Article

Cheaters Never Prosper

Sarah Ryther Francom

September 17, 2013

During the past year, national and local headlines have been dominated by the unethical actions of individuals from sports professionals to politicians to business executives. In our cover story, “Creating Conscious Capitalists,” writer Peri Kinder explores this troubling and persistent trend within the business landscape and, more importantly, how business schools are working to expel the problem. You’ll find her story on page 84.

Economic uncertainty and evolving markets have strained businesses in nearly every industry throughout the nation. Unfortunately, desperate times all too often lead to desperate measures, and unethical practices inexcusably come into play.

A 2012 report published by Ernst & Young, “Growing Beyond: A Place for Integrity,” surveyed 400 CFOs regarding corporate fraud. According to the report, 15 percent of CFO respondents said that they would be willing to make cash payments to win business and 4 percent said that they would be willing to misstate financial performance. In the same survey conducted just two years prior, 9 percent reported that they would be willing to make cash payments and 3 percent reported that they would misstate financial performance. As this report indicates, it’s clear that corporate fraud is not on the decline.

The good news is many companies are acknowledging the disturbing trend of unethical behavior and are working to prevent or quash the problem by empowering boards of directors, adding compliance officers and developing internal audit committees. The aforementioned Ernst & Young report states that “companies’ awareness of the risks posed by fraud, bribery and corruption is high, and that a substantial majority of these companies are doing many of the right things to mitigate the risks.” That’s great, but talk is cheap. It’s obvious that more needs to be done to stem the problem.

There’s no denying that competition is healthy in the business world, driving innovation and growth; however, it seems as though a win-at-all-costs attitude too often leads to a lapse in ethical standards. But growth and ethical standards do not need to be competing priorities. Many studies have found that ethics are increasingly important for a company’s long-term success. A 2008 report published by the Economist Intelligence Unit, “Corporate Citizenship: Profiting from a Sustainable Business,” found that 74 percent of surveyed execs believe there is a correlation between enhanced corporate citizenship and ethics and increased profits. Reasons for increased profitability include greater respect for the company, which leads to increased sales, greater employee loyalty and retention, as well as the ability to attract the best talent.

If your company has initiated programs to ensure high ethical standards throughout your organization, we applaud your efforts and actions. Though many industries are experiencing rapid changes and uncertain futures, compromising integrity for short-term results puts your company at risk. Long-term success is sustained through business ethics and integrity. But operating an ethical business shouldn’t be about increasing profits, public image or long-term success. Ethical practices should be expected from the reception desk to the c-suite because, frankly, it’s the right thing to do. If only it were that easy. Executives should demand high ethical standards within themselves, colleagues and clients, as well as take serious and measurable action to mitigate unethical behavior.

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