Ethics Newsline®

Link between social responsibility and profit seems weak, says research team; U.K. accountants focus on ethics, perhaps out of self-preservation; and IndustryWeek report advises corporations to keep an ethical eye on the supply chain

NEW YORK and LONDON
Business ethics was the topic for several industry analyses last week:

• Doing good may be its own reward, say two business professors, who claim that social responsibility is only weakly correlated with profit. The Wall Street Journal reports that Harvard Business School professor Joshua Margolis and Berkeley professor Hillary Anger Elfenbein say that after reviewing 167 studies over the past 35 years, they conclude that the correlation between financial success and social responsibility is so weak that it may suggest that financial success leads to companies being charitable, rather than the commonly held assumption that doing good deeds leads to profit. But being socially conscious rarely hurts the shareholder, they contend, and it obviously is possible to do good and do well financially at the same time.
• A prominent educator who specializes in teaching ethics to accountants tells the Financial Times that the most important aspect of ethics education is to equip people to think through ethical dilemmas and have a moral framework to support their decisions. David Molyneaux, a former partner at Coopers and Lybrand and a practicing Church of Scotland minister, says the collapse of the Andersen accounting firm and the frauds at Enron and WorldCom have disabused the notion that the ethics of professionals can be taken for granted. In the piece, Financial Times correspondent Ian Fraser reports that ethics has been “moving up the agenda” for accounting firms worldwide, with many ethics codes being written or rewritten. “There is a degree of self-interest involved,” Fraser writes. “Professionals such as accountants are acutely aware that unless they can demonstrate a firm commitment to raising and policing ethical standards, some of their special privileges, including the monopoly they enjoy over auditing, could be stripped away.”
• Managing the supply chain offers a way to plug “ethics gaps” in corporations, according to a report from IndustryWeek, which notes that a recent survey found that 78 percent of companies do not include suppliers in their compliance and negligence programs, and 58 percent report they are not sure if their company monitors ethics risks in the supply chain. “Being an ethical company isn’t enough anymore,” Richard Cellini, vice president of Integrity Interactive, the company that conducted the survey, told IndustryWeek. “Enterprises are being judged by the company they keep, which means the whole supply chain must be ethical. If a dishonest supplier 6,000 miles away disregards manufacturing standards to make more profit, it reflects on the U.S. company that hired the supplier. The public holds the supplier accountable — not the outsourced vendor.”

Sources: Wall Street Journal, Jan. 4 — Financial Times, Jan. 4 — IndustryWeek, Jan. 4.

For more information, see: Related Newsline story, Oct. 15, 2007 — Related Newsline story, Aug. 20, 2007 — Related Newsline story, Nov. 20, 2006 — Related Newsline story, Nov. 5, 2007 — Related Newsline Commentary, Oct. 3, 2005.