When it comes to motivation, business is quick to resort to a sweeter carrot or a sharper stick. But science says: tap into the drive for autonomy, build on the desire to master what we do, and create a purpose – something larger than the individual self – and you’ll bring out the best in people.
I find this true with compliance and ethics programs. Yes, it’s true, the program must state the law and the requirement to abide by the law. But it shouldn’t stop there. It should also focus on principles and the ability to self-govern by higher principles.
What’s the rate of return on an ethics and compliance program? How can you place a dollar value on an improved reputation? I haven’t seen a way to measure this. But one can look back in time at a few statistics. This is what Vivek Wadhwa did in an his article in Business Week entitled Why Be an Ethical Company? They’re Stronger and Last Longer. Here are the statistics:
Of the original Forbes 100 in 1917, 61 ceased to exist by 1987. Of the remaining 39, only 18 stayed in the top 100, and their return was 20% less than the overall market during the period from 1917 through 1987.
Of companies in the original Standard & Poor’s 500-stock index in 1957, only 74 remained in 1997; of these, only 12 outperformed the S&P 500 in the period from 1957 through 1998.
The average CEO tenure in the U.S. is 4.2 years, less than half the 10.5-year average in 1990.
Which companies survived? The hypothesis is: companies with ethics. Mr. Wadhwa points out that companies like Charles Schwab and US Bancorp aren’t struggling in the current economy because they didn’t go after the quick money of mortgage-backed securities. Companies like Costco aren’t hurting because they pay their employees well and they don’t have a CEO with a huge paycheck. These companies place their values over the quick buck.
Mr. Wadhwas concludes:
The moral here is fairly simple: When a company’s ethical compass is pointing true north, everything else falls into line. This isn’t to say that companies with great ethics don’t fail. But it does seem to indicate that companies without good ethics are far more likely to fail due to their inability to sustain or hear an inner voice to guide them through the dark times to the light.
I don’t think it takes statistics and measurements to come to this conclusion. We all inherently understand this. But it can be difficult to implement.
