The risk of being unethical can not only damage the company’s reputation among customers and investors but also create problems in attracting and retaining employees. That’s why business ethics are one of the most important aspects to a successful long-term performance, no matter the size or level of profitability of an organisation. Professor Milton de Sousa shares his thoughts on this topic and provides a view of what business schools should improve to enhance their programmes.

The Magazine-Review interviews Milton de Sousa, Associate Professor Adjunct and Associate Dean for Institutional Relations and International Development at NOVA SBE

The Annual Report on the OECD Guidelines for Multinational Enterprises 2017 points out that responsible business conduct is increasingly relevant for the global economic agenda for dealing with the downsides of globalisation and promoting the positive contribution of businesses to sustainable development. It also helps with increasing returns, lowering the cost of capital, reducing costs and avoiding legal liability.

The topic is now studied by researchers from all over the world. For instance, Project ROI, led by the research team of IO Sustainability and Babson College, found that better business practices have the potential to reduce the cost of debt for companies by 40% or more and increase revenue by up to 20%.

“In a world with a growing number of demanding stakeholders, companies feel increasingly compelled to have a clear position concerning ethical behaviour. The way leaders promote clear values and the corresponding rules, procedures and disciplined action is central to create a culture where ethics is indeed central”, Milton de Sousa, Associate Professor Adjunct and Associate Dean for Institutional Relations and International Development at NOVA SBE, comments.

However, more than ever, we are confronted with planetary scandals. Milton de Sousa remembers one in particular: “The Volkswagen emission scandal was, with no doubts, a business ethics problem. While trying to achieve ambitious and probably disproportionate growth targets while promising to be more environmentally responsible, the company created conditions for lying and fraud at the local level. Eventually, what started as a local experiment, reached a global scale”.

With the power of social media, a company’s reputation can be put on the hard spot in the blink of an eye. The consequences can be far-reaching, including lawsuits, difficulties in financing and attracting investors, the inability to recruit and retain talent, product boycotts and so on. “With the increasing pressure of media and social media, in particular, the business case for ethics has become more obvious for corporate executives. From a Corporate Social Responsibility perspective, ethics is not only about abiding by the law. It includes a clear set of values and rules above and beyond the law in line with the identity and purpose of the company. For example, should a company allow for child labour in countries where this is not illegal? Executives in the past could probably afford the risk, but with today´s current exposure this is almost impossible. Ethics is not any longer a matter of moral principles, but also a matter of strategic relevance”, Milton de Sousa shares.

A frequent speaker and guest lecturer on the topics of ethical leadership and organisational behaviour, Milton de Sousa claims that, if companies want to safeguard their reputation and achieve higher levels of performance, they should promote “integrity and authentic concerns for sustainability”.

Learn it, do it, teach it

Business schools are investing resources and promoting the topic of ethics and Corporate Social Responsibility in general in their curriculum. However, there is room to improve.

“Ethics is often treated as a separate subject. In my view, it should be addressed in every aspect of the curriculum. There are problems related to ethics every day, in all corporate functions, including finance (e.g. creative accounting practices), marketing (e.g. child advertisement), HRM (e.g. gender equality), supply chain management (e.g. fair trade) and many other examples. While I acknowledge the complexity of the topic for many professors, I think business schools should put more effort into ensuring that these matters are incorporated in the various courses”, Milton de Sousa highlights.

But what should we teach the leaders of the future? Words come easy, so it is important to ensure integrity and consistency between words and practice. “Enron, responsible for one of the biggest corporate scandals ever, had a list of eloquent values including integrity and respect. They were empty words with no correspondence to what managers were doing. There should be no compromise on the values you promote”.

The field is complex and full of paradoxes. For example, global firms such as Starbucks, Google and Amazon have come under fire for tax avoidance. Starbucks, for example, had profits of $213m in the United Kingdom last year but paid only 2.8% corporate tax. However, the same company received a round of applause after closing more than 8000 stores in the United States to conduct a training program about racial sensitivity. The decision was made after a viral footage of the arrest of two African-American men in a Starbucks store, which prompted a slew of negative headlines. They were waiting for a friend when the company’s staff asked them to leave.

Milton de Sousa highlights that: “Leaders need to develop and promote ethical decision-making skills to address today´s minefield of complex problems and dilemmas. It starts with one´s self-awareness and the ability to establish dialogue and reconcile opposites. Ethics is hard, but it has become a strategic tool for establishing a strong corporate identity and purpose for long-term sustainable performance”.