Good Business Thesis

THE CENTER FOR ETHICAL BUSINESS P.O. Box 812031 Wellesley, MA 02482 T 617.395.5633 centerforethicalbusiness.org 1

centerforethicalbusiness.org

Mark BaoFounder, The Center for Ethical Business

CENTER for ETHICAL BUSINESS

THE GOOD BUSINESS THESISThe Definitive Guide on the Theory and the Practice of

Building and Sustaining Socially Responsible and Ethical Businesses

Table of Contents & Brief

What is Good Business? 1The theory behind Good Business 1What this thesis is about 1

Why is Good Business important? 2Public view of corporate ethicality 2Increasing rate of unethical behavior 2Better businesses create a better world 2

Ethical Business 3A brief history of the study of ethical business 3What is ethical business? 3

Beginning Integration 4The Golden Rule, as presented by Maxwell’s Ethics 101 4Moving toward acceptance 4Develop a Code of Ethics 4

Case Study: Enron 5History of the Enron scandal 5What we can learn from the Enron scandal 5

Social Responsibility 6Introduction to Social Responsibility 6Why is Social Responsibility important? 6

Social Responsibility in Companies Today 7Gap Inc. 7Lenovo 7Cisco 7

Labor Ethics 8Introduction to Labor Ethics 8Labor Ethics offenses 8The Center for Ethical Business’ Theory on Labor Ethics 8

Strategy for Entrepreneurs 9An Introduction 9Why is Good Business important to focus on? 9

Conclusion 10The Benefits of Good Business 10Recommended Reading 10

THE CENTER for ETHICAL BUSINESS

THE GOOD BUSINESS THESIS

What is Good Business?

The theory behind Good BusinessGood Business is a combination of a number of mentalities and approaches in business, in

the subcategory of business practice. Good Business is composed of the following

components:

• ethical business

• social responsibility

• labor ethics

Good Business aims to advocate for a more responsible form of business.

What this thesis is aboutThis thesis is the definitive guide on the theory and the practice of building and sustaining

socially responsible and ethical businesses. Within, this thesis will discuss the background

of Good Business, why it is important, the history of ethical business, the theory behind

putting Good Business behind an organization, case studies based on past instances of

ethical or unethical business behavior, and lastly, the method of implementation of the

methods of Good Business into new or existing organizations, and why it is important to

do so.

This thesis, and the Center for Ethical Business, aims to define the Good Business

landscape and allow for a common ground for discussing ethical business in general. In

addition, it aims to allow new and existing business owners, as well as individuals within

organizations, include Good Business in their respective groups.


THE GOOD BUSINESS THESIS 1

Why is Good Business important?

Public view of corporate ethicalityConstantly, throughout the years, ethical businesses is constantly challenged. Whether the

trigger for infringements upon ethicality in companies are based in corporate greed,

necessity for the continued operation of the company, necessity for the continued

operation of the sector the company is in, or any other factor—unethical corporate

behavior has become something of a cornerstone of American corporate culture, as well

as the public view of corporations.

In the past hundred years, the American view of corporations has changed for the worse.

The view of corporations has changed from a provider of services in the past, to today—

for many companies—an organization that has to be watched, regulated, and that would

be expected to participate in unethical behavior.

This isn’t how the view of businesses should be.

Increasing rate of unethical behaviorWe’ve seen Enron. Lehman Brothers. Madoff Investment Securities. Goldman Sachs. The

rate of unethical behavior in the corporate world seems to be increasing, and with it, the

acceptance of such actions seems to be increasing as well, creating a vicious circle.

Better businesses create a better worldBusinesses, whether it be a new startup or a large multinational conglomerate, have a

great deal of influence on the world. With better businesses that are based on the ideals of

Good Business, we can create better products, better experiences, and a better world.



Ethical Business

A brief history of the study of ethical businessIn the latter part of the 20th century, American corporations started adopting ethical

practices like nonprofit divisions and charitable actions that sparked the ethical business

movement. Although the field was young at this time, it slowly started to develop, and

eventually it became a field of study. Now, with the increased study of ethics as applied to

business, as well as the factor of globalization, it is a major area of the foundations of

business—as it should be.

What is ethical business?Ethical business is the evaluation of business practices against a background of social,

economical, and moral standards, to assess the impact that the practices will have on the

three areas. Indeed, the moral aspect is emphasized, though both morals and ethics have

their own complex forms. These ethical standards are defined both with the economy and

society as a whole, as well as within a company.

For an organization to adopt ethical business, the organization does indeed have to

sacrifice a number of other attractive advantages, such as the benefit of maximizing

revenue without regard for ethical or unethical practices; flexibility on making decisions at

any level, whether it be executive, managerial, or on the employee level; lack of a need of

oversight over ethical business practices in an organization, and other positives that not

adopting ethical business adds.

However, becoming a business having roots in ethicality has many positives. Past studies

have shown that businesses that have acted ethically ultimately gain customer trust and

go further than others that do not, while at the same time perpetuating ethical business.



Beginning Integration

The Golden Rule, as presented by Maxwell’s Ethics 101In John C. Maxwell’s introduction to business ethics, in his book Ethics 101, he presents

the golden rule of ethicality that can be used not only in business but also in any situation

that requires an ethicality check. It is, essentially: would I like to be treated in this way?

This, indeed, the ultimate ethicality check, as it brings the action that someone is

performing upon someone else—unto oneself. This is the number one tenet of ethical

business: in order to accept performing actions upon others, you must accept performing

those same actions upon yourself. Once this action is established as something you, too,

would accept, it becomes more likely to be an ethical decision.

Moving toward acceptanceFor ethical business to become an important force in an organization, there must be wide

adoption and acceptance of the idea and the importance of ethical business. Send

managers and employees this thesis/whitepaper and allow them to look through the case

studies and core components of ethical business. Give them time to digest the

information, specifically about the positives of ethical business in an organization. This

thesis shows concepts by example rather than tells them.

Develop a Code of EthicsTailor a Code of Ethics toward your organization to fit your organization’s industry,

company goals and targets, and products. This is the ethical blueprint for your company:

what your company should follow with regard to ethics.



Case Study: Enron

History of the Enron scandalEnron, a major energy company and one of the largest corporations in the world, started

to collapse as important details about its financial status were revealed. It managed to

evade federal taxes—going as far as gaining money from the government—for four out of

the five years during 1996–2000, for a total of a $381 million tax rebate from the

government. Over time, it was revealed that Enron was forming foreign subsidiaries to

escape taxes and debt, managing to conceal $1 billion of debt inside these subsidiaries,

which was done in October 2001. Andersen, the Enron accounting firm, denied that the

company was in deep financial trouble whilst it and Enron shredded documents about the

firm. Soon afterwards, the SEC began an investigation into the company, which resulted in

the resignation of the CEO Kenneth Lay on January 23, 2002; the apparent suicide of Vice

Chairman J. Clifford Baxter; and the release of documents from Enron admitting criminal

offenses and financial deceptions performed at the company by new CEO Stephen

Cooper.

What we can learn from the Enron scandalEven though the Enron scandal was on the level of major corporations, it is still important

to note the instances of unethicality inside Enron. These include the shredding of

documents by both Andersen and Enron (clear indicators of guilt for both companies),

Republican political connections trying to push the Enron issue under the rug, deceptive

information given by CEO Kenneth Lay about the company, and other issues that led to

the uncovering of the scandal. The scandal encompassed many areas (corporate, political,

international, etc.), and increased public distrust in corporations and deregulation,

increasing tension between customers and corporations, a fatal economic condition.



Social Responsibility

Introduction to Social ResponsibilitySocial Responsibility is the belief that corporations that serve a community are obligated—

and have a responsibility to—give back to the community at large, or at the very least, be

responsible towards the company’s effect on society as a whole.

The first kind of social responsibility, giving, is focused on the positive benefit that

companies can bring upon society in their areas of interest, via active participation, like

support or formation of charities and organizations promoting positive societal influence.

The second kind of social responsibility, commitment, is focused on watching and

making sure the company is not making substantial negative influences upon society as a

whole. While a company’s societal effect is inherently unmeasurable since it is both a vast

idea with many different variables, and that these variables are qualitative evaluations, a

commitment to social responsibility shows that a company is aware of and watches over

their general power. In addition, a company that is devoted to social responsibility aims to

influence the company towards this sentiment, though the power of social responsibility is

held in the positions of management.

Why is Social Responsibility important?Although the commitment area of social responsibility has an aim similar to that of ethical

business (to do good and not do bad, in laymen’s terms), it is somewhat different than

ethical business. Social responsibility is focused on the company’s actions as a whole,

towards society (like labor concerns, environmental affairs, and similar matters) rather than

acting ethically and within law. Social responsibility goes beyond ethicality similar to how

ethical business goes beyond staying within law.



Social Responsibility inCompanies Today

Gap Inc.Gap Inc. has a company website dedicated to social responsibility, along with their policy

and their responsibility goals, at gapinc.com/socialresponsibility. Gap Inc. is a multinational

fashion chain owning a number of fashion properties. According to their website, the four

areas of social responsibility they focused on are supply chain, environment, employees,

and community investment. They have in-depth information about each of these

categories, documenting the ways in which they present their current responsibility

situation as well as their future goals. They also publish some of their policy documents

such as their Code of Vendor Conduct, which details their policy with regard to factory

work (see also Labor Ethics).

LenovoLenovo has a similar website focused on environmental impact and labor responsibility, on

their online website lenovo.com/social_responsibility. They also have drill-down pages that

focus on their initiatives with regard to the environment and factory labor. In addition, they

outline their corporate ethicality guidelines as well (see Ethical Business) and publish yearly

end-of-year reports on their social responsibility efforts. Lastly, they, too, publish their policy

on various social responsibility fronts (RoHS, recycling, SVHC, ESTAR®, etc.)

CiscoCisco, a multinational networking equipment manufacturer, also publishes a corporate

social responsibility website online at www.cisco.com/web/about/citizenship. They, too,

focus on environmental impact, employees, diversity, and investments.



Labor Ethics

Introduction to Labor EthicsLabor ethics, at its core, is approaching labor policy with a focus on fairness for

employees. The most prevalent areas of labor ethics are wage, benefits, and environment.

These factors are all considered in a complete labor ethics policy, as all three are

paramount concerns when dealing with labor. Labor ethics is tied to social responsibility,

and is usually considered a subset of it.

Labor Ethics offensesOne of the most important labor ethics offenses happens in the most labor-filled country,

China. Apple, with Foxconn (Hon Hai Precision Industry Co.) faced a manager suicide

related to the leak of company technology. Apple increased their ethicality policies.

The Center for Ethical Business’ Theory on Labor EthicsThe Center for Ethical Business believes that in order to increase the quality of life and

work for labor employees, the company has to increase their benefits, environment, and

sometimes wage. For this to happen, however, the company has to either sacrifice margin.

Therefore, it is not only in the hands of the company, but also in the consumer, to increase

social responsibility, as customers looking to support labor ethics are the one that will be

facing an necessary increase in cost.

We believe it is in the hands of the consumer to choose socially responsible companies

with ethical labor policy. The Center for Ethical Business aims to be the central area for

consumers to consult to determine whether the businesses they purchase from are those

that provide a high caliber of ethicality, or are they, in fact, ethical offenders.



Strategy for Entrepreneurs

An IntroductionCurrently, ethical business and social responsibility are not vital driving forces in the

entrepreneurial community. The Center for Ethical Business believes that these should be

paramount concerns, and aims to educate entrepreneurs early so they can incorporate

Good Business beliefs toward their future successful businesses.

If we had introduced Good Business as an important concern in Enron, we would have

either created an ethical Enron or one that collapsed early—both of which, we can see

now, are leaps and bounds better than what really happened.

Why is Good Business important to focus on?Believe this: ethical businesses have a higher rate of success, and earn more revenue.

Entrepreneurs are developing the largest businesses of tomorrow, as the current major

players are changing and collapsing.

We’re building the next businesses now. The benefits of Good Business are real. The focus

of entrepreneurship is making meaning and creating value. Through creating businesses,

you are already creating change in the world. However, every company has an obligation

to give back to the community as a whole. If we focus on how the company benefits the

world, we can focus on how we can create even more value, to increase that benefit.



Conclusion

The Benefits of Good BusinessWithout a plan for Good Business in a company, it is determinable that the company is out

to make profits and disregard most else. This is not the correct approach to corporate

culture, and creates an environment in which employees are working toward greed.

Connect to the purpose of the company and integrate Good Business practice within it.

The benefits are many: with a Good Business policy, the major benefit to the company is

that your customers will have greater trust for the company and an increased probability of

doing business with your company. The major benefit outside of the company is that it will

benefit the world. Not only will you be benefitting labor ethics, environmental policy, or

whatever responsibility you choose to focus on, but you will be a part of the rising

prevalence of Good Business .

Recommended ReadingThe Center for Ethical Business recommends that you peruse the following literature, as

they are excellent sources of information and inspiration for Good Business. You may view

this list as well as other literature at centerforethicalbusiness.org/literature.

‣ Ethics 101: What Every Leader Needs To Know, John C. Maxwell (Center Street)

‣ The Right Thing: Conscience, Profit and Personal Responsibility in Today's Business, Jeffrey L. Seglin (Smith-Kerr)

‣ Working for Good: Making a Difference While Making a Living, Jeff Klein (Sounds True)

‣ Good Work: When Excellence and Ethics Meet, Howard E. Gardner, Mihaly Csikszentmihalyi, William Damon (Basic Books)



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Good Business Thesis