3 Approaches for Running an Ethical Business
Co-written by- Jahnvi Patel, MAZURKRAEMER law clerk, VLS Class of 2024 and Salene Mazur Kraemer, Esquire, Managing Partner, MAZURKRAEMER
Last week, the New York Attorney General Letitia James announced (listen to her report here) the office's lawsuit against former President Trump, his children and the Trump Organization after an investigation alleging they inflated the values of properties in seeking bank loans. Her office is seeking $250 million in penalties for over 200 instances of fraud over 10 years.
In response, we wanted to write a piece on business ethics. As restructuring professionals, we have prosecuted and defended fraud allegations. As business people, our moral values drive every move we make. Do they drive you?
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Business ethics refers to the implementation of policies and procedures regarding topics such as fraud, bribery, discrimination, and corporate governance. The word itself, "ethics," is derived from the Latin word "ethos," which interprets the moral values and characteristics of a society. Therefore, it represents people going beyond doing the legally right thing, and acting morally.
Ethics reflect a culture’s religions, philosophies, and even the skills or qualities specific professions required of their players and employees. It encompasses social norms and an understanding that results in certain ways of behaving or reacting.
Ethics involve examining social values of businesses and their leaders and applying certain standards of conduct, morals and justice to decisions that may increase the bottom line of a company's ledger. "Do unto others as you would have them do unto you" (the Golden Rule) is a well-known ethical standard that also applies to how businesses treat their stakeholders, which include not only shareholders, directors, and officers, but also employees, creditors, lenders, customers, suppliers, and distributors. Business leaders can breach social values, such as unfairly exploiting the poor, putting unjust burdens on workers or customers, and undermining global communities. Business leaders can make their employees sick to their stomach, literally, every day (the "Sunday Scaries") with the thought of having to go to work.
How do your subordinates feel about you?
It is a statement of the obvious--if employees are treated well, for example, they will be more energized and enjoy their jobs -- which in turn, will improve the quality of products and services. Conversely, if employers lie to employees or take advantage of them, there will be low morale and high turnover.
How do you treat your employees? Do you sincerely care about their well-being? Do you want them to be the best versions of themselves?
Do you pay your suppliers on time?
Are you careful to correctly bill your customers? Do you correct problems right away?
How well do you respond to a dispute with any stakeholder?
Are you entirely truthful and accurate on all of your financial disclosures?
For a business to be successful and sustainable, loyal stakeholders are vital.
The 2018 study, conducted by Global Business Ethics, found that U.S. employees were more likely to apply ethical reasoning in the office when their companies display a strong culture of ethics. 99% of employees who feel that their organization believes in ethical principles said they’re prepared to handle ethical issues. As consumers pay more attention to business practices, it’s important that companies demonstrate their commitment to carrying out work with the right amount of ethical and moral concern. Ethics programs are effective in helping companies to promote ethical conduct. Employees who are committed to ethical conduct should be hired.
Is it the TRUTH?
Is it FAIR to all concerned?
Will it build GOODWILL and BETTER FRIENDSHIPS?
Will it be BENEFICIAL to all concerned?
Do your business decisions pass this test? What guides you and your decision makers?
Three Approaches to ethics for your business:
Customer Comes First
There are times when sellers oversell policies or products to customers, such as selling people a $10 million life insurance policy when they only need a $3 million. Other examples also include high-pressure, or "decision-making" or deceptive sales tactics that put the interest of the seller over that of the customer, sometimes doing so to boost short-term profit without regard for long-term reputation. Sometimes short-term profits appear more profitable than appealing to customers or managing a long-term reputation by treating people with dignity and respect.
As lawyers, we promise never to just churn legal fees to meet billable hours or to take advantage of any circumstance. In fact, none of the professionals at MAZURKRAEMER have any billable hour requirements!! Our compensation structure just isn't set that way! Instead, we are results-oriented. We know if we address your legal problem as quickly and efficiently as we can, you will be back with referrals or more business.
Be Honest
Exaggerating something about your own capabilities or the weaknesses of your competitor or its product can be unethical. You also should never lie about the size of your business or its asset portfolio. You should never mislead suppliers, customers, and/or potential investors. When people discover the truth, they may distrust claims you've made about your clients, employees, and products, thus shaking their confidence in you.
Be a Good Citizen
Spend time in your community and find selfless social interaction. One way to be involved is to volunteer for public causes. Allow your workers some time away from work to volunteer for a charity. This will help you build in your company an image of good citizenship and broaden your market exposure in the community you serve. Engaged employees who are involved with your company are more likely to be committed to your business, and strong corporate goodwill and consumer growth are likely to follow. Do your employees actually look forward to your office Christmas party or Summer Family picnic or do they dread it?
The alleged fraud against the Trump Organization is jaw-dropping. It will be a fascinating legal case to follow. Read Salene's other blog post written regarding fraud:
https://mazurkraemer.wordpress.com/2015/11/03/can-dance-mom-dance-her-way-out-of-bankruptcy-fraud-bankruptcy-fraud-basics/
Rotary's 4-Way Test
Salene's Note: In the past, I have been a member of several local Rotary organizations. I have always enjoyed the business and community persons in the group. Rotary promulgates its own set of guiding principles for members to use in their personal and professional lives.
The Object of Rotary is to encourage and foster the ideal of service as a basis of worthy enterprise and, in particular, to encourage and foster:
FIRST: The development of acquaintance as an opportunity for service;
SECOND: High ethical standards in business and professions; the recognition of the worthiness of all useful occupations; and the dignifying of each Rotarian’s occupation as an opportunity to serve society;
THIRD: The application of the ideal of service in each Rotarian’s personal, business, and community life;
FOURTH: The advancement of international understanding, goodwill, and peace through a world fellowship of business and professional persons united in the ideal of service.
This is the Rotary 4-way test for conducting business:
