'Respect. Integrity. Communication. Excellence.' Enron's former motto can make one wonder if business ethics are for real.

Oxymorons come from all walks of life. Some common examples include “jumbo shrimp” and “working vacation.” It's even tempting to add “business ethics” to this list based on the plethora of headlines documenting the fall of Enron, WorldCom and Adelphia, and influence peddling in Congress. In reality, however, ethics in business is neither a lofty ideal nor a lack of resolve to do “whatever it takes” to be on top. In fact, it is a strategic imperative that leads to maximum profitability and success. The prime directive for any company is to profit and survive. The surest path to long-term success is to think and act from an ethical perspective. This mandate is not to achieve any lofty ideals of altruism or moral and social responsibility, but simply that in doing so a company or individual acts in its own best interest. Without ethics - the demonstrated ability to make decisions and act in ways that benefit the greater good - there is no trust. And, without trust, long-term growth and survival wane. In fact, in a 2005 speech, J. Brian Ferguson, CEO and chairman of Eastman Chemical, noted that when that trust is betrayed by a few, then the market system “is threatened for the many. The investor left holding the worthless stock, the employee left jobless or with the worthless 401(k), the customer left with the unfulfilled contract, the vendor left with the unpaid bill - all are the victims when the system gets rigged and trust is betrayed.”

The Long View
If ethics is a fundamental and critical part of business, why do we need to discuss it at all? Shouldn't a person be able to assume the individual on the other side of the table is behaving ethically, that companies are making principled choices and that leaders are striving to do the right thing?

In an extremely competitive environment where the demand for performance is constant, sometimes ethical behavior becomes optional. If there is a quick profit, or a shortcut that will reduce costs, the immediate impact on the bottom line is sometimes the only guidepost followed. This perspective represents short-term thinking that can ultimately trigger a downward spiral of the company.

In their book, The Power of Ethical Management, Kenneth Blanchard and Norman Vincent Peale provide an example of a manager who must hire a new sales rep. One of the top candidates for the job reveals at the end of the interview that he has worked for the competition and has confidential information that can be used to great advantage.

Although the almost-certain advantage in gaining a leg up on the competition would reflect well on the manager, he must consider the longer view, as well. If this new employee is so willing to do this to his former employer, what kind of loyalty will he present to the new company? And if the competitor finds out, might they not seek reprisals and retribution? What effect will this type of behavior have on its industry and reputation with future customers? In the end, the manager decides against hiring the candidate for all these reasons and one more - it just doesn't sit right with him.

Can Ethical Conduct Be Guaranteed?
The short answer is “no.” The only thing predictable about human nature is its unpredictability. But, a company can create an environment that supports and fosters ethical behavior by focusing on key areas:
· Sound financials - “The most unethical thing a company can do is over-leverage its balance sheet,” investor Patrick McVeigh has been quoted. Sometimes in an attempt to take advantage of every opportunity, a company can grow too rapidly, expanding to the point where resources are strained. This “pedal-to-the-metal” mentality can lead to situations where everything hangs on the most positive projections becoming reality. Stress levels rise, time commitments become taxing and a climate evolves where even minor disruptions can lead to desperate situations.
· Good governance - The absolute worst time to implement good governance procedures are when they are needed most - in the middle of a crisis. Good governance, making decisions and setting policy in ways that are balanced and judicious all need to be worked out and in place from the very start.
· Creating a culture of values and principles - The people at the top set the tone and create the expectations that fuel behavior. Incorporating a formal structure of rewards and incentives tied to ethical behavior and decision-making reinforces this culture and should be part of every performance review. Values such as “excellence” and “do the right thing” should be used as a framework when making business decisions. A corporate culture that encourages and supports ethical values can mean the difference between using resources for issue management, not crisis management; between promoting the brand and defending the reputation.
The character of any organization is a reflection of the character of the individuals who lead it. Effective ethical leadership, particularly during times of crisis, encompasses some basic qualities:
· Be proactive - Don't wait for events to dictate actions. See what problems could arise, and take actions to avoid them.
· Engage in grounded decision-making - Use solid analysis and deliberation based on the way things are, not the rosiest of projections or biased perspectives.
· Make sure actions are transparent - Decisions, actions and communications have to be able to withstand internal and external scrutiny.
· Demonstrate compassion - Take into account the cost and effect of decisions in human terms. The bottom line on paper is a number. The bottom line in maintaining a business is relationships: employees, customers, suppliers and the community.
· Pursue excellence in execution - Do all that is necessary to ensure a job is done well.

Capital One used this framework to rethink its service delivery model when changes in the industry, recent developments in technology, software platforms and the cost-effectiveness of outsourcing made reevaluation of the original design necessary to remain competitive. This process began early (proactive), involved months of in-depth analysis (grounded decision-making), included associates in the process and kept them informed well in advance of final decisions (transparency), provided market-leading severance and support for anyone negatively impacted (compassion), and applied robust planning and project management practices to ensure a smooth execution. The effort was difficult, but striving for these qualities helped ensure it was a success - whether viewed through an ethics or a bottom-line lens.

Values As Guidance
A solid set of overall values and principles can be the enduring North Star to guide a company through any situation. Take the case of healthcare giant Johnson & Johnson, where core values have long held center stage. When the Tylenol scare hit in the 1980s and consumer deaths from tampered capsules made headlines, management was proactive and immediately called for all Tylenol products to be pulled off shelves and for production of all Tylenol items to be halted. This was in the face of advice from lawyers who worried that such dramatic action would imply guilt and liability for the company.

Managers instead focused on the core values of the company, putting the health and safety of its consumers first. They were upfront with the public and the media (transparency), and compassionate because they were willing to forego short-term company profits to protect public safety. They removed everything from the shelves very quickly, worked closely with law enforcement and made improvements in packaging security that have now become industry standard. During a difficult time, Johnson & Johnson may have endured short-term damage, but by acting from an ethical perspective, the company preserved its image and relationship with the consumer base and thrived in the marketplace.

The Gut Test
The world of business is dynamic and challenging. New technologies emerge each day. Old competitors become more aggressive, and new competitors arrive daily requiring new ways to keep and win customers while lowering costs. Wall Street's expectation to meet or exceed quarterly projections is palpable.

The avalanche of data and analysis available takes decision-making away from careful deliberation of facts and issues, abdicating the responsibility to a calculator. Reliance upon statistics alone leaves no room for the “gut test” - that feeling in the stomach that something is “just not right.”

In business, ethics is a necessity, not a luxury. It may be tempting for a company to take the shortest path to immediate profit, but a larger view reveals that survival depends on trust and reputation.  E+P

Marge Connelly is former executive vice president of corporate partnerships for Capital One, McLean, Va. She is on the boards of the World Affairs Council and Richmond Renaissance.