Looking for a good measure of business ethics? As a teenager, I was a Rotary International exchange student to Germany for a year. I still think Rotary’s Four-Way Test is a wonderful yardstick:
Is it the truth?
Is it fair to all concerned?
Will it build goodwill and better friendships?
Will it be beneficial to all concerned?
This “golden rule” of business conduct was created by Chicago Rotarian Herbert J. Taylor in 1932 and still stands today as an organizational hallmark.
Is there a place for good ethics in business? According to a site on the history of Rotary, one attorney told Mr. Taylor, “If I followed your Test explicitly, I would starve to death.” Hmm. Can we really balance integrity and ambition?
Herb Taylor sure thought so. At his troubled company, Club Aluminum, in the 1930′s, everything was measured against the 4 Way Test. Words like “better, best, greatest, and finest” were dropped from ads and replaced by factual descriptions of the product. Negative comments about competitors were also removed.
This dovetails neatly with the the BBB Code of Advertising, which prohibits “puffery” and exaggerated claims. (The BBB was founded in 1912 by the former president of Coca-Cola, who was disturbed at his own lawyer’s claims during a lawsuit.)
The 4 Way Test worked for Mr. Taylor. The climate of trust and goodwill among dealers, customers, and employees that it created improved the company’s reputation and its finances. By 1937, the club’s debt was paid off and during the next 15 years, its net worth climbed to more than $2 million.
Trust. It’s priceless. To those who feel they can’t afford good business ethics, I say the opposite is true. You can’t afford NOT to do the right thing.
If you’re looking for an ethical company to do business with, Start With Trust by searching track records on www.bbb.org.
Ethics is concerned with “doing the right thing” in terms of morals, fairness, respect, caring, sharing, no false promises, no lying, cheating, stealing, or unreasonable demands on employees and others, etc. In addition, business ethics calls for corporate social responsibility (CSR) and addressing social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. We need a practical approach rather than a philosophical one, with “leadership by example.”
Business decisions often concern complicated situations which are neither totally ethical nor totally unethical. Therefore, it is often difficult to “do the right thing,” contrary to what many case studies will have you believe!
Leaders have to deal with potential conflicts of interest, wrongful use of resources, mismanagement of contracts, false promises and exaggerated demands on resources, which include personnel. Is it the seller’s duty to disclose all material facts regarding the product/ service in question or is it the buyer’s responsibility to find out the pros and cons of what he or she is getting into? Should the seller answer each question exactly as it was asked, and ignore some pertinent information? Or should he or she merely address the spirit of the question? Is the buyer responsible for due diligence? This is a gray area.
Ethics training can raise ethical IQs and monitor behavior, but it is difficult to alter the basic nature of individuals such as Bernie Madoff, Conrad Black and Vincent Lacroix.
Maxwell Pinto, Business Consultant and Author.
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The Four-Way Test certainly seems to have something to offer but it may benefit from a little more clarity in some respects. For example, it seems important that businesses should take an expansive view in determining whether something will be ‘beneficial to all concerned’. That is, we would hope that businesses would consider not just the effect on the immediate participants in a transaction but also that they would consider community impacts generally. However, if a business is offering a good product at a lower price than a competitor, and not being misleading in its advertising, then it does not seem that that business is doing anything objectionable, even though what it is doing will not be beneficial to its competitors – and therefore not ‘beneficial to all concerned’. So, perhaps a silghtly more detailed account of what is meant by ‘all concerned’ would be helpful.
Daniel
http://thetheoryofbusiness.blogspot.com.au/
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Thanks for your comments, Max and Daniel!
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Your blogs and its stuff are so notable and worthwhile it can make me return.
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