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10.5.98  
Does Being Small Mean Never Having to Say You're Sorry?
An ethics expert says entrepreneurs deserve some slack

Have you ever stiffed or delayed a creditor to keep your company afloat? Did you ever pressure an employee to work when he had a family obligation? Or perhaps you've done something outright illegal in an attempt to get more business?

If so, you're apparently not the first. Ethics is a growth market for consultants, and it's the everyday beat of Marjorie H. Kelly, co-founder and publisher of Business Ethics magazine. Kelly, whose office is in Minneapolis, sees two seemingly opposite trends at work. Larger companies are hiring more ethics officers and becoming more socially responsible and environmentally conscious. At the same time, they're under growing pressure to keep earnings up at any cost, to send jobs overseas, and to lay people off. What should we expect from smaller businesses? Surprisingly, in a recent interview Kelly tells BW's Rick Green that they deserve a little more slack than their bigger brethren. Here are some edited excerpts of their conversation:

Q: Is it harder or easier for a private company to be ethical than a public company?
A: I would say it is easier, because you don't have that relentless pressure to get earnings up every quarter. You can manage for the long term. You can manage for deeper values. An example is Levi Strauss, which is a leader in many areas of social responsibility. They've made it a core guiding value. They set the terms of how they're going to manage. The stock market doesn't set the terms.

Q: Is there any difference between a big company and a small company? Do you think it's harder for a small company to be ethical, given its resources?
A: In some ways, it's easier for large companies, because they have more resources. If they're going to spend a tenth of 1% of their resources on philanthropy or environmental management, that can be a substantial amount of money. That can be an office with several employees and a budget ... who focus on nothing else. They can say, "We're going to cut air pollution from our company 50% in five years," and they have the sophistication and the tools to measure it and to put incentives in place and reward it.

It's very difficult for a small company to do something like that when you're struggling to just meet payroll, when you're struggling to get product out the door. You don't have the luxury of sitting back and saying, "We're going to cut pollution 50%." In that sense, it's easier for a large company.

On the other hand ... a lot of companies say they still have their founders involved, and so there's still a very human voice who's setting goals for the company. It's not just numbers on a piece of paper. For those companies, that's where we're seeing the most innovative, the most sincere, the deepest social responsibility programs.

Q: Let's go to the lower end of the scale, where a company might be struggling to make payroll every day and the pressure on them to do something unethical is stronger. Do we give them a free pass? Should they be held to the same standard as a larger company?

A: I don't think you give small companies a free pass. It's never right to break the law or to cheat people. But I don't think we [should] hold small companies to the same tough standards. And we don't, legally. For example, the Family Medical Leave Act exempts employers with a small number of employees. That's true for a lot of those kinds of regulations. It's a nice idea to give somebody who's just had a child two months off. But if you have five employees, that means 20% of your staff is gone for two months. No company can withstand having 20% of its staff gone for two months.

So I think there are certain niceties that we only have the right to expect of companies when they're larger and more successful.

Q: What are some other common areas of ethical conflict at small businesses?
A: The biggest ones at small businesses is not paying on time. Often, the people who get shortchanged are little guys who don't have the collection agency. Let's say that you have some contract workers or a small firm that you contract out to. You might pay them a little more slowly than you pay some bigger vendors, simply because the bigger vendors will cut you off.

In family businesses, there can be an emotionally abusive environment. Often family businesses are run with the same kind of dysfunctional environment that the family itself is run. When that creeps into the workplace, that can be unhealthy.

Q: Which ethics programs are the easiest for small and medium-size companies to implement?
A: Employee involvement is particularly productive for small and medium-size companies, because, again, they're still close to their founders, they're usually close to their founding mission. Employees can be excited to work for that kind of company. They feel like they're part of the action.

Environmental issues are also worth their weight in gold right now because more than 90% of the public considers themselves environmentalists, and yet it's still a very new and exciting area. Employees feel proud to work for a company that focuses on environmental issues and will often pick up the ball and run with it.

Q: What can the average small-business person do to be more ethical? What should he be watching?
A: The most important thing is to be proactive. It's a mistake to think of ethics as, "When you find yourself in a tough position, you reason it out and come to the right decision." That's simplistic. More important is to focus on the broader social issues and say, "Here's what our company stands for. We stand for integrity. We stand for employee involvement. We care about the environment." When you set that kind of tone in the company, day to day, you send a message about what this company is about. If every day all you ever talk about is the numbers, and you're pressuring people to get their numbers, you're pressuring them to work harder, you are creating an environment where they will cut corners. They're not hearing any message that says, "We care about values."

Q: So it comes from the top?
A: I think it does. The mood is set from the top.

Q: And if people are watching you, you'd better be careful how you act?
A: That's true. But it's more that they're looking to you to be inspired. They're asking you, "Why should I care about what I'm doing? Why are we doing this? Is it just to put money in your pocket? Or are we about something that matters here?"



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