South-Western - Management  
The Ethical Company
Topic Ethics and Social Responsibility
Key Words Ethics codes, ethics training, ethics and employee loyalty
News Story 

In 1982 when Johnson & Johnson faced the tragic discovery of cyanide-laced Tylenol capsules in the Chicago area that caused several deaths, vice chairman David Collins didn't hesitate to act. He decided to recall the entire product line. When Johnson & Johnson was found to be blameless in the situation, the company's reputation was bolstered. When faced with a crisis, they had done the right thing, even though their company was not at fault. In contrast, when the Ford/Firestone tire tragedy occurred, the company tried to cover up the problem and remove themselves from blame. As a result, they took a public relations hit from which they will probably never be able to recover.

Because of several recently highly publicized ethical dilemmas, many companies are beginning to wonder what they would do if faced with a similar crisis. In the Johnson & Johnson case, David Collins looked to the company's famous credo, which began "We believe our first responsibility is to the doctors, nurses, and patients, to mothers and fathers, and all others who use our products and services…" The Raytheon Company uses an Ethics Quick Test of seven questions for employees to use when facing an ethical dilemma. Texas Instruments has a similar test that says simply "If you know it's wrong, don't do it!" Both of these companies supplement their codes with formal training and ways for employees to voice their concerns.

TI's ethics course is voluntary, and Raytheon's is mandatory. Raytheon also has a toll-free ethics line and full-time ethics officers in all of its major business units. Senior management all the way up to the CEO are active in the training program.

Employee commitment levels are one measure that can be used to determine whether the cost of these programs is worthwhile. Bruce N. Pfau of Watson Wyatt Worldwide found that employees who feel their companies conduct business with honesty and integrity show markedly higher levels of commitment-68% compared to 12% for those who rate their companies low on ethical values. High levels of commitment are also linked to a company's success rate. Companies with high scores on the honesty and integrity scale had a total return to shareholders of 101% over three years. Those who rated low averaged only 69%.


The article shows a high correlation between ethical companies and the satisfaction rates of their employees and customers. Why do you think this is true?


The article states that in an effort to have a more ethical environment, it is not enough for a company just to have a written ethics statement. What are three other elements that must be in place for a truly ethical environment to take hold?

Source "The Ethical Company," Wall Street Journal, Nov.10, 2004, pp.D1, D5.
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