CENTER for

ETHICAL BUSINESS
centerforethicalbusiness.org

THE GOOD BUSINESS THESIS

The Definitive Guide on the Theory and the Practice of
Building and Sustaining Socially Responsible and Ethical
Businesses

Mark Bao
Founder, The Center for Ethical Business

THE CENTER FOR ETHICAL BUSINESS P.O. Box 812031 Wellesley, MA 02482 T 617.395.5633 centerforethicalbusiness.org 1
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Table of Contents & Brief

What is Good Business? 1

The theory behind Good Business 1
What this thesis is about 1
Why is Good Business important? 2
Public view of corporate ethicality 2
Increasing rate of unethical behavior 2
Better businesses create a better world 2
Ethical Business 3
A brief history of the study of ethical business 3
What is ethical business? 3
Beginning Integration 4
The Golden Rule, as presented by Maxwell’s Ethics 101 4
Moving toward acceptance 4
Develop a Code of Ethics 4
Case Study: Enron 5
History of the Enron scandal 5
What we can learn from the Enron scandal 5
Social Responsibility 6
Introduction to Social Responsibility 6
Why is Social Responsibility important? 6
Social Responsibility in Companies Today 7
Gap Inc. 7
Lenovo 7
Cisco 7
Labor Ethics 8
Introduction to Labor Ethics 8
Labor Ethics offenses 8
The Center for Ethical Business’ Theory on Labor Ethics 8
Strategy for Entrepreneurs 9
An Introduction 9
Why is Good Business important to focus on? 9
Conclusion 10
The Benefits of Good Business 10
Recommended Reading 10

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What is Good Business?

The theory behind Good Business

Good Business is a combination of a number of mentalities and approaches in business, in
the subcategory of business practice. Good Business is composed of the following
components:

• ethical business
• social responsibility
• labor ethics

Good Business aims to advocate for a more responsible form of business.

What this thesis is about

This thesis is the definitive guide on the theory and the practice of building and sustaining
socially responsible and ethical businesses. Within, this thesis will discuss the background
of Good Business, why it is important, the history of ethical business, the theory behind
putting Good Business behind an organization, case studies based on past instances of
ethical or unethical business behavior, and lastly, the method of implementation of the
methods of Good Business into new or existing organizations, and why it is important to
do so.

This thesis, and the Center for Ethical Business, aims to define the Good Business
landscape and allow for a common ground for discussing ethical business in general. In
addition, it aims to allow new and existing business owners, as well as individuals within
organizations, include Good Business in their respective groups.

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Why is Good Business important?

Public view of corporate ethicality

Constantly, throughout the years, ethical businesses is constantly challenged. Whether the
trigger for infringements upon ethicality in companies are based in corporate greed,
necessity for the continued operation of the company, necessity for the continued
operation of the sector the company is in, or any other factor—unethical corporate
behavior has become something of a cornerstone of American corporate culture, as well
as the public view of corporations.

In the past hundred years, the American view of corporations has changed for the worse.
The view of corporations has changed from a provider of services in the past, to today—
for many companies—an organization that has to be watched, regulated, and that would
be expected to participate in unethical behavior.

This isn’t how the view of businesses should be.

Increasing rate of unethical behavior

We’ve seen Enron. Lehman Brothers. Madoff Investment Securities. Goldman Sachs. The
rate of unethical behavior in the corporate world seems to be increasing, and with it, the
acceptance of such actions seems to be increasing as well, creating a vicious circle.

Better businesses create a better world

Businesses, whether it be a new startup or a large multinational conglomerate, have a
great deal of influence on the world. With better businesses that are based on the ideals of
Good Business, we can create better products, better experiences, and a better world.

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Ethical Business

A brief history of the study of ethical business

In the latter part of the 20th century, American corporations started adopting ethical
practices like nonprofit divisions and charitable actions that sparked the ethical business
movement. Although the field was young at this time, it slowly started to develop, and
eventually it became a field of study. Now, with the increased study of ethics as applied to
business, as well as the factor of globalization, it is a major area of the foundations of
business—as it should be.

What is ethical business?

Ethical business is the evaluation of business practices against a background of social,
economical, and moral standards, to assess the impact that the practices will have on the
three areas. Indeed, the moral aspect is emphasized, though both morals and ethics have
their own complex forms. These ethical standards are defined both with the economy and
society as a whole, as well as within a company.

For an organization to adopt ethical business, the organization does indeed have to
sacrifice a number of other attractive advantages, such as the benefit of maximizing
revenue without regard for ethical or unethical practices; flexibility on making decisions at
any level, whether it be executive, managerial, or on the employee level; lack of a need of
oversight over ethical business practices in an organization, and other positives that not
adopting ethical business adds.

However, becoming a business having roots in ethicality has many positives. Past studies
have shown that businesses that have acted ethically ultimately gain customer trust and
go further than others that do not, while at the same time perpetuating ethical business.

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Beginning Integration

The Golden Rule, as presented by Maxwell’s Ethics 101

In John C. Maxwell’s introduction to business ethics, in his book Ethics 101, he presents
the golden rule of ethicality that can be used not only in business but also in any situation
that requires an ethicality check. It is, essentially: would I like to be treated in this way?
This, indeed, the ultimate ethicality check, as it brings the action that someone is
performing upon someone else—unto oneself. This is the number one tenet of ethical
business: in order to accept performing actions upon others, you must accept performing
those same actions upon yourself. Once this action is established as something you, too,
would accept, it becomes more likely to be an ethical decision.

Moving toward acceptance

For ethical business to become an important force in an organization, there must be wide
adoption and acceptance of the idea and the importance of ethical business. Send
managers and employees this thesis/whitepaper and allow them to look through the case
studies and core components of ethical business. Give them time to digest the
information, specifically about the positives of ethical business in an organization. This
thesis shows concepts by example rather than tells them.

Develop a Code of Ethics

Tailor a Code of Ethics toward your organization to fit your organization’s industry,
company goals and targets, and products. This is the ethical blueprint for your company:
what your company should follow with regard to ethics.

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Case Study: Enron

History of the Enron scandal

Enron, a major energy company and one of the largest corporations in the world, started
to collapse as important details about its financial status were revealed. It managed to
evade federal taxes—going as far as gaining money from the government—for four out of
the five years during 1996–2000, for a total of a $381 million tax rebate from the
government. Over time, it was revealed that Enron was forming foreign subsidiaries to
escape taxes and debt, managing to conceal $1 billion of debt inside these subsidiaries,
which was done in October 2001. Andersen, the Enron accounting firm, denied that the
company was in deep financial trouble whilst it and Enron shredded documents about the
firm. Soon afterwards, the SEC began an investigation into the company, which resulted in
the resignation of the CEO Kenneth Lay on January 23, 2002; the apparent suicide of Vice
Chairman J. Clifford Baxter; and the release of documents from Enron admitting criminal
offenses and financial deceptions performed at the company by new CEO Stephen
Cooper.

What we can learn from the Enron scandal

Even though the Enron scandal was on the level of major corporations, it is still important
to note the instances of unethicality inside Enron. These include the shredding of
documents by both Andersen and Enron (clear indicators of guilt for both companies),
Republican political connections trying to push the Enron issue under the rug, deceptive
information given by CEO Kenneth Lay about the company, and other issues that led to
the uncovering of the scandal. The scandal encompassed many areas (corporate, political,
international, etc.), and increased public distrust in corporations and deregulation,
increasing tension between customers and corporations, a fatal economic condition.

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Social Responsibility

Introduction to Social Responsibility

Social Responsibility is the belief that corporations that serve a community are obligated—
and have a responsibility to—give back to the community at large, or at the very least, be
responsible towards the company’s effect on society as a whole.

The first kind of social responsibility, giving, is focused on the positive benefit that
companies can bring upon society in their areas of interest, via active participation, like
support or formation of charities and organizations promoting positive societal influence.

The second kind of social responsibility, commitment, is focused on watching and

making sure the company is not making substantial negative influences upon society as a
whole. While a company’s societal effect is inherently unmeasurable since it is both a vast
idea with many different variables, and that these variables are qualitative evaluations, a
commitment to social responsibility shows that a company is aware of and watches over
their general power. In addition, a company that is devoted to social responsibility aims to
influence the company towards this sentiment, though the power of social responsibility is
held in the positions of management.

Why is Social Responsibility important?

Although the commitment area of social responsibility has an aim similar to that of ethical
business (to do good and not do bad, in laymen’s terms), it is somewhat different than
ethical business. Social responsibility is focused on the company’s actions as a whole,
towards society (like labor concerns, environmental affairs, and similar matters) rather than
acting ethically and within law. Social responsibility goes beyond ethicality similar to how
ethical business goes beyond staying within law.

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Social Responsibility in
Companies Today

Gap Inc.
Gap Inc. has a company website dedicated to social responsibility, along with their policy
and their responsibility goals, at gapinc.com/socialresponsibility. Gap Inc. is a multinational
fashion chain owning a number of fashion properties. According to their website, the four
areas of social responsibility they focused on are supply chain, environment, employees,
and community investment. They have in-depth information about each of these
categories, documenting the ways in which they present their current responsibility
situation as well as their future goals. They also publish some of their policy documents
such as their Code of Vendor Conduct, which details their policy with regard to factory
work (see also Labor Ethics).

Lenovo
Lenovo has a similar website focused on environmental impact and labor responsibility, on
their online website lenovo.com/social_responsibility. They also have drill-down pages that
focus on their initiatives with regard to the environment and factory labor. In addition, they
outline their corporate ethicality guidelines as well (see Ethical Business) and publish yearly
end-of-year reports on their social responsibility efforts. Lastly, they, too, publish their policy
on various social responsibility fronts (RoHS, recycling, SVHC, ESTAR®, etc.)

Cisco
Cisco, a multinational networking equipment manufacturer, also publishes a corporate
social responsibility website online at www.cisco.com/web/about/citizenship. They, too,
focus on environmental impact, employees, diversity, and investments.

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Labor Ethics

Introduction to Labor Ethics

Labor ethics, at its core, is approaching labor policy with a focus on fairness for
employees. The most prevalent areas of labor ethics are wage, benefits, and environment.
These factors are all considered in a complete labor ethics policy, as all three are
paramount concerns when dealing with labor. Labor ethics is tied to social responsibility,
and is usually considered a subset of it.

Labor Ethics offenses

One of the most important labor ethics offenses happens in the most labor-filled country,
China. Apple, with Foxconn (Hon Hai Precision Industry Co.) faced a manager suicide
related to the leak of company technology. Apple increased their ethicality policies.

The Center for Ethical Business’ Theory on Labor Ethics

The Center for Ethical Business believes that in order to increase the quality of life and
work for labor employees, the company has to increase their benefits, environment, and
sometimes wage. For this to happen, however, the company has to either sacrifice margin.
Therefore, it is not only in the hands of the company, but also in the consumer, to increase
social responsibility, as customers looking to support labor ethics are the one that will be
facing an necessary increase in cost.

We believe it is in the hands of the consumer to choose socially responsible companies

with ethical labor policy. The Center for Ethical Business aims to be the central area for
consumers to consult to determine whether the businesses they purchase from are those
that provide a high caliber of ethicality, or are they, in fact, ethical offenders.

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Strategy for Entrepreneurs

An Introduction
Currently, ethical business and social responsibility are not vital driving forces in the
entrepreneurial community. The Center for Ethical Business believes that these should be
paramount concerns, and aims to educate entrepreneurs early so they can incorporate
Good Business beliefs toward their future successful businesses.

If we had introduced Good Business as an important concern in Enron, we would have

either created an ethical Enron or one that collapsed early—both of which, we can see
now, are leaps and bounds better than what really happened.

Why is Good Business important to focus on?

Believe this: ethical businesses have a higher rate of success, and earn more revenue.
Entrepreneurs are developing the largest businesses of tomorrow, as the current major
players are changing and collapsing.

We’re building the next businesses now. The benefits of Good Business are real. The focus
of entrepreneurship is making meaning and creating value. Through creating businesses,
you are already creating change in the world. However, every company has an obligation
to give back to the community as a whole. If we focus on how the company benefits the
world, we can focus on how we can create even more value, to increase that benefit.

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Conclusion

The Benefits of Good Business

Without a plan for Good Business in a company, it is determinable that the company is out
to make profits and disregard most else. This is not the correct approach to corporate
culture, and creates an environment in which employees are working toward greed.

Connect to the purpose of the company and integrate Good Business practice within it.
The benefits are many: with a Good Business policy, the major benefit to the company is
that your customers will have greater trust for the company and an increased probability of
doing business with your company. The major benefit outside of the company is that it will
benefit the world. Not only will you be benefitting labor ethics, environmental policy, or
whatever responsibility you choose to focus on, but you will be a part of the rising
prevalence of Good Business .

Recommended Reading
The Center for Ethical Business recommends that you peruse the following literature, as
they are excellent sources of information and inspiration for Good Business. You may view
this list as well as other literature at centerforethicalbusiness.org/literature.

‣ Ethics 101: What Every Leader Needs To Know, John C. Maxwell (Center Street)

‣ The Right Thing: Conscience, Profit and Personal Responsibility in Today's Business,
Jeffrey L. Seglin (Smith-Kerr)

‣ Working for Good: Making a Difference While Making a Living, Jeff Klein (Sounds True)

‣ Good Work: When Excellence and Ethics Meet, Howard E. Gardner, Mihaly
Csikszentmihalyi, William Damon (Basic Books)

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