Ethical Behavior by Corporations

Would it be unethical for company “X” that has just constructed a new plant with pollution-emission restrictors to lobby the government for stricter anti-pollution laws that could affect company “X’s” competition by forcing the competition to spend capital on upgrades?

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Certainly on one level it would be very unethical. It would be hypocritical too. Doing that — actually hiring a Washington D.C. lobbyist to push Congress to create legislation that matches company X’s expensive pollution control upgrades — would imply that company X only installed the clean technologies to outdo its competition. It would suggest that company X went the extra mile, not because it has serious concerns about climate change and community health issues, but for its own selfish, narrow reasons within the marketplace.

Hiring a lobbyist to do that would be philosophically unethical; it is sneaky and unbecoming a corporation that also strives to have consumers trust its values and its products.

On the issue of trust, Norman a. Baglini writes in the Geneva Papers on Risk and Insurance that in order for “any firm to be successful…it must be trusted by it clients and potential clients” (Baglini, 2001, p. 367). Trust is “fundamental to any relationship that involves value…values…and a future promise to perform,” Baglini writes. Even the suggestion or allegation of “misbehavior” results in a “substantial drop in shareholder value,” the author continues.

Baglini also asserts that companies should develop and enforce a code of ethics that goes beyond existing laws; the code of ethics — shared systematically with employees in the company — should make clear “what behavior will not be tolerated and what behavior is encouraged.” In this case, if, among the specifics within the code, a company is promising its stakeholders and its employees that it will act ethically within the community and in the marketing and manufacturing of its products to consumers, it will break that code if it conducts the lobbying (mentioned earlier) with the specific intention to harm its competition. Baglini is correct when he writes that a code of ethics won’t necessarily “add to the bottom line,” but on the other hand codes of ethics “might save money by minimizing lawsuits and adverse publicity that can have a direct affect on shareholder value” (Baglini, p. 370).

On the subject of shareholders and adverse publicity, in the book Corporate Ethics and Corporate Governance, the authors mention how much investors / shareholders “hate” surprises, in particular when the surprises are caused by the “unethical behavior of senior managers…” (Zimmerli, et al., 2007, p. 155). In today’s mass media environment it is a sure thing that some blogger, local newspaper reporter or national cable news talking head is going to find out that company X has hired a lobbying firm to basically bust the competition. When this story hits the 24-hour news cycle — and the media today is extremely competitive, so it is a given that several media outlets will dig deeper into the story and be less than objective in their reports — the shareholders will be hit with the surprise they did not want to be hit with.

An embarrassing public relations disaster like this may take years for company X to overcome, and meantime the community and all the stakeholders will be held accountable for the negative fallout that will certainly create a sense that the company X is less than ethical. Reporters will dig into company code of ethics, into the mission statements, into other records (under the Freedom of Information Act) that perhaps will reflect fines that company has previously been slapped with, or misbehavior by executives within the company.

Conclusion: Ethics encompasses many aspects of corporate behavior, not just Enron-type blatant corruption, or Bernie Madoff- style scams. When company X pulls off a shifty, risky maneuver to try and beat the competition, it violates ethical standards and causes a loss of accountability and a loss of trust for company X.

Works Cited

Baglini, Norman a. (2001). Ethical Behavior, Corporate Culture and Financial Services. The Geneva Papers on Risk and Insurance, 26(3), 367-372.

Zimmerli, Walther Christoph, Zimmerli, Walther C., Richter, Klaus, and Holzinger, Markus.

(2007). Corporate Ethics and Corporate Governance. New York: Springer.