Business ethics: A matter of principle

By Jodie Jacobs

Jewish Business News

Do business ethics matter? Experts weigh in on www.SmallBizChicago.com

Rabbi Karen Kedar offers insight on the importance of ethics in business.

How America conducts business has been called into question during the current economic crisis. Greed, ambition and poor regulation frequently have been raised, while ethics – or the lack of — doesn’t always make the news. Writing for Jewish Business News, Chicago journalist Jodie Jacobs asked five Chicago experts to share their views on the role of ethics in business. 

Alan Dershowitz is a legal scholar and the Felix Frankfurter professor at Harvard University, where he teaches a course on legal ethics that covers several professions.

 “One has to make a distinction between personal morality and ethics. Ethics are determined by the rules of a profession,” said Dershowitz. “Every profession has it,” he said, pointing to journalism and business. “You come across something, but you can’t disclose your source. In business, a fiduciary obligation to stockholders may be inconsistent with personal morality.”

According to Dershowitz, choices are not easy. “I teach a class about conflict. The choices are not between good, better and best. Often, they’re between bad, worse and worst,” he said.

However, he thinks business ethics are improving. “They’re getting better because there’s more public scrutiny. Journalists are reporting more on business….. the more sunlight, the better,” he said, “Business can no longer operate in utter secrecy.”

When asked how evolving Internet technology may impact ethics, Dershowitz pointed to issues of intellectual property theft and of the public’s right to know, but said, “It’s cutting edge.” (Dershowitz is on the case of Julian Assange, founder of Wikileaks, which leaked diplomatic cables.) Referencing both issues, he added the caveats: “Old answers do not apply” and “There is no simple solution.”

Lloyd Shefsky is clinical professor of entrepreneurship at Northwestern University’s Kellogg School of Management.

Asked about  ethical issues facing small business owners today, Shefsky said, “Tight capital leads to pressures that often result in ethical problems, including attempts to reduce costs, ignoring contractual obligations, misstatements of facts, etc.”

He listed the following most frequent excuses for wrong-doing:

  • What I’m doing is something the board would approve anyway.
  • This is just temporary; I’ll fix it later.
  • I’ve given the company so much; I deserve this.”

Shefsky tells his students that ethics is something they should have already learned from parents and clergy. Shefsky, past president and director of the America-Israel Chamber of Commerce, said Judaism provides the following lessons in business ethics: “1.The concept that one should avoid even the appearance of wrongdoing is a great warning system. 2. The concept that each individual is responsible not only for his [or] her own reputation, but also for that of the Jewish people. 3. Charitable thinking is good. However, the concept regarding charity can create conflicts with fiduciary duties to shareholders.”

 Hedy Ratner is co-founder and co-president of the Chicago-based Women’s Business Development Center.

“There are no ethics rules for small businesses, but there are moral principles of life you must consider as a business owner,” said Ratner. She emphasized building trust between the business and customers and between owner and employees, whether business is good or bad.

Ratner warned there are many ways to betray one’s principles by exploiting customers or employees. She urged small business owners to set an example of ethical behavior for employees. “You don’t want an employee saying, ‘This isn’t the company I thought it was.’”

Having an ethics policy is good business, according to Ratner. “Let employees know you have it and that you’re living it,” she said. “Build trust with customers so they know they can trust you to give the best price and best service.”

She also emphasized the ethics of meeting obligations even during economic downturns. “Instead of arbitrarily cutting salaries, talk to your employees. Explain business is not good, so let’s work together for a solution. When you negotiate, you get more concessions. When you impose, you lose,” she said. “Being respectful and treating others with respect is part of behaving ethically.”

 David Jacobson is founder of Chicago Jewish Funerals and a board member of several Jewish organizations.

For some people, a funeral home sends up red flags, Jacobson said. But he believes any business whose owner is ethical will have a good reputation. “Ethics are pretty cut and dried. The Torah says you must behave in the right way. You must do the right thing all the time,” said Jacobson.

“I make sure my employees are taken care of. They’re the face of my business. If you devote your life to a company, you have to take care of your employees,” he said. He also felt strongly about obligations, trust and respect. “If you promise something, you better deliver what you promise and even more. We never take a short cut.”

As a guide, he suggested: Treat a client like you would your family. “People pay a fair price expecting that everything is right,” said Jacobson. “There are cheaper ways of doing things. That’s not our way. It’s not good business.”

As an example, Jacobson said he parted ways with a huge insurance company because it cut staff he thought was necessary for personal contact and service. “They fired their ground people, so I fired them. They offered incentives to stay with them. I didn’t accept because I didn’t want to work with the corporate office. You have to do the right thing,” he said.

Rabbi Karen Kedar is senior rabbi of B’nai Jehoshua Beth Elohim in Deerfield.

Kedar edited the finance and ethics issue of the spring 2010 CCAR Journal (The Reform Jewish Quarterly of the Central Conference of Reform Rabbis). In an introduction to the journal, Kedar referred to the impact the economic crisis has on families and business. “It seems that the rules have changed. Banks aren’t behaving like banks. Performance, ambition, and intelligence are irrelevant to job security. What was affordable in previous years is now out of sight,” she said.

She encouraged a review of attitudes toward wealth. “Nobody stands at your grave and reads the details of your portfolio. Life is judged by giving, loving, faith and the ability to rebalance when we’ve lost our focus.”

Kedar explained the impetus for the journal’s ethics issue as “back to basics during a historic moment when ethical issues regarding money, finances and business dealings are in question in our country, and indeed in the global marketplace.”

However, she cited an important reference from Shabbat 31a. “May you live 120 years, but when you die, G-d asks you six questions. The first is, were you honest in business?”

Kedar explained why honesty in business was first. “The ethical order of money is the basis for everything,” she said. “According to the Talmud, if you don’t have a society based on ethical behavior, then you have no foundation for any relationship.”

Jodie Jacobs is a Chicago journalist who has contributed to the Chicago Tribune for more than 20 years. Her articles have also appeared in Crain’s Chicago Business, Lake County Business Journal and What’s Happening. Email her at Jodie_jacobs@sbcglobal.net

 

 

Posted by on Apr 24th, 2012 and filed under Special Reports. You can follow any responses to this entry through the RSS 2.0. You can leave a response by filling following comment form or trackback to this entry from your site

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