Ethical business is defined by Investopedia as, “the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities.”

Ultimately, there are points in any manager’s or executive’s work where they will be faced with difficult decisions. These decisions can, and should, be considered from an ethical standpoint in regards to fairness, equality, and lawfulness.

Making decisions based on ethical criteria, or at least after considering the ethics that are inherent in the situation, is a great way to avoid regrets, shame, and further ethical dilemmas. This occurs in both life and business.

Today, I wish to present 5 of the key criteria and considerations for doing business ethically. These criteria will act more like values and a guide for thinking through issues in an ethical manner as opposed to hard and fast solutions.

These guides are meant to provide you with a direction of thought when considering ethical issues in terms of other people’s perspectives, and the proper way in which to think about moral dilemmas.

Let’s dive into these ethical thought-guides and use them to unravel the philosophy behind proper business.

Rule 1: Empathy, NOT Sympathy

Although these rules are in no particular order of importance, The first rule is general enough to apply to any and every ethical decision a leader my need to make. Let’s take a look at the traditional definitions of empathy and sympathy to further clarify this point.

Empathy: the ability to understand and share the feelings of another. (The Oxford English Dictionary)

Sympathy: feelings of pity and sorrow for someone else’s misfortune. (The Oxford English Dictionary)

It’s much easier to have, and to overlook, your sympathy for another person. Empathy, however, is on an entirely different level in regards to emotional connection, understanding, and experience.

Consider this: Sympathy is similar to turning your head away from the homeless person on the street. It is horrifically easy to do, and to justify, for nearly every person in the world. Empathy, however, is similar to recalling your own experience as a homeless person (if you have them).

It’s the actual experience and similarity of struggles that makes empathy so much more powerful and makes people so much more willing to get involved and help a person.

In terms of business, I firmly believe that every HR representative who performs firings should have, at one point, been fired themselves. It’s the sharing of similar feelings, experiences, and emotions that give empathy its power over surface-level thoughts and justifications that sympathy possesses.

Therefore, as a business leader, manager, or some other important person, consider the repercussions of your decisions by placing yourselves into the shoes of your employees. This is the best way to gather empathy for their situations.

We’ve all seen the popular T.V. show Undercover Boss, right? This show feeds off of the power of empathy because it places the executives of the organization into the actual shoes of the organization’s employees. The sharing of similar hardships, struggles, and thoughts is what causes the executives to change their minds about how the company is run.

Rule 2: Commitment, NOT Compliance

Commitment allows you to consider the best path when making a decision.

The difference between a team that operates on commitment and a team that operates on compliance is like the difference between night and day. Similarly, a leader that makes decisions based on commitment, and not compliance, is a much better leader and becomes a force to be reckoned with.

Commitment and compliance both refer to internal motivations for action from within a team. The difference is this: commitment motivates a person based on a commonly shared purpose, compliance motivates a person to act out of fear.

Commitment is a result of understanding the purpose of an action. It ensures that the action will be taken despite the presence of management or the lack of repercussive actions.

Compliance is a result of knowing what to do, but not the reasoning behind why you do it. Compliance is dangerous to an organization’s development.

We’ve all heard, and probably read, Simon Sinek’s famous book, Start With Why. “Why” is the very principle at the heart of the commitment and compliance debate.

Making your ethical decision with regards to a greater purpose is almost guaranteed to help you in making the ethical decision. This occurs because you become willing to search for, not just the first acceptable solution, but the ethically optimal one.

As opposed to commitment, compliance is a result of performing because you are expected to perform. Leaders who “lead” with compliance often pull rank and threaten others to “just do what they say.”

The result is an unmotivated and broken down communication channel built upon fear, and not trust.

After all, they say that if a satisfied employee’s output is 100% (average), then a motivated and committed employees output jumps to 210-215% (average). That’s the motivating power of commitment. Utilize that power to optimize your ethical solutions to business issues.

Rule 3: Anonymity

Almost every organization nowadays has an open-door policy of some sort that is put in place. It’s become the modern ethical/HR equivalent of a standard operating procedure. In fact, I’m sure many organizations would be quick to actually consider their open-door policies to be a standard operating procedure.

The only issue with this policy (and these types of situations) is that humans have a knack for under-handing the good nature of these policies with bias.

Bias occurs when a person simply favors one thing over another, most often in a way that is considered to be unfair or lacking “merit” with which to justify a decision.

That is often why there are laws that prevent certain reasons to hire on candidate over another. Our lawful system tries to put into place a guideline with which to quantify merit over other, irrelevant, factors.

Consider this, nowadays, on every job application, you always have the option to opt-out of disclosing your race/ethnicity. This is because these are deemed as irrelevant factors that do not contribute to one’s merit for performing the job.

In terms of business ethics, anonymity can be your best friend. For example, Costco Wholesale puts into place an open-door policy in which you can choose to be anonymous, but disclose non-ethical information regarding a person, store, or other function of the organization.

The reason this is important is because it represents the nature of Costco Wholesale to give true consideration to their ethical practices.

I can actually relate this to marketing. In marketing, you want the point at which customers purchase a product to be as painless and simple as possible, right? That way, they will feel inclined to purchase more products.

Now, in ethical business practices, you want the flow and disclosure of information to be as painless as possible as well. That way, it encourages others to continue this flow of information in a way that is continuously improving the organization.

The simplicity of the matter is in such: Anonymity makes people more comfortable and willing to provide sensitive information that can better the company.

Rule 4: Integrity Now Trumps Honesty Later

This may be a controversial point in terms of a person’s willingness to justify their non-ethical activity. I argue that there is a hierarchy, designated by time, that sheds light on the importance of being ethical consistently as opposed to “picking and choosing” your situations.

Due to the nature of repentance and guilt, many people claim that it is “never too late” to make good on your unethical activity. Although I do believe that, I also believe that it is far BETTER to be ethical and have integrity from the beginning.

The former simply allows to much freedom to justify unethical decisions now with the hope of making good on them later.

Lots of self-help gurus and philosophers say that “It is better to ask for forgiveness than it is to ask for permission.” In terms of personal goals and motivations, this saying works fine. But, in terms of ethics, it crumbles to the floor.

It is always better to have integrity in the moment, as opposed to having honesty later. What this means is, decide on the ethical action now, don’t justify unethical actions based on your “plans to make it right.”

Time is, inarguably, more valuable than anything else in the world. Therefore, it should be common respect and courtesy that defines the relationship between time and ethics as one of equal importance.

There is a Chinese proverb that states, “The best time to plant a tree was 20 years ago, the next best time is now.” I believe this can also be translated to mean that the optimal time to be a better version of yourself was in the past, but you can always start now.

In terms of ethics, your past decisions will dictate the present, but you can always make ethical decisions now. Never rely on your expectations for the future, they may very well fall by the wayside.

Rule 5: Taking (And Not Taking) Action Can be Equally Unethical

Don't be a bystander to an ethical issue.

Rule 5 has to do with a person’s knowledge and comfort with the unethical situation they find themselves in. More specifically, how comfortable a person is with taking action despite their direct involvement in an ethical dilemma.

Many people (wrongfully) believe that if they avoid taking action on any ethical dilemma, they are spared from the judgment and guilt of having to do so. This couldn’t be further from the truth.

Consider the military. Throughout history, there have been orders given by direct superiors to do things that are considered unethical and war-crime status dilemmas (i.e. kill non-combatants, rape, pillage, etc.) Whether you are the person tasked with executing the order, or the person who sits idly by and watches it happen, you are equally guilty.

The person who feigns ignorance is just as guilty as the person who was directly involved. This is because, in some respect, you are responsible for the effect that these decisions have based off of the power you have to stop or alter them.

In psychology, specifically counseling, doctors have found that the best way to approach interpersonal issues is by having BOTH parties take 100% of the blame. This is because, if a single one of those two parties did something differently, 0% of the situation would have occurred.

For example, if the people raping, pillaging, and killing decided not to, 0% of the situation would have occurred. Similarly, if the person who feigns ignorance had spoken up with a commanding officer to overrule or reconsider the command, 0% of the situation would have occurred.

Whether you directly have the power to alter another person’s decision is not the point, but pretending not to notice ethical issues, and not speaking up for them, is what makes a person accountable as well.

Conclusion:

Here are the 5 golden rules of ethical business:

1. Empathy, NOT Sympathy.
2. Commitment, NOT compliance.
3. Anonymity.
4. Integrity Now Trumps Honesty Later.
5. Taking (and NOT Taking) Action Can Be Equally Unethical.

With these considerations, you will be much more able to form optimally ethical solutions to business issues or practices!

Thanks for reading!
Work With Austin

-Austin Denison is a management consultant and coach from Southern California and founder/CEO of Denison Success Systems LLC. He is the author of The Essential Change Management Guidebook: Master The Art of Organizational Change as well as The Potential Dichotomy: The Philosophy of a Fulfilling Life.