Ethical Companies Last Longer

Article from Newsline, the weekly newsletter from the Institute For Global Ethics:

Ethical Companies Last Longer, Contends BusinessWeek Analyst

Says it was companies without a moral compass that “drove off the cliff”

NEW YORK BusinessWeek columnist Vivek Wadhwa contends that there is a compelling reason for a company to be ethical: It’s more likely to stay in business.

Wadhwa, a researcher at Harvard and an executive in residence at Duke, writes that while many Wall Street firms that were consumed with the goal of making money for themselves crumbled, “Charles Schwab & Co. has largely avoided the huge fallout. So has US Bancorp.”

“A quality both of these companies share,” Wadhwa writes, “is a laser-like focus on customer service and on honesty and transparency. This comes from their cultures.”

“Neither company touched the subprime mortgage securitization market,” Wadhwa continues, “because they saw it as risky and simply not the kind of business that served the company’s long-term interests. I’d wager, as well, that these companies didn’t feel comfortable asking their employees to sell unethical mortgages to customers, a practice undertaken by many subsidiaries of the big Wall Street investment banks and large bank-holding companies.”

Another factor in ethical and healthy companies, according to Wadhwa, is tolerance for internal dissent. Companies in which workers were afraid to challenge management had a “muted internal voice” and lacked a “moral compass.”

“As a result,” Wadhwa concludes, “they drove off a cliff with astonishing speed.”


I have been receiving their e-newsletter for several years, and find it fascinating. For more, visit http://www.globalethics.org/newsline/2009/08/24/