ONCE again, the United States has been rocked by a corporatequake. Less than a year after the Enron scandal, the country – and the rest of the world – is feeling the effects of the WorldCom scandal.
Much like Enron, the WorldCom debacle has sparked countless analyses and debates on the issue of business ethics and corporate governance.
Undoubtedly, much had been written on business ethics and all its aspects such as disclosure, transparency and accountability well before the scandals surfaced.
However, we find that heated discussions on the need for the inculcation of good and proper business ethics often arise only after a scandal or a disaster has occurred.
Unless this happens, the issue of good business ethics is generally ignored or taken for granted. Enron and WorldCom are only two examples of the many corporate scandals around the globe.
However, failure need not come in the form of corporate scandals alone. It may also present itself in the form of human tragedies. The midair collision between two aeroplanes over Germany last month is one such example.
It has been suggested that failure to follow instructions from the air traffic control on the part of the pilot of the passenger plane led to this tragedy.
This is an example of the sort of disaster that can occur if ethics are not instilled within people and organisations . Failure to follow instructions is a manifestation of the failure to follow professional ethics.
In Malaysia , we have witnessed several disasters as a result of such failures.
All this has led to financial losses, environmental devastation and even loss of lives. Some of these incidents could have been avoided if the professionals involved had been more ethical in their approach. But what do we really mean when we say “ethics?”
Turning to the everreliable dictionary, we find that the word “ethics” is defined as “science of morals, moral principles or code”.
Not surprisingly, many of us tend to interchange the terms “ethical” and “moral” while describing people or actions we consider to be correct or in tune with societal or religious norms.
To put it simply, ethics revolves around the question of right and wrong. When we look at business and professional ethics, we usually refer to how things should be conducted in accordance with best practices.
All professions have their codes of exemplary conduct. Professionals such as doctors, lawyers, engineers and accountants abide by their codes in order to ensure that their profession’s credibility is intact. The Enron and WorldCom scandals are a result of professionals neglecting these standards.
In essence, it is imperative that good business and professional ethics are instilled from the very beginning.
This business of encouraging ethical behaviour is a proactive and preemptive measure. Organisations should be encouraged to “invest” in good ethics among employees.
There could be those who argue that the investment is costly. However, the cost of this investment may be lower compared to the cost of rectifying mistakes, problems or scandals that may arise as a result of unethical conduct. Let us take a look at one example of how this investment could be beneficial in the long run.
If a person dealing with the procurement of building materials is ethical, he will not cut corners by purchasing low quality materials to maximise profit.
Such a person would contribute to his company by helping to avoid or at least minimise the risk of buildings collapsing. Should a building collapse, the burden on the company is definitely much higher.
The cost is not only in the form of financial losses, but also in the erosion of credibility, reputation and public confidence. Either way, the company’s earlier profit by cutting corners would come to naught.
By investing in ethics, one can actually identify and resolve potential problems. That is why we find today that many organisations have actually recognised the need for ethics training.
Some of them conduct courses on ethics during induction and promotion exercises. Others do this on a regular basis.
Islam views ethics as a crucial element in conducting business. Ethics – sometimes referred to as akhlaq in Islam – is important to ensure that business (as well as professionals) abides by the dos and don’ts prescribed by the syariah .
Islam does not view business and professional conduct only as a worldly affair. Instead, this conduct has implications and ramifications for the hereafter.
This is evident from a tradition attributed to the Prophet of Islam. He has been reported to have said words to the effect that: “A truthful and trustworthy merchant (will be gathered in the Day of Resurrection) with the Prophets, the truthful and the martyrs.”
As such, ethics is indispensable to the practice of business and professional affairs. In fact, Islam propagates the notion of “ethics for profits”.
We note that in business dealings, potential clients, customers and investors take into account an organisation’s ethics when making business and investment decisions.
This notion of “ethics for profits” is in fact shared with some Western thinkers. For example, Tad Tuleja in his book Beyond the Bottom Line wrote that “sound business ethics means good business practices”.
The other side of the coin is that unethical conduct could result in disinvestment and financial loss to organisations . Again, this highlights the need for organisations to instil good ethics among its employees and to insist on ethical practices in all its dealings.
Some people might dismiss profits and ethics as incompatible, due perhaps to the perception that ethics in general, and Islamic ethics in particular, impose extremely demanding standards.
However, these standards are actually for the greater good of the public. That is why Islam is of the view that by practising good ethics, a person or an organisation is actually putting the public interest before individual interest.
This is very much in line with the Islamic approach towards fardu kifayah (social obligation). On this matter, Ismail al- Faruqi , a renowned Muslim scholar, once wrote that everyone is expected “to produce more than he consumes, to render more service than he is rendered”.
By putting the interest of the public before that of an individual, organisations must practise ethical business and must have ethical professionals.
In truth, ethical business and ethical professionals have become inevitable in this day and age. The need for ethics to be practised in business and professional dealings has only been intensified in the light of the corporate scandals beleaguering the US corporate world.