Do The Right Thing An investigation of the new athnically enlightened age when self-interest and public interest go hand in hand

Because we believe the subject matter is so important,Entrepreneur Media is running the following article, examining thequestion of ethics for small business, in three of ourpublications: Entrepreneur's HomeOffice, Entrepreneurand Business Start-Ups.

Charlie Wilson is trying to run an ethical business. He'smade social responsibility part of the mission statement at his$1.6 million Houston-based salvage company, SeaRail InternationalInc. And he's made "self-actualization"--notwealth--his ultimate goal as an entrepreneur.

But don't mistake Wilson for some born-again hippie ormoralistic stick-in-the-mud. For him, it's all about success."Ethics is what's spearheading our growth," saysWilson. "It creates an element of trust, familiarity andpredictability in the business. We're in an industry where alot of people cut corners. It's easy to misrepresent productsand be less than upfront with customers about the condition ofgoods. I just don't think that's good for business. Youdon't get a good reputation doing things that way. Andeventually, customers won't want to do business withyou."

For years, ethics and business had a rocky marriage. If youasked entrepreneurs to talk about ethics, the responses would rangefrom silence to scorn. It's a dog-eat-dog world out there,they'd say, and I'm just trying to survive. But it wenteven deeper than that. Here are folks who--by definition--likebreaking the rules. Suggesting that entrepreneurs follow apredefined set of edicts was about as popular as asking them toswear off electricity.

But this attitude may be changing. Whether people are hung overfrom the freewheeling '80s or reflective about the comingmillennium, talk about ethics, values, integrity and responsibilityis not only becoming acceptable in the business community--it'spractically required.

"This looks to me just like the quality movement of 20years ago," says Frank Walker, chairman of Indianapolis-basedWalker Information Inc., a research and consulting company thattracks customer satisfaction and business ethics. "In anyfree-enterprise system, customers need a way to differentiate onefirm from another." For years, the dominant point ofdifferentiation has been quality. Now, says Walker, everyone candeliver quality, so businesses need to step up to a higherplane.

Are the nation's entrepreneurs ready to ascend to newheights of ethical literacy and compliance? Well, sort of. Althoughmost entrepreneurs still aren't trying to unseat the likes ofSocrates and Plato, many are giving serious thought to improvingtheir ethics, with the hope that doing good business will be goodfor business as well.

Gayle Sato Stodder covers entrepreneurship for variouspublications. She lives and works in Redondo Beach,California.

Ethics, Schmethics

What's behind the current buzz about ethics? A number offactors, really. The days when one could argue that conscience andbusiness don't mix are gone for good. Although the socialresponsibility movement of the late 1980s and early '90s hardlyqualifies as news anymore, its message has become part of ourpopular consciousness: Businesses need not exist for the sake ofgreed alone. Consider the bar permanently raised thanks toconscientious companies.

As standards have gone up, public awareness has alsointensified. "It's not necessarily that we care more aboutethics today," says Laura Pincus Hartman, director of theInstitute for Business & Professional Ethics at DePaulUniversity in Chicago, "but that, because of [bettercommunication], we know more about companies than we once did. Withthe World Wide Web, more information gets out to more people thanever before. Anyone can log on to the Internet and find out almostinstantaneously about libel suits, harassment suits and all kindsof information that would have been difficult to uncover in thepast."

Awareness translates into action. When Walker Information polled1,037 consumers in 1994, 47 percent indicated they would be muchmore likely to buy from a "good" company if quality,service and price were equal. On the other hand, 70 percent ofconsumers would not buy--at any price--from a company that was notsocially responsible. "Apparently you get some credit forbeing good," says Walker, "but you really get clobberedfor being unethical."

For ethicist Robert C. Solomon, professor of philosophy andbusiness at the University of Texas, Austin and author ofIt's Good Business: Ethics & Free Enterprise for the NewMillennium (Rowman & Littlefield), these various threadsweave together into a single truth: Ethics is at the very core ofsuccessful commerce. "Ethical managers and ethical businessestend to be more trusted and suffer less resentment, inefficiency,litigation and government interference," says Solomon."[Being ethical] is just good business."

Put A Moral In Your Story

Deciding to embrace ethics is one thing. Figuring out how toincorporate ethics into your business is another. Yet itdoesn't have to be painful or complicated. Here are some stepsto get you started:

• Set priorities. The first and perhaps simplestthing you can do to delineate your company's values is tocreate a clear mission statement. What is your highest priority?Wilson included the following words in his company's missionstatement: "We put social responsibility in front ofprofit." Although this is not exactly a specific plan ofaction, it guides many of Wilson's decisions. "Whenever Ihave to make a tough judgment, I refer to our missionstatement," he says. "Putting things down on paper helpsset in stone what your standards are."

• Start now to create company policies and procedures thatguide you. To a homebased entrepreneur with no employees,writing a policy manual may seem unnecessary. In reality, puttingguidelines on paper will not only help you make decisions now butwill also guide the employees you may someday have.

Look for procedures that help guide you through the kinds ofdilemmas you face daily. In Iris Salsman's public relationsbusiness, St. Louis, Missouri-based Salsman Lundgren PublicRelations Inc., credibility is key. "We're puttingourselves out on a limb, asking the media to portray [clients] ascertain kinds of people," Salsman explains. "If theyaren't that kind of person, [that discrepancy] affects ourreputation." So Salsman performs careful client interviews anddoes a little investigating online and with contacts to make surethe story a prospective client gives her is in line with theclient's reputation. "We're not saying we won'taccept a client who's had problems in the past," saysSalsman, "but we don't want to be taken bysurprise."

• Get advice. Don't reinvent the wheel. Ask oneof your industry's trade associations if it has a code ofethics; the information it contains may help you establish yourcompany's policies and procedures. At the very least, it willhighlight important issues to consider.

When faced with an individual dilemma, Wilson consults fellowbusiness owners at the Greater Houston Partnership, which issimilar to a chamber of commerce. "Sometimes you don'tknow what's best," Wilson says. "That's when ithelps to turn to your peers."

• Avoid hypocrisy at all costs. Suppose you have nocompunction about lying to clients, you cook the books at tax timeand, worst of all, you have no interest in changing your evil ways.Whatever you do, don't promote yourself to clients and thecommunity as a paragon of virtue. "People are a lot moreobservant than you realize," says Wilson. "You'vejust got to be [ethical]--you can't lie about it."

The Rewards Of Virtue

If bulking up your company's moral fiber seems like a lot ofwork, consider the alternative. Imagine your company dogged bydisgruntled clients, hapless decision-making and a poorreputation.

Not exactly your vision of success? In fact, it's hard toenvision any company being successful under these conditions. Andwhile it's believed that virtue offers its own spiritualrewards, the rewards of running an ethical business usually involvefinancial gain as well. Unscrupulous behavior, on the other hand,generally leads to havoc.

This is why business consultant and business owner David Thrope,founder of Boston Knish Inc. in Acton, Massachusetts, believes thatcodifying your ethics should be part of the strategic planning ofan organization early on. Clarifying ethical standards--foryourself as well as others--is a critical step towardentrepreneurial maturity. "A code of ethics gives [you] astructure within which to make decisions," says Thrope. Asyour business grows, that code will help ensure everyone in thecompany is on the same wavelength.

In any business, developing and preserving ethics is an ongoingprocess--and an imperfect one. And while it's not necessary tocover every base and perform flawlessly in every situation, it isimportant to try.

"I think about how I'm going to feel when I'm mymother's age--and my grandfather's age," says Wilson."What will I think of the decisions I've made? How will Ifeel about the things I've done? If I can't feel [proud],what good is it to have made a lot of money? It's ineveryone's interests to appreciate what they're doing andto feel good about what they're accomplishing. Otherwise,what's the point?"

Battle of the Sexes

Do women have higher ethical standards than men? In general,yes. That's according to two University of Alabama businessprofessors whose complex analysis of past research revealed someinteresting differences in the ways men and women perceiveunethical behavior.

Dr. Deborah Crown, associate professor of management, and Dr.George R. Franke, associate professor of marketing, found that onaverage, men and women go into the work force after college withdifferent perceptions about ethics.

Differences are most pronounced among college students andgradually decrease with work experience until, after being in thework force for about 21 years, the differences practicallydisappear.

Other findings:

• Women were more likely to perceive rule-breaking as unethical.However, men were no more likely to break rules than womenwere.

• Men were more likely to recognize ethical problems involvingmoney than those involving nonmonetary issues.

• Ethical standards rise over time: "Junior workers maycross an ethical line without even realizing it," says Franke."With work experience comes a better understanding of what isappropriate and inappropriate behavior."

• There's more agreement than disagreement: Overall, theethical perceptions of men and women overlapped by 84 percent.

There's A Place...

By Laura Tiffany

Juliette Mills-Lutterodt had no fear when zoning departmentrepresentatives visited her business: She didn't know she wasoperating illegally.

The surprise visit came about a month after she launched herhomebased nanny placement agency, Agence Georgette, in the basementof her Montclair, New Jersey, home. "I had no idea I wasviolating any zoning codes," says Mills-Lutterodt, who startedher business in July 1997 so she could be with her 6-year-oldson.

After ordering her to discontinue the business, the zoning boardwrote to her duplex management company, which threatened to evicther if she continued her fledgling agency. "[Ethics] was oneof my main concerns," she recalls. "It was important tome not to create any trouble but to get more information about howI could go about [doing business] quietly."

Mills-Lutterodt quelled the concerns of the zoning department bymeeting nanny applicants in local coffee shops and continuing herregular practice of interviewing clients in their homes, therebystopping the flow of traffic to her home. She also joined the HomeBased Business Council in Neptune City, a local association workingto change the zoning laws in New Jersey. "I really hopesomething can be done, and we can continue to talk about the lawson this issue. I almost felt I should leave Montclair because ofthe zoning restrictions. The one or two people who came to [myoffice] each day could have easily been my friends, and because ofthat, I can almost feel eyes on me when I have company."

Mills-Lutterodt admits it would be easier for her to meet withapplicants in her office with her computer nearby. But until thelaw changes or she can afford separate office space, she willcontinue to meet applicants at coffee shops to keep her businesslegal.

Contact Sources

Agence Georgette, (973) 783-4788

Boston Knish Inc., (978) 264-0107,