Hopefully as you are building and growing your business you’re keeping your ethical responsibilities in mind.
In a “dog eat dog” world it can be tempting to comprise ethics in order to get ahead, but according to the latest study from The Ethisphere Institute, doing business in an ethical manner can be, well, good for business.
Ethical Companies Outperform
Past performance of the world's most ethical companies have significantly outperformed the S&P 500 over the past five years according to the research from the Ethisphere Institute.
So while it may be tempting to check your ethics at the door in an effort to capture outsized profits, this research would indicate that good guys don’t always finish last!
This would indicate that ethics should be high on your list of priorities for you and your business, perhaps even a piece of your mission should speak to your ethical business practices, in order to act as a reminder of their importance.
The Worlds Most Ethical Selection Process
The Ethisphere Institute uses a rigorous selection process when deciding who makes the list. Per their website, the selection process includes:
1. The Methodology
A methodology committee of leading attorneys, professors, government officials and organization leaders, assisted Ethisphere in creating the scoring methodology for the World’s Most Ethical Companies awards.
2. Candidate Selection
Over the course of the year, companies across the world submitted their applications to become 2009 World’s Most Ethical Companies. Based on these applications, as well as information Ethisphere gathered throughout the year, a list of semi-finalists was created.
3. In-Depth Analysis
At this stage, semi-finalist companies were notified and given an in-depth survey questionnaire to fill out regarding their ethics and compliance program, governance and corporate responsibility.
4. Further Refinement
Ethisphere then conducted data analyses on hundreds of companies based on their responses to the survey, as well as documents and information researched and requested by Ethisphere to confirm survey responses. Every company was then given an EQ score based on the results of the survey and measured against seven distinct categories. These categories were Corporate Citizenship and Responsibility; Corporate Governance; Innovation that Contributes to the Public Well Being; Industry leadership; Executive Leadership and Tone from the Top; Legal, Regulatory and Reputation Track Record; and Internal Systems and Ethics/Compliance Program.
Corporate citizenship and responsibility: 20%
How does the company respond to the community and workplace, what is the company’s sustainability track record and how does it audit its supply chain? Ethisphere factored in placement on major sustainability lists, such as FTSE4Good Index Series.
Corporate governance: 10%
Is the company properly aware of potential value conflicts at and around the company and address those conflicts in an effective way?
Innovation that contributes to public well being: 15%
Does the company provide products, services and/or process innovation that positively contributes to public well-being?
Industry leadership: 5%
How does the company set industry standards for business ethics and compliance, corporate governance, responsibility, sustainable development and environmental protection?
Executive leadership and tone from the top: 15%
Does the company have strong and visible executive leadership on ethics, corporate governance and citizenship?
Legal, regulatory and reputation track record: 20%
What is the legal history of the company?
Internal systems and ethics/compliance program: 15%
Does the company have satisfactory internal control systems, including a leading Code of Conduct, whistle-blower policies, prevention and detection controls, etc?
2009’s Worlds Most Ethical Companies
The highest EQ scores for each industry became this year’s 2009 World’s Most Ethical Companies.
Summary
Take a few minutes to look over the list of companies selected. These are some of the most well respected and profitable companies in the world, and they are doing business ethically. Try to emulate some of what they do with your own business and I am sure you will benefit from what could be called an ethical advantage.
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I don’t quite believe that all of these companies are ethical. I think they have put a great deal into appearing ethical because they think it will give them some kind of a competitive advantage. A case of, “all business is based on deception.” We must remember that businesses are not ethical. Big businesses have but one purpose to make money. They only appear ethical as a strategy for making more money. It is primarily regulation that controls the ethics of big business. I have read that the financial crisis we are in will be responsible for the death of 400,000 children. Did any of theses companies have their hands in that honey pot?
Nike? Best Buy? Seriously? Wonder how much that cost.
http://tinyurl.com/d2gc6k
It’s a nice thought, but where’s the REAL list?
@Andrew
I have to disagree with one piece of your comment, and that is that businesses are unethical becuase they have a purpose to make money.
Making money in and of itself does not make a busienss unethical. I agree that in the quest to make more and more money, apease investors, and line the pockets of the top brass it becomes difficult to run an ethical shop. However many small business are able to make money, and keep their ethics in tack. To say those businesses are unethical becuase they are profit driven is simply inaccurate.
My business does things ethically, and I still make money…maybe I’m the only one, but I doubt it.
Matt
Must say that I’m proud of BMW being on the top, being the way they are, the types of “ultimate driving machines” they built, their service, etc.(am I giving out what I drive so far?)
Alright it might be a bit influential, but I think it’s well deserved.
As to my industry, Realtors® go by Code of Ethics and Standards of Practice by the NATIONAL ASSOCIATION OF REALTORS® read it here. I think it’s a great guideline which should be set for all types of industries.
To me Being Bthical = Being Transparent in all your actions.
Great Post Matt.
You rule!
@Matt
I agree that making money itself is not a bad thing. It’s the degree that an entity is willing to hurt others in the process that balances the scale in one direction or the other. I believe ethics does play and important part in small business. That is why I firmly believe a great deal of the economic recovery will come from small business. It’s the overworked small business owner who is personally involved in the lives of the community that will make a difference. The people who will help save everybody are the innovative small business owners who did not get millions of dollars in bailouts.
It is harder for a small businesses to hide behind a corporation than some of these big companies. I still say big businesses are not ethical. I think big businesses are not moral. On paper they are neither good or bad. Ethics to a big business is not breaking the law in a way that would be financially unmanageable. For big business being ethical is also something to be marketed. When ethics is used as a marketing ploy, a ruse, the company is subtly declaring their customers the enemy.
I have to add it may be possible for a big business to honestly demonstrate a case for being ethical, but somewhat unlikely. So far Google has been kind of impressive.
@Andrew:
So, because a business is large, by default it is unethical?
Really?
I’m sorry but I think a broad based generalization like that says that you’ve more a problem with a capitalist model than with the businesses themselves.
The post clearly states what the criteria are to make the list so I don’t believe there is any smoke and mirrors here.
I just don’t believe that making money makes you unethical by default.
George
lol. That’s funny. Nike? McDonads? Kellogs? Dell Petro Canada? lol… lol.. well if ethics are relative, then from a certain perspective I guess companies who use swet shops, and genetically modified ingredients, or rare metals which wars are being fought over, or energy resources which are dominating the introduction of true green technologies (buying the up and hiding them)… lol
@George
There are some very good things to be said about a capitalist model, I even enjoy the competition of capitalism. While I like it I do not think it is the highest trait humans have to offer. In the long run we may need something different. I do not know what that different is.
I agree with you that making money does not make one unethical by default. In fact I almost believe the opposite, not having enough money tends to make humans act more like animals than having money. Homeostasis is a powerful thing. With money and power it could be a case of having too much is the same as having too little. I think it was Miyamoto Musashi who said this. I believe the quote is actually “Too much is the same as not enough” at least that’s the way I remember it in most of the translated texts.
I do think a large corporation can act ethically, but it is done as a strategy. Just as an aggressive dog can act not aggressive, it is a learned strategy. In the case of the dog you still have an aggressive dog, but it is conforming so nicely to what people expect that they forget it’s aggressive. Until some stressful event triggers a reaction. The stressed cooperation may think lets increase our profits. No one will know. Even if it is something that customers may think is unethical, the cooperation may think it’s perfectly ethical. It could be that all our ethical behavior is just a social strategy. Ethics is a complex subject that cannot be understood easily. I believe it was B.F. Skinner who said something to the effect that we all eventually conform the culture of our group. A big part of that culture is ethics. In this respect I would say all large corporations are ethical, they conform to the cooperate culture or the groups ethics.
It seems that at some point a business loses its humanistic moral identity and takes on a more neutral morality of capitalist ethics. I am not condemning this, just as I do not blame a dog who has a behavior problem. The dog does not have the ethics of a human and nether do many corporations, especially large ones. Corporations are not moral beings they are strictly legal entities. There is an ethical component to big businesses and I think it revolves around the law, regulation, and markets. Just like we need to manage the unruly behavior of aggressive dogs we need to contain the ritualized aggression of big corporations.
There are more social controls for keeping individuals acting ethical than there are for big corporations. The social controls big corporations respond to are markets and regulation.
Probably most people are as ethical as they need to be. I believe it was Abraham Lincoln who said “Nearly all men can stand adversity. But if you want to test a man’s character – give him power.” Most people and most corporations loose sight of ethics when they have enough power.
I will admit that by the rating organizations rule these companies are ethical. I wonder if in the 1940s we could find German organizations that would certify Nazi party practices as ethical? It may seem that I am being quit cantankerous, but I really am just questioning. I want better regulations but I do not want over regulation. I tend to have a rather complex view of most things
@ 7 Shahee
I agree with you, there are a couple companies on there that make you shake your head.
Part of what I like about lists like this is the debate that goes along with them. And anytime you discuss ethics, especially when you are picking the “WORLDS BEST” the discussion is usually more thought provoking than the list iteself.
Thanks for coming by, I appreciate your comments.
Matt
Very interesting and helpful. Integrity is the only thing that can be taken into the afterlife.
Another great post. Thanks. I love how you broke the #’s down. I also like the mission statement idea. Like Sony did in the 1950’s, they made their mission statement bigger than the company:
“Become the company most known for changing the worldwide poor-quality image of Japanese products”
Great article and good to know what companies to spend your hard earned $ at.
Interesting article. There’s definitely some names on the list, especially the petroleum companies, that I wouldn’t have expected to see.
There may be a number of reasons that it is inappropriate that firms like GE (GE), Dell (DELL), Starbucks (SBUX), and Weyerhaeuser should not be winners. But, the real trouble with the entire process is that it has the appearance of many of the corporations on the list “voting for themselves” due to the close ties with The Ethisphere Institute.