June 25, 2008

Business Ethics 101

LET'S SAY YOU'RE A business student studying for the GMAT, the standardized exam students applying to graduate business schools must generally take. One day, you stumble across a site that promises to divulge information about current test questions for the sum of, say, $30. You are concerned about your potential performance on the GMAT, and are wondering whether you should spring for membership. Should you?

As we will see, the answer is a definite No.

Apparently, one such site enticed more than 1,000 prospective business-school students to sign up to get these questions, according to Business Week magazine. Due to bad planning, however, the site was apparently incautious about its operations, and the people who run the GMAT found out about it. One $2.3 million judgment later, the operator of the site has fled to his native China and the GMAT folks are in possession of the site's hard drive. As a result, Business Week reports, the students who paid to use the site are about to reap the whirlwind of Academic Justice, which as we all know is pitiless, merciless, brutal and swift. Stakes are so small and all that.

This to me is not so much an ethical question -- although there are ethical questions surrounding it -- as it is an introduction to how the business world works. In the real world, companies jealously covet their intellectual property, and are not about to have some upstart steal it and undercut a particularly lucrative business line. Nor will they stand idly by when threats to their brand's reputation exist. Nor, when presented with such threats, will they hesitate to chop off the heads of the people responsible.

Along those lines, the colleges themselves will not hesitate to chop off the heads of prospective or current students if they are judged guilty of using this site. After all, they have their own brands and reputations to protect. Thus, unless a student is particularly brilliant or naive, he will get cashiered out of the place faster than one can say Jack Robinson.

True, the students could offer defenses. Good luck with that, kids. If there's enough evidence, it will stick. The students might even sue. Again, good luck with that -- try getting a lawyer to take that on contigency.

I do realize one could argue the offense is relatively minor; but even minor things have a way of turning into major things. For instance, let's say your company acquires a contract to build a school in some foreign country, by which I do not mean China. To get the contract, you have to offer a bite or two of your apple to the local big shots. No big deal, right?

Well, contract in hand, you go about building the school. But as part of the deal you have a local partner who has also greased various palms to get his action. To keep up his profit margin, he uses substandard materials to build the school. There's almost no way anyone will notice -- until disaster hits in the form of an earthquake. Then everyone notices, because the school collapses and a lot of people inconveniently die. Now, you are in real trouble.

If you had done things above board in the first place, you might not have gotten the contract, but you wouldn't find yourself in some life-altering situation further down the line. The same principle applies here. In business, doing the right thing isn't just doing the right thing -- it's the smart thing, and a course of action that generally will save you time and trouble in the future.

Posted by Benjamin Kepple at June 25, 2008 08:12 PM | TrackBack

Hi Benjamin,

I agree. Doing the right thing, even in relation to small issues, is not only ethical but will benefit oneself over the long term.

I particularly like the way in which you use vivid examples to demonstrate the point.

In my opinion, problems arise where people adopt short term perspectives. This is particularly so in business, where the adverse consequences from 'ethical shortcuts' are often not felt until well after the individuals responsible have left the company.

Take the example of the tobacco industry. The industry faces continual problems relating to litigation all across the world, particularly as the industry misled the public about the dangers of smoking for several decades.

The managers who were responsible have long gone, leaving current management to deal with the problems. So, whilst tobacco companies are facing consequences for their actions, the individual managers themselves have not been affected.

Nevertheless, I do agree that doing the right thing on small matters may well prevent problems down the road.



Posted by: Andrew at June 26, 2008 05:55 AM
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