Economist Milton Friedman appeared in an essay on the New York Times in September 1970 entitled, “The Social Responsibility of Business Is to Increase its Profits”. In it, he wrote that corporate officers have no obligation to support social causes as hiring the hard-core unemployed to reduce poverty, or reducing pollution beyond that mandated by law. But the rules of the game have changed and people today expect more of businesses than simply that they maximize their profits without doing the right thing.
But what is business ethics? In short, it is about how an organisation does its business. Does it treat its employees with dignity and respect? Does it treat its customers fairly? Does it pay its suppliers on-time? Is it open to dialogue with its local communities? Does it acknowledge its responsibilities to wider society?
Many researches have shown that businesses not following any kind of ethical code not only make headline news but also have a long-term negative impact on the company and the communities in which they operate. So, many companies have created voluntary codes of ethics that regulate practices in their industrial sector in ways that stakeholders, customers, employees, suppliers, regulators and communities consider to be both fair and honest.
But, business ethics is more a matter of religion than management. To say it is Pope Francis, who last Saturday met with members of the Italian association of manufacturing companies, Confindustria, calling them to reflect together on the ethics of doing business. “You have decided, said the Pope, to focus your attention on values, values which are the ‘backbone’ of any formation project, of the appreciation of your country, and of promoting social relations, and which allow for a concrete alternative to the consumeristic model of profit at all costs”.
The Institute of Business Ethics IBE, a research institute established in 1986 to promote high standards of business behaviour based on ethical values, published in February 2016 a summary of useful surveys which have been released on a business ethics theme last year. The Report shows a general increase in the investment in the ethics function and the increasing awareness of elements of an ethics programme such as a code of ethics, speak up (whistleblowing) lines and ethics training. However, three areas requiring ongoing focus emerge: engaging middle managers, the treatment of whistleblowers and training on how to handle ethical dilemmas.
In particular, the IBE believes that employee views are a key indicator of the ethical temperature in today’s organisations. The institute has been surveying employees about ethics at work in Britain since 2005, and in 2012 extended this research to four major continental European markets (France, Germany, Spain and Italy). According to the 2015 edition of Ethics at work, 33% of the employees in continental Europe have witnessed some form of unethical misconduct over the past year. However, amongst those who say that they have been aware of a behaviour by their employer or colleagues which they thought violated either the law or their organisation’s ethical standards, more than half (54%) do not speak about their concerns with management, another appropriate person, or through any other mechanism. The reason? They fear that management sees those who report concerns about unethical or dishonest behaviour as troublemakers.
IBE researchers have also conducted the first study about the state of art of business ethics in Italy. The results show that the number of Italian employees who were aware of misconduct in 2015 is slightly higher than the previous years. In other words, they seem to be more concerned with a broader perception of unfairness with their organisations. “The fact is that in Italy the economy has been affected sharply by economic crisis and the undesired effect of austerity policy. The severe financial difficulties companies have faced as a result of this downturn have had a strong negative impact on the emphasis placed on ethical behaviour”, explained Lorenzo Sacconi, the scientific director of EconomEtica.
Yet, when Italian employees are asked whether they spoke up about their concerns, only two-fifhts of them said that they reported the misconduct. “This can potentially be related to the negative attitude towards whistleblowing in Italy, including a “duty of loyalty” that prohibits employees from disclosing negative information about their employer.
The courts have not been consistent in ruling on the legality of whistleblower retaliation, and cases can take many years to be settled”, says Guendalina Donde, from the Researcher Institute of Business Ethics. It is up to the Italian government to help organizations strengthen their ethical culture through the sharing of knowledge and good practice.