Business Ethics

Research has found that 75% of employees do not desire to work for businesses with poor organizational ethics.[1] Beginning in 2003, many businesses created a new staff position titled Ethics Officer to satisfy work ethics, increase awareness of positive ethics in business, and safeguard the company’s position in the marketplace. Ethical considerations within businesses are largely overlooked, and most business ethics research is susceptible to interaction biases.

Organizational Ethics. Organizational ethics is the study and evaluation of decision-making processes by business leaders according to moral concepts and judgments. An ethical theory is a system that provides rules that guide individuals in making decisions. Organizational ethics are determined by the standards, principles, and moral intentions by which a business operates. Ethical behavior provides a foundation for understanding what constitutes a moral human being. Unethical behavior is regarded as an act which violates accepted moral norms of behavior.

Make certain that your business has implemented codes of ethics and that your employees are aware of these policies. It is your responsibility as a business leader to inform and educate your employees about your policies, considering that you will be held accountable when ethics are not satisfied. Many business professionals believe that ethics are unimportant in the field of business. They further believe that the only obligation they have to their business is to maximize profits. By not implementing and satisfying organizational ethics, it could cost your business financial loss, risk your positive reputation, and increase external pressures.

Ethical Dilemma. In a multi-part federal investigation of an American Express subsidiary in Utah, American Express was found to have violated customer protection laws from every stage of the customer experience from marketing to debt collecting. Several American Express companies were found to have violated protection laws provided for customers. The illegal activities were discovered during a routine examination of an American Express subsidiary by The Federal Deposit Corporation and the Utah Department of Financial Institutions. American Express was found to have violated federal law in billing, debt collection practices, and marketing. In the same year, the Customer Financial Protection Bureau enforced actions against Capital One and Discover Financial over sales tactics.

So, what happened? American Express, along with Discover and Capital One failed to monitor their third-party vendors. The activity had occurred at the American Express Centurion Bank, the American Express Travel Related Services Company, Inc., and American Express Bank, FSB. The violations included deception, unlawful late fee charges, age discrimination, failure to report customer disputes to reporting agencies, and misleading customers about debt collection. In 2012, American Express was required to refund $85 million dollars to customers for illegal card practices that took place between 2002 and spring 2012. Though the act was unethical, American Express leaders fully cooperated with authorities and began their own investigation into the matter. They eventually found and reported additional fraud and violations. American Express agreed to end the illegal practices of their subsidiaries, fully refund approximately 250,000 customers who were affected, implement new compliance procedures, and pay a civil monetary penalty of $27.5 million. Court orders also required American Express to change their business practices so that a similar situation would be avoided in the future.

As the Chief Executive Officer of American Express since 2001, Kenneth Chenault stated in an interview that, no matter how strong or ethical a company is they are going to experience some difficulty. He further noted that leadership was paramount during these difficult times. Chenault stated that if leaders could not be ethical in times of crisis, they would lose credibility and followership. As a leader, ethics determine what is done in decision-making situations. Ethical leaders are concerned about justice, fairness, and treating subordinates equally. Additionally, leaders with an ethical identity are likely to affect the self-concepts, beliefs, and attitudes of their followers.

Chenault’s belief is that if leaders are not focused on moral ethics and integrity, they will not be successful. He further explained that to create ethics within an organization, it begins with leadership. The best-run companies are those that encourage employees to raise issues based on their ethics.

When responding to an unethical situation of its subsidiaries, American Express acted ethically by cooperating and coming forward with valuable information that could help the investigation, and ensure that the customer would be fully refunded. American Express corrected the matter by putting together plans to correct each of the violations and worked to strengthen its internal compliance processes. By correcting the matter and admitting to its faults, American Express may have maintained their brand reliability and business’s ethical standards. Had the situation not been resolved, American Express may have tarnished their brand’s reputation, trust, status, and lost customers because of their unethical tactics.

Businesses are often focused on the pursuit of self-interest, and it is human nature not to ask questions about why things are going well. Situations such as the one with American Express place pressure on organizations and their leaders to behave ethically at all times. It was the responsibility of American Express to hold their subsidiaries accountable for their lack of ethics. To resolve unethical situations in your business, you should implement ethical standards that align with your industry, the law, and your personal beliefs. Additionally, ethics officers can assist your business in developing codes of ethics and enforcing ethical codes as needed.

 

[1] Chekwa, C., Ouhirra, L., Thomas, E., & Chukwuanu, M. (2014). An examination of the effects of leadership on business ethics: Empirical study. International Journal Of Business & Public Administration, 11(1), 48-65.