Maintaining Ethical Standards

The emergence of the technological gig economy has been one such change. International companies like Airbnb and Uber allow people access to previously restricted markets at a much reduced cost by avoiding certain regulations. These services thrive on providing services like accommodation and transport to the public at lower cost and greater convenience. But there has been a dark side to these new industries. For example, in recent years, Airbnb has struggled with reports of renters installing secret cameras in properties, and Transport for London revoked Uber’s license over concerns about public safety. [1] [2] Uber had already suffered a Twitter revolt over its surge pricing during high-demand events like a taxi strike and terrorist events. [3] Both businesses are essentially built on models of providing a platform for members of the public to do business with each other. But a combination of public outcry and government intervention has forced them to take on more responsibility for the actions of those providing services through their platforms. In Uber’s case, this has also led to them having to reconsider their relationship with their drivers, and treating them more like employees than freelancers.

Not only do businesses have to consider the effects of their decisions on their profits, but also on their community. Uber and Airbnb likely suffered some brand devaluation when they were seen to be failing to live up to their social responsibilities. In these cases, like others, there was, in fact, a business case to make for erring on the side of social commitment, as well as an ethical one.

This, of course, does not even allow for the difficulties faced by multinational organizations operating in a variety of countries, where differing moral, ethical and legal standards will apply.

Blind Spots

Most people have an inherent sense of right and wrong. But that doesn’t mean they always make the right decisions. In their book Blind Spots: Why We Fail to Do What’s Right and What to Do About It, authors Max Bazerman and Ann Tenbrunsel discuss the circumstances under which people can make poor ethical choices. [4] Bazerman gives the example of ENRON, where, he argues, a number of employees who were not involved in the illegal activities which brought down the company were still in a position to recognize what was happening and yet did nothing. He calls this ‘motivated blindness’. It could also be seen as part of the psychological phenomenon known as ‘diffusion of responsibility’. This occurs when people are part of a group and tend to assume either that someone else is responsible for taking action, or that they have already done so. Thus they do not adhere to the same ethical standards they would otherwise do if they were acting alone.

Handing Off Responsibility

The issue of responsibility is key. Leaders have a duty not to absolve themselves or their organizations of responsibility for ethically unsound behavior by handing that responsibility off to someone else. If an organization subcontracts work out to an independent supplier, they are clearly not absolved by the public of responsibility for ethical violations. The 2013 collapse of the Rana Plaza building in Bangladesh previously brought this issue to the fore when high street retailers, including Primark, Tesco and H&M, signed up to a legally binding code requiring them to ensure safe working conditions in the factories where their products are made. [5] Whether they were actively responsible for the unsafe conditions, or even aware of them, the public held them accountable, and, like Uber and Airbnb, their brands were devalued by the perception that they had not lived up to their responsibilities.

What Can Leaders Do?

The above examples fall into three key categories in which organizations can stray into unethical behavior:

• conflicts of interest
• diffusion of responsibility
• giving away accountability

Avoiding these situations, or at least being aware of their potential to cause ethical dilemmas, is the responsibility of leaders. They set the tone for their entire organization and can unwittingly create an environment where unethical behavior is not only tolerated but becomes part of the culture. This can happen despite employees doing nothing illegal or even understanding that what they are doing is ethically questionable. To avoid slipping into ethical blind spots, Bazerman and Tenbrunsel offer the following advice.

Don’t Overestimate Your Organization’s Ethical Standards

Most leaders have an overconfident idea of the ethical standards within their company. This can lead to a lack of action to address ethical difficulties. Whatever you imagine the situation to be, assume it is, in reality, worse than you think, so as to remain watchful for problems.

Don’t Become Isolated

Leaders who are rarely questioned in their judgments can find themselves in a kind of ‘ethical mirage’ and come to believe their actions are ethical, despite slipping into dubious areas. Make sure you have people around you who are willing to question your actions and decisions. As a rule, Bazerman and Tenbrunsel suggest that if you find yourself in any way justifying your actions to yourself, the chances are you’re uncomfortable with your decision and need to reconsider its morality.

Remove Conflicts of Interest (Where You Can)

Bazerman gives the example of the auditing industry here, pointing out that auditing a company that is also a client causes a moral dilemma. On the one hand, you are employed to ensure their business is in good order; on the other, you want to retain them as a client. This state of competing drivers makes it difficult to walk a straight, ethical path. Where you can, avoid putting your organization into such situations by actively looking for, and addressing, conflicts of interest. Of course, for any profit-driven organization, there will come situations where profit and corporate social responsibility come into conflict. This is why it is worth creating and actively maintaining a CSR strategy. This can help both to establish your organization’s ethical standards and enhance your reputation as a responsible operator.

Do Not Abandon Accountability

Take responsibility for your supply chain or other corporate partners. You may feel that it is not your responsibility to police the actions of other companies, but consider how you will be seen by the public, should an organization you work closely with be involved in serious ethical misconduct. Be careful who you get into business with – you could be tarred by their brush.

Avoid ‘Ethical Fading’

This is where an ethical question drifts into a financial one. For example, instigating a fine for unethical behavior may actually increase the behavior, as people weigh the benefits for themselves against the financial cost, rather than the moral one. This can also happen with organizations. If governments place fines on certain behaviors, companies may lose sight of the underlying moral imperative and consider whether the fine is worth the financial benefit. Beware of allowing this to creep into the culture of your business. It can easily absolve people of guilt if they feel they’re paying financial recompense for questionable actions.

Conclusion

Business ethics are a difficult topic, and there are often no easy answers. For leaders, the focus should be on maintaining their own ethical standards, setting an example for all employees, and actively avoiding situations that may put people into ethically difficult corners. A clear and definitive CSR policy could be a way to set standards throughout the organization, which lets all employees know what is expected of them, and that they will be supported in making good ethical choices.