*Andrzej Jacek Blikle – computer scientist, mathematics professor, member of the Polish Language Council and a master confectioner. Shareholder, former CEO and current COB of the Blikle company.
Anti-competitive practices can be categorized into two distinct types. The first one has to do with unfair competition as such: smear campaigns, dumping, intellectual property theft, bribery. The other includes predatory pricing tactics: lowering prices by misleading customers, employees, contractors and the state, but also by externalizing costs to the environment.
In the long run, either of these practices is not only socially and economically destructive, but will likely backfire on the company adopting them. Unfair treatment of employees has a ripple effect on their relationship with customers and contractors. Ethical lapses also demoralize workers and erode their company loyalty. It all leads to a vicious cycle.
The discourse surrounding viability of ethical business practices is based on a silent assumption that although fair and just behaviour is largely merited and desirable, the “invisible hand” of the market compels us to occasionally abandon these principles. Of course, no one will ever openly endorse such behaviour, but being the way they are, our market realties often make ethical conduct simply impractical. With each crisis, opinions stating that “in times like these” we cannot afford ourselves to act ethically recur.
To say that unethical business practices were a direct outcome of the 2007-09 financial crisis would be wrong. In fact, quite the opposite is true- unethical conduct is what caused the crisis in the first place.
After all, it was the misconduct of the Lehman Brothers employees that set in motion a chain reaction and resulted in a disastrous global financial crisis in 2008. Today, many experts believe that it was not so much the defective fiscal and monetary policy that caused the crisis, but rather the lack of business ethics. Incidentally, this also revealed that economic growth does not automatically guarantee ethical conduct.
Similarly, an increasing number of critical voices blame the devastating consequences of the coronavirus pandemic on the lack of integrity and political courage that many governments demonstrated.
Enlightenment thinkers like Immanuel Kant already recognized the practical value of ethics. Professor Janusz Czpapiński, in turn, sees a direct link between trust, generated by ethical conduct, and lower transaction costs. The practical experience of several generations of entrepreneurs, including today’s generation, only seems to confirm his thesis.
Numerous individual cases and statistical data appear to confirm the notion that being honest and fair pays off. Stephen Young’s “Moral Capitalism” provides an abundance of such individual examples. Statistical proof can be found in the Gallup Employee Engagement Survey or in Paul Herman’s HIP (Human Impact and Profit) investor’s index. The latter is based on a rating system that focuses on companies’ ethical conduct with regards to their treatment of workers, clients, contractors, but also the society and environment. It turns out that the highest ranked companies on the HIP index tend to be more profitable than the ones scoring lower.
Contrary to what most corporate managers still believe about work and motivation, rather than money, it is the human need for dignity that is the most powerful incentive. Many years ago, Peter Drucker expressed this principle stating that in terms of performance, voluntary work is most efficient, while forced labour is least.
Businesses that treat their stakeholders ethically, allow their workers to satisfy their need for dignity, which then translates into positive work ethics and results in quality products and low costs.
On the other hand, companies that do not follow ethical standards and damage this ethos, demoralize their employees, which then has a negative impact on their company loyalty and conscientiousness. In this case, the work is sloppy and costs are high.
In the context of business ethics, there is still the question about company objectives and profit. The notion that profit should be every company’s main objective goes back to early capitalism. Even then, however, many entrepreneurs recognized that the company’s reputation and its fairness towards customers, contractors and workers, is at least as important as financial gains.
Among those sharing this view were the successive owners of E. Wedel, a Polish confectionary company established in the XIXth century. But even Henry Ford, whose hard-core capitalist approach secured him a place in the history books, expressed a similar view in one of his four principles of business: “Without a profit, business cannot extend. There is nothing inherently wrong about making a profit. Well conducted business enterprises cannot fail to return a profit but profit must and inevitably will come as a reward for good service. It cannot be the basis- it must be the result of service”.
Whether a company’s sole objective is profit ultimately depends on the priorities set by its owner, not on some universal economic principle.
There are businesses - and their number is constantly increasing - whose core priority is to create conditions that would benefit all their stakeholders: clients, workers, contractors, the society, the state, owners and the planet. Their ethos is: we must be the change that we wish to see in the world.
The biggest problems facing the world today are much too complex for any single country to tackle alone. Given their enormous potential, companies must join the effort too. Doing that, however, requires abandoning competitive thinking for an approach that acknowledges the synergistic effect of cooperation. Saving the world must be a mutual effort, and we are running out of time.
However, to even begin saving the world, interpersonal relations among people who make the company must be firmly based on trust and responsibility. Today’s crisis provides us with an extraordinary opportunity to develop an ethos of cooperation and empathy. All of us need support sometimes, but now more than ever, all of us also have a chance to give that support to others. It can be something small, like helping your neighbours take out the thrash, getting their groceries, or staying late at work while covering for a colleague, sometimes even without the extra pay. There is a whole range of things companies can do as well.
In the midst of the 2007-09 financial crisis, while American companies were laying off employees to keep pay checks intact, their Japanese counterparts did the opposite- they cut the pay checks to prevent layoffs. But the Japanese agreed to have their wages cut only because of their sense of solidarity; they saw it as a sacrifice for the collective good.
I remember a story of an American business owner whose furniture factory burned down on Christmas Eve. It was the largest employer in town and in a single night left nearly two thousand people without a job. With financial support from the local bank, the owners offered their employees a job rebuilding the factory. Each worker was paid a minimum wage, and was assigned a task according to what he/she could do best. In result, carpenters worked as carpenters and directors were their assistants.
I will always remember the owner’s words concluding the story: “I wish everyone their business would burn down like that. And I’m not saying this because it allowed us to modernize the production process, but because it gave us faith”. And since -as we all know- faith can move mountains, there is no need for carrots or sticks.
Today, the entire economy is going down in flames and it’s on us to help save it. This is our chance to show solidarity and help those less fortunate, even if they are our competitors. There is only one planet earth and it is the only home all of us have. If we manage to save it, there will be plenty to share.
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