Small Business

Making the Case for Business Ethics


Turney Stevens, dean of Lipscomb's College of Business, explains why it's important for leaders of small companies to do the right thing

When Lipscomb University in Nashville contemplated opening a business ethics institute in 2008, its backers could hardly have foreseen how timely and relevant it would be. Turney Stevens, dean of Lipscomb's College of Business, says he has noticed increasing ethical lapses in business dealings during his career as an investment banker and public company director. He spoke recently to Smart Answers columnist Karen E. Klein about the need to restore the study of business governance and how entrepreneurs must make ethical choices daily. Edited excerpts of their conversation follow.

This fall, Lipscomb University launched the Dean Institute for Corporate Governance & Integrity. It opens at a time when enormous fraud is being uncovered in our financial system—not only outright crimes but also underlying assumptions and practices that seem to have been all about short-term gain without consideration for the long-term implications. Have you seen business ethics deteriorate over your career?

In my experience putting deals together, I've seen a general deterioration of civility and honesty. People never stop negotiating. They'll say: "Yes, we have a deal." But then tomorrow we'll find out that we don't have a deal because there's leverage there, so people just keep negotiating. You know what? At some point, if you say we've got a deal, we should have a deal. That's the honorable way to do business. I also notice that there's been a general trend toward redefining what truth is. People do not necessarily honor the truth, like I was brought up to honor the truth and tell the truth, not shade it or see what you can get away with.

What will be the role of the Dean Institute?

It's not our purpose or our place to try to moralize. Our purpose is to raise the question: "What's the professional—and the right—thing to do? How do you define words like truth and integrity?" At our launch this month we did a seminar with Benjamin W. Heineman Jr., from Harvard, who wrote High Performance with High Integrity. He has done more thinking than anybody in the country on how to create a culture where people are motivated and rewarded for doing the right thing.

Should regulation and oversight be strengthened so that business leaders are not only encouraged to be ethical but also required to follow certain practices by law?

I believe that there is a role for regulation, and we probably need to rethink the definition of regulation. But I also think that unless we become a totalitarian society, we can't regulate all aspects of our lives. That's where making ethics important again comes in. I think all colleges should be promoting this with their business students and in their communities, and I think we went through a period in academics where we de-emphasized business ethics. It shouldn't just be a perfunctory class, it should be something important that the students are learning.

Is there a balancing act that CEOs have to achieve between doing the right thing and being competitive and getting the best profit possible for themselves and their companies?

I'm all about aggressive competition, but there have got to be rules of engagement, or we degenerate into anarchy. We seem to be seeing all around us the fruits of too much aggression. Let's look at the mortgage industry: "Let's give mortgages to people with no discernible income and sell them to unsuspecting investors in Europe, and by the time they figure it out, we'll be gone and no one will be the wiser." Well guess what? We figured it out, and terrible damage has been done to a lot of people. So unethical behavior catches up with you eventually.

My feeling is if you behave honorable and ethically in your business, if you think about the greater good and sacrificing the short-term gain for the longer-term health of the company, you'll gain terrific confidence and loyalty and you'll get abundant returns on your investment.

Is it tougher for a small business owner to be unethical, when he or she is so much closer to the employees and the results of decisions are felt more immediately by the entire firm?

It is harder to duck when the people on the plant floor see you every day. Your employees know if you treat customers right. Because the great majority of jobs in this country are in small businesses, it's critically important for the entrepreneur to place as much emphasis on ethics and integrity as it is for the CEO of a large business.

Of course, the larger the crime, the more publicity it gets, so you hear about the big crimes more often. But if the dry cleaner, the restaurant owner, the small manufacturer, or service company is cheating its customers, mistreating its employees, and cutting corners, that creates a big problem. The basic fabric of America is strong, and I believe most people out there want to do the right thing. But the bad news is that as a culture we've slipped in terms of being able to define what the right thing really is.

How do we change that?

It's critically important for business leaders to set good examples. If a CEO gives lip service to integrity but behaves in a different manner, that hypocrisy undermines any attempt to [inspire] the troops. If your knee-jerk reaction as a business owner is to ask: "What can we get away with here?" that's a message your employees will pick up on. As a leader you have to say: "Look, it's not a matter of what we can get away with. The question is what is the right and honorable thing to do."

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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