Surge of Interest in Ethics. As scandals hit business, ethics consultants find there's a boom for their services
THE chief executive officer of a large research-and-development company in the Washington area recently approached Prof. Donald Brenner, lamenting the fact that his middle- and upper-level management lacked ethics training, and asked his help. ``When companies read in the paper about problems in other companies, they get concerned,'' said Mr. Brenner, who teaches in American University's Kogod College of Business Administration.Skip to next paragraph
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Whether you call it criminal action or a lack of ethics, business is increasingly concerned about such conduct and its effect on the bottom line. With scandals rocking the savings-and-loan, defense, and securities industries, companies are increasingly seeking outside help from law and accounting firms, business professors, and other consultants.
``There has been a tremendous growth of interest in ethics programs in companies that have experienced deregulation during the last five years - telephones, banks, financial institutions, and others whose relationship to its customers and other stakeholders have gone through major changes,'' says Kirk Hanson, a business ethics consultant and senior lecturer at Stanford University's Graduate School of Business.
Although the growth of ethics programs is difficult to quantify, ``there's no question that this kind of activity is on the uptick,'' says Gary Edwards, executive director of the Washington-based Ethics Resource Center, a nonprofit organization that consults to business and government.
Codes are becoming ``more of a positive statement rather than a negative one,'' says John Cooper, a senior research fellow with the Ethics and Public Policy Center, a nonprofit think tank in Washington. They are geared ``toward articulating a corporate mission.''
The use of ethics training and new codes has soared, according to a survey of 2,000 companies to be released later this year by the Ethics Resource Center. But Mr. Edwards says the surge ``is almost certainly headline driven.''
Others, however, aren't quite so skeptical.
``The principal difference between now and five years ago is that most companies thought that a compliance program was passing around a code of ethics and having employees sign,'' says Robert Kenney Jr., a partner with Hogan & Hartson, a Washington-based law firm. ``There is a greater sophistication as to what is required. ... Companies recognize that they have to build compliance into the fabric of their business structure. It's an ongoing process of building a system within a company.''
EVEN companies with a well-established commitment to ethics training are finding that from time to time it is useful to call in consultants to ``take the pulse of the company,'' says Patricia Stoddard, director of administration at Champion International Corporation. ``There is a great need for all institutions to take a hard look at what they say and do about ethics, and their employees need to know what they stand for.''
Edwards says that a 1980 survey of the Fortune 500 companies and the 150 largest nonindustrial firms showed that 73 percent had codes of conduct. Half those had codes that were less than five years old, leading Edwards to suggest they were a result of the Watergate and Koreagate scandals. ``They were written by lawyers clearly to protect the company from acts of its employees.''
But headlines aren't the only reason for a surge in activity.
Champion and others have taken a lesson from Johnson & Johnson, which, because of its reputation as an ethical company, is credited for surviving incidents of tampering with its Tylenol over-the-counter medicine. Company officials point to Johnson & Johnson's commitment to its ``credo'' as the glue that holds the company together.
In the end, no matter how attractive the idea may be to ethics consultants, companies cannot rely on outsiders indefinitely to keep their houses in order.
``There's no question that there needs to be a continuing commitment,'' says Mr. Kenney. ``But any company that relies on outside consultants for the long run isn't doing it right.''