At some point, every executive may face this dilemma: long-term results versus short-term gain. Owners or investors want to see the numbers growing, and the pressure to break the ethical rules to earn more seems tempting. However, you may lose everything when you act questionably to get an immediate financial result.
Why all the fuss about business ethics?
Every company has stakeholders—clients, investors, partners, vendors, etc. Hence, it needs policies for ethical interactions with all of them to address questions like “How does our organization conduct business? What’s allowed, what’s forbidden, and what’s frowned upon?”
The particularly tough part concerns competition: how we treat our rivals and our strategy for winning the market share. Some companies are willing to widen their ethical limitations without hesitation to get dirty. For those focusing solely on short-term profit, it seems only logical.
As a CEO or founder, remember the unethical practices that sometimes may be utilized by your competitors. So, they may:
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“Hire” a competitor’s employee to hijack deals. Recently, it happened to our company. We noticed that sales went down despite having enough new leads. Eventually, we figured out the reason and worked on the legal part of this issue with lawyers. As a result, accountability for breaking the NDA will extend not only to our former employee but also to the competitor.
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Stealing the information. If a company has unique know-how or intellectual property, a competitor may try to reveal it, for instance, by bribing an employee. If this information is critical to the business, the leakage may put a company’s existence at risk.
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Spreading disinformation about a rival. It is especially dangerous for B2B businesses in markets where trust and personal connections are essential and influence decisions.
Sure, there are many more ways to harm a competitor and benefit from it in the short term. Sometimes, unethical behavior towards a rival may bring huge profits. But the most important question is, what comes next?
Is the profit worth the risk?
Often, when we think about the consequences of business and competition ethics violations, the first thing that comes to mind is legal implications. But it’s a tiny part of all the risks you’d be facing. How so?
- Unethical business behavior affects your reputation. Your company may lose credibility among potential clients and partners, which decreases long-term profits. Just a fact to remember: a company’s reputation accounts for 63% of its market value.
- Ethics impacts your brand, and your brand impacts customers’ opinions. A recent study showed that almost 60% of US customers were inclined to buy a product or service because of the promise, actions, values, and beliefs of a company’s executives and employees.
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Top talent doesn’t want to work for questionable companies, which means higher hiring costs, more time to fill the openings, etc.
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Employees in companies with a bad reputation tend to have lower morale, which leads to a higher turnover risk and a decrease in productivity.
Some may argue that all these adverse effects would only appear if unethical business behavior became public. Sure, but in most cases, it eventually does.
How do you reinforce business and competition ethics in your company?
Nowadays, business ethics is strongly connected to a company’s strategy and values. That’s why all the initiatives should start at the top. Leaders are role models; employees base their decisions on executives’ actions, not words.
So, review corporate values and strategy and assess whether they align with your business ethics policies. For example, what does “integrity” mean in your company? What business practices and behaviors support this value? And how is it reflected in our policies?
Also, reach an agreement on the basic definitions. What is “honest competition” to all senior leaders? And what do they believe is unethical business behavior? Exchanging examples would help executives find common ground faster.
No matter how detailed your business ethics policies are, it’s impossible to predict every scenario. There’s always room for breaking the rules, especially if you look for it. But when temptation occurs, one question may help you make the right decision: If someone did it to my company, would I consider this step ethical?
Being ethical and prioritizing long-term results, including reputation and market capitalization, can help you attract the best clients and employees, increase the company’s value, win cleanly, and succeed—not just today but also far into the future.
Andrii Bezruchko, CEO and founder of Newxel. Andrii, with over 20 years of experience in software development and leading global development teams and R&D centers, has held various C-level IT roles, including CTO and Director of R&D, where he shaped technology strategy.
