03 Jul 2020 By Cyril Shroff
Ethical considerations and not just economic ones are at the core of several dilemmas facing businesses today
“Business Ethics" - is that a contradiction in terms? Particularly in a developing economy where we struggle to feed millions is ethics a “luxury good"? More so as we confront a confluence of crises – a raging pandemic and unprecedented contraction of the economy?
Actually, business ethics is a concept that makes eminent economic sense. Professor Amartya Sen in his canonical article on the subject has reminded us that businesses and ethics are not binary opposites but in fact, business ethics have economic benefits. Professor Sen quotes Adam Smith, believed to be the epitome of self-seeking capitalism lesser known but apposite statement “humanity, justice, generosity, and public spirit, are the most useful qualities to others". Professor Sen also reminds us businesses behaving ethically is particularly crucial in a developing country so that trust (which is central to all economic activity) may be engendered – in all stakeholders- consumers, partners governments, regulators, employees present and prospective, suppliers and the wider community.
To weather a crisis in particular, ethical behaviour and the values and purpose that undergrid it are fundamental- not just to exist but to endure; to survive as well as thrive. Building a new ecology of business founded on meaning will be the pathfinder for businesses through the haze of uncertainty.
Professor Colin Mayer has conceived the purpose of the corporation as not to produce profit along, but to “produce profitable solutions to the problems of people and planet, and in the process, produce profits". Mayer also identifies two other underpinnings required to reconceptualize business for the 21st century: trustworthiness and values. Trustworthiness is cultivated through strong corporate values of honesty and integrity and cultures of committing to the corporation’s purpose.
Corporations must therefore step up to provide solutions for the most challenging crisis facing us in recent memory. How companies behave and respond to the crisis will also be remembered. This can be in the form of re- orientation of their business purpose to provide solutions for the crisis-through, for example, automotive manufacturers in India that are able to switch to producing ventilators, alcohol manufacturers moving to manufacturing hand sanitisers; internationally, to fast food producers that are able to shift towards producing nutritional food that’s going to address the food shortages, luxury goods maker rearranging their production lines to produce supplies for the outbreak. “Pivot of Perish"- has a business as well as ethical dimension.
Ethical considerations and not just economic ones are at the core of several dilemmas facing businesses today.
Take the question of whether to start operations requiring a physical – this cannot simply be answered through a calculus of cost and benefit. This is not an elementary choice between lives and livelihoods, given as livelihoods require life and a good quality of life- more in a time of scarcity of medical and healthcare infrastructure. Health is a public good and the actions of each person impact the health of several others and businesses therefore struggle with the decision of opening up, the protocols to do so in a manner that balances human and financial health.
As they navigate the questions of survival businesses will navigate the thorny questions regarding redundancy and pay cuts. With regard to redundancy, in the economic calculations, businesses must build in the ethical dimensions- which have quantifiable long-term costs and benefits. Adam Grant, the Wharton pyschologist writing in the Economist reminds us that layoffs hurt productivity and innovation as businesses lose valuable skills and synergies. “Those who remain are distracted by survivor’s guilt, anxiety and searching for more secure jobs." Companies that slash jobs tend to perform worse than those that find alternatives such as pay cuts – they also erode trust in the long run. To maintain long-term trust and productivity, in any decision regarding redundancy and paycut, must be deliberative and participative to the extent possible and factor in fairness of process, transparency and compassion.