Managing Corporate Ethics: Learning from America's Ethical Companies How to Supercharge Business Performance

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Managers often ask why their firm should have an ethics program, especially if no one has complained about unethical behavior. The pursuit of business ethics can cost money, they say. It can lose sales to less scrupulous competitors and can drain management time and energy. But as Harvard business professor Francis Aguilar points out, ethics scandals (such as over Beech-Nut's erzatz "apple juice" or Sears's padded car repair bills) can severely damage a firm, with punishing legal penalties, bad publicity, and irreparably injured customer relations. Equally important if less obvious, unethical behavior can undermine a firm's organizational spirit. On the other hand, Aguilar argues, in a well run firm, ethical programs can actually enhance corporate performance, strengthening the company at every level and supercharging employee risk taking and innovation. In Managing Corporate Ethics, Aguilar shows managers how to create ethical programs within their organizations that not only discourage large-scale wrongdoing, but can contribute substantially to the achievement of corporate excellence. Aguilar's program is down-to-earth and comprehensive, and based on his extensive research on highly successful, ethical companies, both large and small. He recommends action on three fronts: first, get senior management to provide effective ethical leadership; second, set up an ethics program that promotes concern for the interests of people affected by the firm's operations and that provides safeguards against corrupting business pressures; and third, staff the company with ethical people and surround the organization with ethical advisors (including legal, financial, accounting, tax, and marketing consultants). To illuminate this three-step program, Aguilar incorporates the lessons learned in his in-depth study of ten prominent firms with proven successful ethics programs--among them Hewlett-Packard, Johnson & Johnson, Nucor Steel,Cray Research, ServiceMaster, and Texas Instruments. He examines Lincoln Electric's attention to compensation and job security to ensure quality products and to reduce the pressure or temptation to act unethically. He shows how General Mills, while pushing product line managers to compete aggressively, uses corporate staff units to guard against illegal or unacceptable claims (testing cake recipes, for example, to see if a product's quality fails under the less-than-perfect conditions of a normal kitchen). And he details how Armstrong World Industries uses pep talks, inspirational stories, role models, and ready access to management to promote ethical standards among employees. Throughout, Aguilar demonstrates convincingly that an ethical program pays dividends: that employees, suppliers, customers, and the community at large know when they are being treated in a positive and constructive manner, and are likely to respond in kind. Packed with real life examples of successful (and failed) ethical programs, Managing Corporate Ethics is a valuable roadmap to an often overlooked source of business success.