We need a Nobel Prize in business, awarded to organizations that demonstrate how business effectiveness (meaning survival, market share, profits, and stock value) results directly from ethical behavior. A society that is not built on ethics – on fairness, freedom, and mature hearts and minds – cannot survive for long. -Peter Koestenbaum, 2002

In 2001 in the U.S. alone, 257 public companies with $258 billion in assets declared bankruptcy. This was a huge increase over the previous year’s record of 176 companies with $95 billion.

Taking a look at what went wrong and why these companies failed reveals moral and ethical shortcomings. A bad economy, financial risks, accounting manipulations, loss of competitive advantage, and rapidly changing markets are undeniably strong negative factors.

But to truly understand, one must look deeper, into the very hearts and souls of the leaders that guide corporate responsibility. One must look at the moral and ethical stance of an organization and the role of leadership in creating a
culture of values.

Some say that business ethics is an oxymoron. Somehow we accept that business is different. Success is emphasized more than ethical and moral values. As long as a company is successful, we don’t look too closely. However, when companies collapse, everyone cries foul and is appalled at the ethical violations.

When leadership is ethically elastic, and standards are allowed to be stretched, then employees lose trust in the integrity of the organization. What follows is a loss of enthusiasm and motivation, and performance suffers.

Leadership development programs must explore moral and ethical dilemmas. It is often not as simple as choosing between right and wrong. It is often a case of between right and right. Some say that the organization of the future will have to be morally responsible as well as successful in generating profits.

Important concepts covered in this article:

Bankruptcies and Scandals: How Can it Happen?
Is Business Ethics an Oxymoron?
Facing Ethical Dilemmas: Living in the Gray
Leaders & Responsibility for Creating Trust and Cultural Values
What Can be Done
How to Solve an Ethical Dilemma
Leadership & Ethics: Resources

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In the last few years several books have addressed why some companies are
more enduring than others. What distinguishes the great from the merely good?

Really great companies, even in bad times, place people and values first. The
obsession with stock prices has obscured our vision and caused companies to lose
their way. The current economic shake-up will cause them to find their way
again, or sink. The link between people and the bottom line is becoming clearer.

A focus on treating employees with warmth, dignity and respect pays off in how
customers are treated and consequently in how the business performs.

As Herb Kelleher of Southwest Airlines is fond of saying, “We put our employees
first, our customers second, and our shareholders third. In that order it works
and out of that order nothing works.”

As we continue into this new century with new uncertainties, companies will need
to draw on the full creative energy and talent of their people. Why should
people give full measure?

Confronted with an increasingly mobile society, cynicism about corporate life,
and an expanding entrepreneurial segment of the economy, companies need to have
a clear understanding of their people and values. They must make work meaningful
and thereby attract, motivate and retain outstanding people. There must be a
balance with people, values and business in order to create sustainable results.

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