Brad has many years of business experience, and in his discussion below, he talks about the need for organizations to hold discussions with their staff about the most effective ways to handle specific situations in which they may encounter potential ethical dilemmas in the course of their duties:

 
I’ve been a big fan of Andrew’s blog from the moment he told me about his theme, business ethics. It’s a topic that deserves much more attention, and I love how Andrew is able to give us a clear yet high altitude understanding of complex ethical issues.

For my guest post, I’d like to turn the tables a bit and talk about what business ethics look like from the trenches. Since that’s where I’ve spent most of my career, it seems like the logical place for me to go.

It’s been said that ethics is what you do when nobody is looking. In day to day business activities, nobody is looking pretty much all the time. I’ve worked in environments where management requires detailed call reports and looks over employee shoulders continually, but the fact is, people can get away with just about anything if they are so inclined.

Well intentioned or not, in the trenches it is difficult to tell when you’ve crossed the ethical line. Hypothetical: Supposing a customer overpays you by $10 on a $1000 invoice. Would you pocket the $10 or credit it back?

It’s quite easy to justify pocketing the $10. Processing the paperwork will cost the customer more than the $10 in question. I’ve certainly given that customer more than $10 of free service in the past, so this just evens things up. It’s the customer’s responsibility to pay properly, not mine. Ten dollars is nothing – why bother with it at all?

Even when the choice is made to refund the $10, the choice might be made for less than ethical reasons. For instance, the seller might think, I’ll show the customer how upstanding I am. Perhaps in the future I’ll be able to use it to my advantage for a greater gain.

So, even in a simple situation like this, discerning right from wrong requires a good deal of thought and reflection. But the seller could be faced with more complications still. Suppose the customer always pays 90 days beyond terms. Suppose the customer is notorious for taking unauthorized deductions or grinding suppliers’ margins into the ground? Do those considerations affect the decision of how to handle the extra $10?

And what about the big picture? In the trenches, we don’t think about that a lot. But any employee who cares about the success of his firm should. I might be able to justify keeping the $10, yet if my colleagues applied my same reasoning, my firm might overcharge customers by tens of thousands over the course of  a year. Conversely, if our firm had a policy to refund regardless of circumstances, we might forgo tens of thousands in revenue leading to a reduction in salaries and bonuses. 

In my experience, well intended business people will reach different conclusions about how to handle my hypothetical $10. Does that mean business ethics are situational? Is it possible to devise a rule to cover all variations of even the simple example in this post? I’ve been in business for more than thirty years and to tell the truth, I don’t know the answer to either question.

What I do know is, whether a firm has rigorous ethical guidelines or none at all, discussing ethical issues that occur in the trenches is a must. Discussion serves as a collective conscience. While some may not agree on the ultimate decision, everyone comes away with a new perspective and a deeper understanding. These things make it likely that the next time a problem crops up, it will be handled better and more swiftly.

How would you handle my $10 example? Perhaps we can put my theory to work and see if discussion brings clarity!

Andrew, thank you so much for giving me the opportunity to be a guest author on Good Honest Dollar $$!

 
About Brad Shorr 
Brad Shorr lives in the Chicago area, and is president of WordSell, Inc. He helps organizations strengthen their online business presence with business blogs and compelling web content.

Brad writes extensively on his own and many other blogs, mainly about writing, online marketing, entrepreneurship, sales and business humor.

To many in the western world, such a right is beyond legal and moral dispute, and in my view, the option to join a union (as well as the option to refuse to join) is a right to which workers should be entitled.

Nevertheless I feel that challenging the notion of union membership as a fundamental right is a worthwhile exercise, particularly as unions are disallowed in some countries.

Accordingly, today I would like to outline and discuss two common objections toward the concept of unions. Next week, I will highlight and discuss the case in favor of unions, and why I believe workers should be permitted to bargain on a collective basis via membership of a union.

 
The case against unions
Trade unions are subject to an extremely wide range of criticisms, springing from a variety of sources.

Today, I would like to focus on two areas of criticism in particular - that unions have a harmful impact upon the economy and that they are anti-competitive in nature.

 
How collective bargaining is anti-competitive
Anti-competitive behavior is generally frowned upon in much of the western world – in particular the practice of firms engaging in collusive behavior with other (competing) firms in order to maximize the prices they receive for their output.

Such practices are generally considered to be unfair and a hindrance to the effective functioning of a competitive marketplace.

But aren’t workers doing the same during the collective bargaining process? They are. Where staff employed in a particular industry join together (in a union) to bargain on a collective basis, this too represents a form of collusion – individual workers colluding with each other in an organized effort to maximize the price which they receive for their labor.

Moreover, in cases where the majority or entirety of the workforce within a given industry is represented by a singular union, such a union effectively operates from the position of a monopolist during the bargaining process, and is able to exploit its position to make unfair or unreasonable demands upon employers.

In a fair system, all classes of economic participants should be given equal rights, and the rules as to what is considered to be acceptable conduct or otherwise should apply equally to all. Why then should employees, as one class of economic participants, be allowed to engage in collusive behavior when other classes are not? 

 
Unions and the economy
A second objection to the concept of unions, and one which I do not feel is particularly strong, relates to their economic impact.

Critics say that the collective bargaining process results in higher unemployment as well as higher consumer prices than would otherwise be the case if collective bargaining were not allowed.

According to this argument, collective bargaining increases the negotiating strength of workers, and thus leads to higher wage settlements and therefore higher labor costs. This, in turn, leads to two negative economic effects: 

• Higher consumer prices, as firms seek to protect profit margins in light of higher labor costs; and

• Higher levels of unemployment, as higher wage levels result in a reduction in demand for workers.

I do not feel that this argument is particularly strong. Given what I feel is a strong case for unions (see next post), I feel that any adverse economic impact of their formation would not be a sufficient basis upon which to disallow the practice of collective bargaining.

But with rights come responsibilities, and today, I would like to outline what I feel should be the key responsibilities of each and every employee.

 
Key responsibilities of employees
Listed below are what I feel should be the key responsibilities of every employee. This list is by no means exhaustive and readers are encouraged to add their own suggestions:

 
• Strive to maximize their contribution.

This point summarizes the overriding responsibility of an employee in a nutshell.

Employees must at all times strive to maximize the value of their contribution to their contribution, both to their employer and also the key stakeholders to whom their employer is accountable.

This must be the overriding focal point, and the foundation upon which staff base their whole approach toward the fulfillment of their responsibilities.

The bare minimum is not acceptable. Workers must go all-out for excellence.

 
• Adopt an attitude of service.

An employment relationship should be one of mutual respect. But it is not a relationship of equals – the employee is the servant and the employer is the master.

Let me stress, I am not talking about any form of slavery. Instead, what I am talking about is that workers must accept that they are in a position of service, and that this has two fundamental consequences in terms of the manner in which they should approach their responsibilities.

The first such consequence relates to an employee’s interaction with those to whom he or she is accountable. Staff must seek to adopt an attitude of personal humility, particularly in the presence of superiors, owners or shareholders, as well as other relevant stakeholders. In addition, workers should demonstrate an appropriate degree of courtesy and respect toward those to whom they are accountable.

The second consequence relates to the manner in which employees approach their responsibilities. Workers must seek to serve in a manner which is dutiful, loyal and trustworthy at all times – regardless of whether his or her superiors are watching.  

 
• Do whatever it takes.

Staff must always be willing and prepared to do whatever is necessary in order to complete their responsibilities in a satisfactory manner.

Whilst excessive amounts of overtime should not be encouraged, employees must be willing to put in time outside of standard office hours where necessary in order to get the job done. In addition, workers must be willing to assist with projects which are not normally within their job description where necessary.

 
• Be a team player.

The attitude of “not my department, not my responsibility,” has no place within the modern workplace environment.

Employees owe a position of service to the entire company and the key stakeholders that the company serves, not simply the department to which they are allocated, and staff must be willing to work in a cooperative manner with those outside of their department and contribute toward projects which fall outside the scope of their regular duties.

 
• Act with integrity.

Employees should seek to act in a manner of complete honesty and integrity at all times.

Prior to commencing employment, prospective employees must refrain from making any form of misrepresentation in terms of their qualifications or suitability for the position.

Whilst in employment, any form of theft, misappropriation or unauthorized of company money, property or data is unacceptable, as is any misuse of position for personal gain.

In addition, staff must refrain from participation in any form of conduct which is illegal, unethical, or in breach of any applicable industry or professional codes of conduct – regardless of any pressure applied by colleagues or superiors.

Finally, upon becoming aware of any form of improper conduct of others, employees must report such conduct to an appropriate authority – whether this be to an appropriate manager within the organization, or potentially to regulatory authorities or other parties outside the organization.

 
• Observe all health and safety procedures.

Whilst the employer has an obligation to provide a safe working environment, every employee within an organization has the responsibility to take a proactive approach toward ensuring not only their own personal safety, but also that of their colleagues.

This includes following all occupational health and safety procedures, wearing all required safety equipment, and either taking immediate preventative action or brining the matter to the attention of appropriate personnel in the event of identification of potential hazards.

 
• Refuse to engage in conduct which harmful to their employer.

At no stage should an employee engage in any form of conduct which could in any way cause harm to their employer, whether during or outside office hours.

Employees must refrain from participation in any form of employment or business activities outside the scope of their regular job which either represent any form of competition to their employer’s business or result in any form of conflict of interest which has the potential to in any way compromise their ability to serve their employer in a satisfactory manner.

In addition, staff must at all times refrain from any form of conduct which has the potential to bring the reputation of their employer into disrepute.

 
• Be a good ambassador for their employer.

The behavior of staff, both during and outside office hours, has an impact upon the reputation of their employer.

Accordingly, staff should seek to act in a manner which is honorable to their employer at all times.

During work hours, staff must adopt a thoroughly courteous and professional approach in their dealings with all relevant stakeholders.

Outside office hours, employers need not observe all of the rules of regular office etiquette, but should nevertheless refrain from any form of conduct which could in any way bring the reputation of their company into disrepute, as noted above. This particularly applies whilst participating in any form of out of office functions or activities which are related to their employment.

Today I would like to start a new series of discussions which will focus upon the rights and responsibilities of employees at work. Although the majority of the discussions will focus predominately upon employee rights, the responsibilities of workers will be alluded to also, particularly I do not feel that it would be appropriate for me to focus solely upon employee rights whilst neglecting the other side of the equation.

Also, I intend to discuss the issue at a very broad level, so as to ensure that the discussions are relevant across both the developed and the developing world as much as possible.

I have not yet made a final decision about which specific areas the discussions will cover, and readers are more than welcome to suggest any particular topics.

I thoroughly hope all readers enjoy this series.

Cheers

Andrew

Now comes the hard part – verifiable and lasting improvement on the factory floor.

 
Wal-Mart’s strategy
On October 22, the company outlined a renewed strategy designed to produce significant improvement in terms of the management of its supply chain from a social and environmental perspective.

The centerpiece of this strategy is a new supplier agreement, to be phased in over a three year period beginning in January 2009. Under the new agreement, suppliers will be required to:

• Certify (a) compliance with all relevant laws and regulations in areas in which they operate and (b) adherence to strict social and environmental criteria;
 
• Conduct their own audits, as well as co-operate with (sometimes unannounced) audits from company representatives or independent auditors;
 
• Provide the name and location of every factory which they use in the manufacturing process; and
 
• By 2012, source 95% of all manufacturing inputs from suppliers which receive the highest ratings in relation to social and environmental practices.

In addition, the strategy also includes a range of targets relating to energy efficiency and product quality and safety, with particular emphasis upon its Chinese operations.

(Refer company announcement and International Herald Tribune article for more details)

 
Lessons from Nike
Associate Professor Chris McDonald, author of The Business Ethics Blog, draws a comparison with Nike. By all means, this is a valid comparison – Nike once had a poor reputation from the point of view of labor practices within its supply chain, but its reputation has improved considerably over recent years due to improvements in public transparency and accountability.

Nevertheless, the comparison with Nike raises three interesting issues:

 
• Wal-Mart’s efforts, at least in terms of public accountability and transparency, do not appear to be as extensive as those of the sporting goods manufacturer.

Nike currently provides full public disclosure in relation to (a) the location of supplier factories; and (b) the aggregate results of audits into labor conditions at supplier factories.

The announcement by Wal-Mart does not state whether or not such information will be publicly disclosed. If not, the general public will not have means by which to verify any claimed improvement in supply chain practices.

 
• Wal-Mart’s problems go beyond its suppliers.

Whilst the problems at Nike relate predominately to its external contract manufacturing practices, those at Wal-Mart extend further, and include alleged poor labor practices in the U.S.

If the company is serious about improving its reputation, it must address all of these issues, not just the issues which pertain to its supplier base.

Moreover, responsibility for improvement cannot be simply transferred to suppliers. Wal-Mart itself has a responsibility to adopt proactive supply chain management initiatives, including the training of suppliers in terms of best practice operating proceedures. Perhaps the most important action which the company could take is to cease placing unrealistic cost and time pressures upon its supply chain - suppliers must be provided with the opportunity to make improvements in operating practices without compromising the viability of their operations.

 
• Accountability is one thing, results are another.

As noted in an earlier post, whilst Nike has made significant improvements from an accountability viewpoint, its progress in terms of verifiable improvement on the factory floor has been very disappointing, with problems occurring frequently in terms of excessive overtime, poor occupational health and safety practices and failure to pay legal minimum wages.

Wal-Mart must go beyond Nike and demonstrate a substantial level of verifiable improvement at the level of the factory floor. Until this happens, no improvement in its corporate reputation will be justified.

 
Summary
Wal-Mart is to be commended on its positive initiatives, particularly its new supplier agreement.

Now comes the hard part – results on the factory floor.

(Image provided by Hugh Beauchamp)

This is the final post in the series on socially responsible investing (SRI).

Today, I would like to outline some basic principles as to how to actually go about becoming a socially responsible investor.

But before I get into that, let me stress two important points.

Firstly, I do not intend to provide a complete guide toward ethical investment – such a guide would be beyond the scope of this discussion and I intend to simply outline a few common sense basic principles. Readers are encouraged to add any thoughts of their own.

Second, I am not a qualified financial planner. As such, I cannot, and will not, recommend specific investment strategies, and the information presented here is intended for general discussion purposes only.

Indeed, this brings me to my first point:

  
• Consult a qualified financial planner.

For those with a substantial sum of money to invest, obtaining professional advice prior to making any form of investment decision is a prudent course of action.

Ethical investing is no exception - there are a considerable range of options available and your financial planner is in the best position to provide advice in relation to the strategies which are most appropriate for your individual circumstances.

In addition, should you choose to invest via an SRI fund, your financial adviser can also advise you as to which funds are considered to be the most reputable.

  
• Learn about ethical investing.

Notwithstanding the point above, conducting your own independent research is also a good idea.

In particular, you would want to gain a basic understanding in the following areas;

(1) Investing in general – how share, property and bond markets work, along with the basic workings of managed funds and retirement accounts.

(2) Ethical investment – the nature of ethical investment, the range of approaches available, and the workings of SRI funds.

(3) The corporate reputation of any prospective investee companies as well as any key ethical issues confronting the industry in which they operate (only relevant for those who purchase shares directly, as opposed to community investment or investment through an SRI fund).

  
• Determine your core ethical principles.

There are many, many issues which could be considered within the ethical investment process. Just to name a few, these could include – environmental management, labor rights, world poverty, legal compliance, corporate governance, technological advancement, legal justice, education, public health, transparency, corruption, war, political & religious freedom, product safety, resource management, ethical sales and marketing practices.

It is most unlikely that there are any investment options which satisfy every possible ethical issue, and therefore it is important to focus upon the core issues about which you feel most strongly.

My suggestion - choose five core issues and/or principles, and focus primarily upon these during the decision making process.

  
• Determine your ‘style’

One issue which will have an impact upon determining the approach which is most appropriate for you is your investment style  - in particular, your appetite for risk and whether or not you wish to take an active or passive approach toward the management of your investments.

Those who are most comfortable with a more passive approach, for example, may be best suited toward investing through as SRI fund. Community investing may also be an option.

In contrast, those wishing to take a more active approach may prefer to select their own investment portfolio via direct investments in the share, property or bond markets. Such investors may also consider becoming involved in some form of shareholder advocacy.

Finally, those with a particular burning passion, who are willing to undertake a considerable level of risk, may wish to invest their financial and/or time resources into some form of social entrepreneurial type project.

  
• Determine your financial goals, objectives, and priorities.

Ethical investment decisions must be consistent with two core items – your ethical investment priorities and your financial investment priorities.

Your financial priorities should guide your decisions in terms of determining an appropriate growth profile of prospective investments as well as an appropriate risk profile.

My suggestion - make a list of financial goals, for the next one, three and five years. Depending on your circumstances, it may be appropriate to set even longer term goals, particularly if you are in the process of planning for retirement. But I would think that five years would be an appropriate time horizon at a minimum for the majority of investments.

  
• Act.

Once the due diligence process is complete, it’s time to act, and to enjoy the satisfaction of knowing that however large or small, your investments are having a positive impact upon the world in which we live.

On the other hand, when they work together, mutually beneficial results are often achieved.

Today I would like to highlight the new Integrated Biodiversity Assessment Tool (IBAT), a wonderful example of a common sense project which can occur when large business and conservation groups work together in a spirit of mutual co-operation.

  
The problem
New business projects, such as construction of mines, pipelines, and many other forms of infrastructure, often have a significant impact on the area concerned from a viewpoint of biodiversity.

In order to prevent or mitigate this impact, or to avoid costly modifications to the project at later stages, it is crucial that such concerns are considered during the early stage of the planning process.

However there are at least two key barriers toward this end:

• Companies may be reluctant to share their plans with conservation groups until planning has reached a considerably advanced stage, lest they give away sensitive information.

• The process of conducting Environmental Impact Assessments (EIAs), which can involve compiling a substantial volume of information from a wide range of disparate sources, is arduous at best, and is often not complete prior to crucial decisions having to be made.

  
The solution
What business needs is a one stop shop – a singular, comprehensive, publicly accessible database which details, in consolidated form, complete information about each and every significant biologically sensitive area on a worldwide basis.

This is the objective of the IBAT, a consolidated web based analytical database which has been developed by Conservation International, in conjunction with a range of conservation groups and corporate partners.

  
How IBAT Works
Say, for example, that BP plans to build a new pipeline or road.

Regardless of where in the world the project is to take place, BP will be able to use the database to determine:

• whether or not any proposed construction routes intersected with legally protected areas;

• whether or not any such routes intersect with area which are not legally protected, but which are otherwise considered to be of significance from a conservation viewpoint; and

• which licenses or permits which, if any, the company will require.

Further, IBAT will also enable the company to explore each individual site in a considerable degree of detail and gain an in depth understanding of specific biological issues associated with the proposed construction routes, in turn providing guidance during the EAP process.

  
How IBAT benefits business
The benefits of IBAT to business will be twofold:

• Better information – earlier.

By helping companies indentify and accommodate specific conservation related concerns at an early stage of the planning process, the database will help to avoid: the need for significant adjustments to the project at a later stage; and/or any adverse reputational impact from allowing potentially destructive plans to reach advanced stages.

• Anonymity.

After an initial registration process, companies will be able to use IBAT on a completely anonymous basis, allowing them to search the database without fear of alerting external parties to any plans under consideration.

  
Environmental benefits
The benefits of IBAT from a conservation viewpoint are equally as clear.

The earlier that potential biodiversity related concerns are identified within the planning process, the greater the likelihood that firms will be willing to make adjustments to projects in order to accommodate such concerns.

  
Sleeping with the enemy produces results
Perhaps largely due to issues of mistrust, some on the side of both business and conservation have been reluctant to embrace any form of collaboration.

However, the IBAT initiative is a shinning example of the benefits to both which can accrue when they put aside any differences and work co-operatively toward mutually beneficial solutions and outcomes.

But can we actually verify that SRI funds are as ‘responsible’ as they claim?

Potentially not, commentators such as Paul Hawken claim, due to a lack of transparency within the industry, which they see as a serious impediment to informed decision making from prospective investors.

 
What does my fund invest in?

One of the key problems, according to Hawken, is a failure on behalf of many SRI funds to provide adequate disclosure about specific holdings within their portfolio.

The majority of funds explain the broad principles which they follow in relation to how ethical issues are taken into account during the investment selection process. However, many fail to provide specific details in relation to individual companies which are included within the portfolio.

As a result, prospective investors are unable to determine for themselves which specific companies these funds invest in. This, in turn, results in two adverse consequences:

• it makes it difficult for investors to determine with any degree of certainly whether or not such investments are compatible with their personal values; and

• it means that prospective investors have no way by which to verify or substantiate claims made by fund managers in relation to the overall social responsibility of the portfolio. 

This is particularly troublesome given industry criticisms that some funds are not as ethical as they claim. Such concerns have been heightened by the recent case of Pax World Management Corp., a well known SRI fund which was found by a recent SEC examination to have invested in ten securities which violated its own stated rules of avoiding firms in the defense, alcohol, gambling and tobacco industries.

 
Hawken’s Solution
In order to have sufficient information upon which to make informed decisions relating to the selection of SRI funds, Hawken believes that prospective investors should be able access the following information online:

• a complete listing of the entire holdings of the portfolio in question; and
• a thorough analysis of the strengths, impacts and weaknesses of each firm within the portfolio from an ethical perspective.

 
My viewpoint
With respect, the above recommendations go too far in my view.

I agree that SRI funds need to move toward greater transparency and accountability. I also agree that prospective investors need a greater degree of visibility in terms of the investment portfolio of SRI funds.

Nevertheless, the value of such information must be weighed against the cost involved in its provision. Furthermore, provision of the extensive information which Hawken proposes would be a costly exercise, particularly given the need to continually update such information on a very frequent basis to account for changes in holdings of the portfolio.

These expenses would be paid for by investors, and whilst I can appreciate the benefits of this level of disclosure, I do not believe that such benefits would be sufficient in order to justify the additional costs involved.

 
My alternative suggestion
In my view, a less extensive disclosure regime is appropriate, and SRI funds should not be required to disclose their entire holdings.

Instead, investors should be able to go online and view:

• a list of the thirty most significant firms within the portfolio; and
• a plain English summary of the strengths and weaknesses, from an ethical viewpoint, of the firms in question.

The list need not be up to the minute, but should be updated on a frequent, periodic basis.

The above disclosure, in my view, should be sufficient to enable investors to make informed choices about whether or not the fund in question satisfies their requirements from an ethical viewpoint, without imposing an excessive level of administrative requirements on behalf of the fund.

The finance industry neglected its duty of care in two key areas – advancement of credit beyond levels which borrowers could afford, and failure to manage their loan portfolios with sufficient prudence so as to ensure their long term survival.

Their neglect of this duty has widespread consequences, particularly for borrowers, taxpayers and the economy as a whole.

But do borrowers have to share some of the responsibility? Yes and no.

The responsibility of borrowers
Some commentators, such as business ethics motivational speaker Chuck Gallagher, feel that borrowers need not accept responsibility for the current situation.

To a degree, this viewpoint is fair enough. Borrowers, after all, did not cause the collapse of financial institutions – this was caused by internal mismanagement of loan portfolios by the institutions themselves.

Nevertheless, what borrowers are responsible for is their own debt commitments. Borrowers, in my view, owe a duty of care not to borrow in excess of their debt servicing capacity.

Prior to taking out a loan, borrowers have a responsibility to make a realistic assessment of whether their debt servicing capacity is likely to be sufficient to meet their loan commitments, and also to ensure that they fully understand the terms and conditions of the loan. Most importantly, borrowers have a duty to refrain from accepting any offer of credit which exceeds their anticipated debt servicing capacity.

Any borrowers who do not possess sufficient expertise to do this for themselves should seek independent financial counsel prior to the acceptance of any loan.

To be sure, many borrowers may have been bombarded with aggressive marketing campaigns from lenders. As human beings, they are susceptible to such campaigns. This, however, does not absolve borrowers of responsibility for their own decisions.

Of course, some borrowers experience difficulty through no fault of their own. Unexpected circumstances, such as job losses or personal injury can easily cause even diligent borrowers to default on loan commitments.

I am not referring to such cases here. Instead, I am referring to cases where borrowers over-borrow in the first place.

In a nutshell
Borrowers did not cause the financial crisis – irresponsible lending practices and poor loan portfolio management did that.

But each and every individual borrower is responsible for ensuring that they do not accept credit levels beyond their anticipated debt servicing capacity.