By Bill Valentino
The corporate scandals that have rocked the business world in recent years have made ethics ubiquitous in the corporate world. Where previously many companies viewed business ethics only in terms of administrative compliance with legal standards and adherence to internal rules and regulations, the focus now is on ethical behavior, moral judgment and transparency.

Going global, beating the competition, influencing governments, convincing customers and increasing profits are among the many pressures faced by business leaders who must deliver results but at the same time have to meet the high moral expectations of customers, communities, governments employees, and many other stakeholders. Corporations are now being held increasingly accountable for their actions, as the demand for higher standards of corporate social responsibility, which can be described as ethical leadership in action, continues to grow. In essence, the discourse on ethics and values is the epistemology of corporate social responsibility

Statements in an annual report are scarcely a convincing measure of corporate ethical competency. Even CSR initiatives driven by good motives, ethics and core values are often undertaken as a matter of marketing or public communications. In practice, CSR, if seen as ethics in action, is about companies strategically positioning themselves for leadership and economic success by infusing their organizations with a strong sense of values based on quality, reliability, accountability and good citizenship. In the context of corporate culture it is apparent now more than ever that good ethics leads to better managed companies and a high probability of sustainable business success.

Ethics, values, integrity and responsibility are no longer considered as just nice to have. They are now required. These contributions, which an organization makes to the larger society within which it operates, are seen by many to be just as important as the profits the organization earns. This does not downplay the importance of profitability. Strong, sustained profitability will always remain essential but ethics and values are rapidly gaining in importance.

It can be argued that the extent to which ethical behavior is economically advantageous depends on societal expectations, society’s institutions and cultural relativism. Under certain circumstances it can also be misguidedly debated that ignoring or evading laws and regulations or even basic human rights can be profitable. Corruption is a classic ethical dilemma where companies seeking the higher moral ground are often placed at a disadvantage. When push comes to shove, ethical commitment and economic self-interest are compatible in some situations but conflicting in others. Whatever arguments are presented, it cannot be denied that business ethics, values and social responsibility are among the most essential and fundamental drivers of business success. These are drivers which shouldn't ever be ignored or evaded.

Ethical thinking and action demonstrated via CSR have ceased to be a damage control measure and are increasingly justified in terms of business benefits such as problem avoidance, cost containment, improved stakeholder relationships, enhanced working conditions, and increased competitive advantage.

Matters such as honest accounting, treating employees with dignity, disclosing product risks, or being a good corporate citizen are no longer just a means to achieving outstanding performance – they have become a part of how it is defined and measured.

Many companies today find themselves operating in a virtual fishbowl, with their every move being watched and potentially subject to wider scrutiny. They are in the spotlight today more than ever for their behavior with respect to ethics and social responsibility. In the context of the MBA toolkit for CSR, it is important to understand how firms develop their ethical stances and the values that are the foundation of their decision-making frameworks.

Ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company.  Corporate social responsibility has become an umbrella term under which the ethical rights and duties existing between companies and society are intensely debated but also under which the economic, legal, ethical and discretionary activities of a business entity are undertaken and adapted to ethical norms, company values and the expectations of society. A key function of CSR is to create the understanding and processes for weaving values, business ethics, and social responsibility into an effective management structure, which then touches all aspects of a company’s operations.

Under values we understand attitudes, beliefs, and behaviors, derived from membership in a community that are indicative of what people think is important or worthy in decision-making.

Ethics are defined as the conception of what is right and fair conduct or behavior (Carroll, 1991; Freeman & Gilbert, 1988). Ethics can also be equated with the concept of morals — one's ability to choose between right and wrong, good and bad, acceptable and unacceptable. In the context of doing business the field of business ethics has emerged to specifically deal with ethical dilemmas arising in the business world.

Values, ethics, and corporate social responsibility are clearly interrelated and to a great extent interdependent. Values influence the extent to which a corporation perceives social responsibility. One key component of corporate social responsibility is an organization's ethical responsibility, which is also influenced by the values of society.

Placing ethics in the MBA toolkit for CSR confronts the inevitable ambiguous challenges of ethical dilemmas that face companies when the choice is between what is right and what is profitable. This points to an emerging new standard of corporate performance that calls for excellence along both financial and moral dimensions. In this context, corporate strategies must make both moral and financial sense. The main idea here is that in addition to being measured in financial terms, companies today are increasingly being held to a standard that has both financial and moral dimensions. Following a stakeholder approach, this emphasizes the intertwined nature of economic, political, social, and ethical issues. Centered in the practice of management, it provides the manager with a pragmatic framework for action.

As corporations have become pervasive and powerful actors in the world, society has in effect endowed them with a moral personality whose functional tasks must be carried out within a moral framework. The moralization of the corporation explains why values and ethics have become so important in defining how companies are expected to behave.

Companies are responding to these new expectations with an array of initiatives and programs such as values initiatives, ethics programs, citizenship initiatives, diversity initiatives, compliance programs, reputational management efforts, corporate identity efforts, supplier codes of conduct and employee volunteer programs. Centered on these initiatives are the key recurring themes of risk management, organizational functioning, market positioning and civic positioning.

In CSR, the paths to ethics and values are many and varied. They can be problem driven or opportunity driven. Managers often turn to ethics and values as a way to manage or eliminate risks. Sometimes they focus on misconduct, which undermines the public’s trust in a company. But sometimes it is less about preventing misconduct and more about organization building aimed at efforts to build a well functioning company ideally one that can be a progressive force for social betterment

The importance of ethics and values for shaping a company’s identity and reputation, building its brands, or earning the trust of customers, suppliers or other business partners is equally important. Commitment to values like honesty, fairness, and responsibility is crucial for building a good reputation, which goes beyond just meeting stakeholders' needs. It emphasizes the message that these companies are attractive as business partners and as good corporate citizens.

Civic positioning, the company’s standing in the community and not just in the market place, is also very important because companies seen to be trustworthy and civic minded frequently have an easier time dealing with government officials or regulators. Strong credibility can sometimes give companies a greater voice in regulatory and policy matters that affect their business.

The MBA toolkit for CSR containing ethics and values, employed either in a business education setting or in the setting of an operating corporation, is called upon to identify, critically examine and understand the context, role, and effectiveness of ethics in a global business environment. The aim is to acquire or implement the critical skills and analytical frameworks essential to identify, characterize, and resolve ethical problems likely to arise in the workplace and in business situations.

This particular tool provides the basis for true ethical leadership, which is aimed at not just dealing with short-term, superficial issues, but to really reflect on deeper underlying issues that affect and drive business. The expected outcome is that business leaders increasingly will become aware and clearly grasp the ethical implications of their positions and linked responsibilities but above all the consequences of their actions and impacts on their stakeholders and the larger society within they operates.

About the author:
Bill Valentino, continuously working for Bayer in China since 1987, holds a MBA from Thunderbird, the Gavin School of Management, and a MA in Technology and Communications from Columbia University, New York. He co-directs the Tsinghua-Bayer Public Health and HIV/AIDS Media Studies Program and is a Senior Guest Lecturer at the Center for International Communications at Tsinghua University. He is also currently the Chairman of the European Chamber's CSR Working Group and a long-standing member of the AmCham CSR Committee in Beijing.

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