Can Paying Better Attention to Ethics Truly Create a Better Bottom Line for Credit and Business?
Picture this: You are a credit professional at a company with strict policies prohibiting the acceptance of gifts exceeding $25 in value from customers when, one day, a box of high-end steaks arrives at your office from a key foreign business contact. Knowing what to do would be easy if it weren't for the fact that your contact comes from a culture where respect is of great importance, and such gift-giving is seen as an industry standard. It's quite the dilemma and raises questions: Should I adhere to the company's policy to the letter of the law? Are they going to be insulted if I don't accept? Might people assume I'm giving them some type of unfair advantage if I do accept? This is not a hypothetical scenario, but rather, an actual example discussed by an attendee in the International Business Ethics session at this years Credit Congress.
It raises an interesting debate to say the least. The problem is that the topic of ethics is not discussed very often in educational materials or at conferences. In credit and, frankly, business overall, ethics has been treated as a back-burner issue. Diane Swanson, PhD, professor at Kansas State University and founding chair of the Business Ethics Education Initiative and ethics instructor at NACM's Graduate School of Credit and Financial Management, said that many professionals in credit, especially early in their careers, simply "haven't been trained for that discussion."
That's not to say ethics are not of extreme importance to business functions. Poor ethics, and dealing with customers that may tolerate them as part of their business culture are not good for the bottom line in the long term (even if there is potential for a short-term boom). For example, look at companies like Enron. What started out as "creative" (re: not ethical, but not yet illegal) accounting practices, became full-out fraud. What had been amazingly impressive gains soon turned into one of the largest, most painful and embarrassing corporate collapses in U.S. history. Granted, this is an extreme example, but it illustrates the point exceptionally well.
During FCIB's Annual International Credit and Risk Management Summit this spring, panelist Karen McLaughlin, ICCE, international credit analyst with Innospec Limited and Innospec Inc., noted during the Compliance and Ethics in a Corporate Society session the importance of companies big and small being wary of the slippery slope where loose ethics increase the potential for unlawful practices. "The consequences behind not following rules and regulations, they're heavy: nice big fines, penalties and potential prison," she said.
Traditional Priorities and Recent Evolution
James Hopkins, general counsel for Sicklesteel Cranes, Inc., in a prepared presentation on ethics, said that there is "a lack of involvement of leaders and managers in business ethics discussions, which has led many to believe that business ethics is a fad or movement having little to do with the day-to-day realities of running an organization." Simply put, businesses and business schools have historically not emphasized ethics, noted by Hopkins (who reviewed material for NACMs Manual of Credit and Commercial Laws, Volume III: Construction Issues), Swanson and David Osburn, founder of Osburn & Associates LLC.
A 2006 Kansas State University (KSU) study found that less than one-third of all business schools in the United States included a class on ethics. That number didn't include those that require it, just those that offered it. It also included some schools with only one class offering. While numbers have increased, it illustrates just how far ethics needs to come. "People going into credit often come from finance, marketing or accounting programs of business schools. Ethics courses still are just not that plentiful," said Swanson on the topic of traditional educational tracks. …