This is not off topic:
INTERVIEW - Ethics viewed as good business sense
Reuters Story - August 27, 1998 19:57
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By Nadja Rogoszynski
NEW YORK, Aug 27 (Reuters) - Last year's damaging federal investigation of Columbia/HCA Healthcare , the world's largest health-care provider, offers a valuable lesson on the link between ethics and a company's bottom line, an expert in the field of corporate responsibility says.
Last year, Columbia's stock was repeatedly slapped down by investors as more news about the Medicaid fraud allegations involving the company became public. It finished the year with a fourth-quarter loss of $1.25 billion after one-time charges, some related to the federal probe.
"Good ethics is good business," Patrick Murphy, author of the recently published "Eighty Exemplary Ethics Statements," told Reuters in an interview. "Once the reputation is lost, the clean-up gets expensive."
Ethics codes usually address issues such as teamwork, quality of work, fairness toward co-workers as well as toward customers and investors and commitment to the company and the product produced or service rendered. Compliance programs are often considered the bottom line, a set of closely-monitored, spelled-out rules, usually enforced when a company has been under investigation for ethical-related charges.
Murphy, a professor of marketing at the University of Notre Dame, said investors risk less by investing in corporations with an ethics statement because the probability of companies getting in trouble with the law or losing a once-solid reputation is less.
"People are more questioning since the days of Watergate. ...You can't afford to have different standards of ethics with instantaneous communication," Murphy said. "If you screw up halfway around the globe, this could be found out in New York, Chicago or Paris in a matter of minutes or hours.
"It is just a safer investment if a company has an ethics code," Murphy said, "It signals that the company is trying to do the right thing, that the company has a solid financial and strong overall reputation with consumers."
In his book, Murphy cites businesses such as Bayer AG , Boeing Co. , Hyatt, Johnson & Johnson and Starbucks Corp. as companies that have written strong ethics statements.
Some mutual funds have started to recognize a related trend, attracting investors who have made a conscious choice to steer clear of companies not committed to a certain ethical standards.
In England and Canada, so-called "ethical" or "green funds" are showing robust growth with investors attracted not only to high ethical standards, but often returns that are equal or higher than those of companies in the broader market.
Ethical Growth, for example, the first Canadian fund of its kind, gained attention when it weathered the 1987 stock market crash and ended the year with an 8 percent return.
These funds avoid investments in major polluters, tobacco companies, weapons manufacturers and utilities involved in nuclear energy, while focusing on companies committed to environmentally safe practices.
According to Murphy, corporate ethical violations span a broad spectrum that includes misleading investors with slanted earnings reports, accepting gifts worth more than $25 or even boycotting teamwork.
Murphy stressed that companies that breach ethical standards often end up paying a large price, both in an immediate financial sense and in long-term cost of rebuilding goodwill that has been tarnished in an ethical scandal.
Columbia/HCA has belatedly recognized the importance of launching ethics and compliance training to deal with its problems.
To spearhead the effort, the company hired Alan Yuspeh as senior vice president for ethics, compliance and corporate responsibility, to take charge of programs to combat the company's internal problems and help revive its public image.
Yuspeh said compliance programs were the minimum standard that need to be enforced by companies, and codes of ethics should be added to them.
"Investors need to be comfortable with a company, particularly in a highly regulated environment, because if they fail, there will be serious results," Yuspeh said.
"Our company has combined both in order to send a certain leadership message," Yuspeh said.
((--New York Newsdesk (212) 859-1700)) |
