Adam Smith's The Wealth of Nations is perhaps the
most famous book about economics. But it gets short shrift at his
grave in Scotland. The father of capitalism's tombstone gives
another book top billing, as is appropriate. He always felt
The Theory of Moral Sentiments was his
more important work.
Smith took trust and ethical behavior seriously. Perhaps the
leaders of Arthur Andersen, Enron, WorldCom--and who knows who else
by the time you read this--missed that part of history class.
Thanks to their inattentiveness, other executives are relearning
how much trust matters.
"We've got it wrong when we say business is business,
and [it] has nothing to do with ethics," says R. Edward
Freeman, who teaches business ethics at the University of Virginia
at Charlottesville. "Adam Smith thought that markets
wouldn't work unless people wanted to do the right
thing."
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Trust underlies your business relationships with employees,
customers and suppliers, says Paul P. Baard, management and
communications professor at Fordham University in New York City.
"Where am I going to work? From which supplier am I going to
purchase? These decisions all involve trust," Baard says.
W. Michael Hoffman, executive director of the Center for
Business Ethics at Bentley College, thinks ethics tend to be taken
for granted. "Warren Buffett said after the [1991] Solomon
Brothers [U.S. Treasury bond] trading scandal that trust is like
the air we breathe," he says. "When it's present,
nobody really notices. But when it's absent, everybody
notices."
"Warren Buffet
said . . . that trust is like the air we breathe. When it's
present, nobody really notices. But when it's absent, everybody
notices."
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In 2002, people paid attention as Arthur Andersen, Enron, Tyco,
WorldCom and other companies cast a veil of suspicion across
American business. Think this is only a big-company problem?
Don't.
"Everyone has something to worry about," says Laura P.
Hartman, president of the Society for Business Ethics. "You
could be at the most reputable firm, and this stuff could trouble
you."
If you need to be convinced of the importance of ethical
behavior, just think of it in terms of your P&L statement.
Entrepreneurs tend to pay employees less than corporate America
does. According to Baard, that's because employees earn psychic
benefits from growing a small business. If they get psychic scars
due to broken trust, you'll have to pay more to retain
them.
And consider that handshake deal you've got with your
suppliers. If you fail to pay invoices within the agreed-upon time
frame, you haven't kept your promise. "Suppliers will say
that we're going to get more contractual now," says Baard.
Breaking that trust just drove up your legal bill.
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