“Does a bad scandal really damage a company?” As a motivational ethics speaker and ethics consultant the question, laced with skepticism is asked with surprising frequency.
Those who question my answer of, “There’s no question the company is damaged,” will point out numerous scandal-ridden organizations that seem to be just fine. These include companies involved in banking, automotive production, food processing, pharmaceuticals, insurance, energy and other organizations.
My doubting audiences will respond to my simple statement with, “There’s no justice. We might as well be unethical too.”
The problem with that mindset is that unethical behavior is usually not isolated. One unethical misstep leads to another until something major destroys the organization.
Ethical Dilemmas: How Scandals Damage Companies
Research has shown that workers want to work for an ethically-based company. The last major study done in this area was the Glassdoor Mission & Culture Survey of 2019, with responses coming in from the U.S., U.K., France and Germany.
Nearly 80 percent of employees wanted to work for an ethical company; 73 percent of potential employees take the values of a company seriously and when making a purchasing decision, 43 percent of customers want to buy from an ethical company.
After the worst of the pandemic passed, hundreds of thousands of workers marched off their jobs, and many, even upon gaining new work, didn’t make appearances. Most cited that the company’s values did not resonate with theirs.
These statistics and trends are significant. As a motivational ethics speaker, ethics consultant and author, I know that when a company loses valued workers due to a toxic workplace where unethical abounds, there is a three-fold effect.
The first effect is that when “experience walks,” many of the established policies and procedures leave with them. This drain can have an enormous effect on the overall efficiencies of an organization, often translating into a customer service headache.
The second effect, is that employees who legitimately feel an organization’s ethics are rotten, are the worst kind of spokespeople an organization can imagine. It is often one thing if there are complaints about the product or service, but quite another when the organization was rife with fraud and scandalous behavior.
The third effect, a direct outcome of the second, is the use of social media. Once news of the unethical behavior of the company begins to become known, news of that behavior quickly goes viral.
Obviously, unethical behavior is seen on the bottom line. The fines and penalties for publicly-traded companies that have committed unethical acts can be massive, sometimes reaching the billions of dollars. When the stock price suffers as the result of poor ethics, it translates into a loss of investor confidence.
As we are in an era of heightened corporate social responsibility, a company cited for environmental issues or poor behaviors on issues such as diversity and inclusion, the organization becomes associated with such acts. If we consider the ethical dilemmas of how scandals damage companies, we need to also understand that the residual effects of unethical behavior can far outlast a problem that has been cleared.
Recovery is hardly immediate
To the point I made above, understand that recovery from poor ethics may take months, if not years to rectify themselves. People do not necessarily forget an unethical action and reputation suffers not only at the hands of past “customers” but the competition.
Let’s not forget that in a highly competitive world, any ethical misstep resulting in fines, jail sentences or even court appearances, will be seized up by the competition. The unethical act will be broadcast throughout the industry.
Of all the ethical dilemmas caused by unethical behavior, a loss of reputation may ultimately evolve into the most serious issue. Far easier to commit to impactful ethical training than to look the other way.
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