving a small number of carefully selected companies that will be used to provide feedback for wider implementation.

Implementing a formal business ethics program can contribute to an improved culture at a company, and to improved overall performance. It is well worth trying.

‘The above article first appeared in the Guardian Life Business View column, Newsday Business Day Magazine