Trust, triumph and tomorrow: Building a future-proof business empire
In the dynamic landscape of contemporary business, where competition is fierce and the pursuit of success often relentless, maintaining ethical standards may seem like a secondary concern. Is it?
I have had the good fortune to advise and interact with world-famous business leaders, Fortune 500 CEOs and billionaire business owners. The one thread that runs through them all is: the ones who succeed long term are the ones who adhere to high ethical business standards; who emphasize the long-term benefits of holding one’s word, honoring contracts and eschewing unethical practices.
Your reputation is priority No. 1
In business, the most important thing you will ever have is your reputation. Founders know this very well. My team and I work a lot with self-made founders of conglomerates as well as with multigenerational families. The founders always know that their word is gold because they built the business from the ground up. Founders have to be trustworthy, otherwise people would not do business with them. They usually do not have a great name yet when they start out.
As soon as it gets to the second generation, that mindset and those ethics have to be taught and passed on. They do not come naturally. Entitlement, a life of comfort and the natural respect that comes with the great name the founders worked so hard to build for the family often stand in the way of proper business ethics.
When you start breaking contracts with one person, then everybody starts to say about you: “Contracts don’t mean anything to him or her.” So they either start breaking them with you or they don’t want to have them with you.
And sooner rather than later, this spreads like wildfire through the business and online community.
The foundation of trust
Trust is the currency of business, and its foundation is laid on the bedrock of ethics. Imagine a scenario where a business owner fails to honor a commitment or breaches a contract for short-term gains. While such actions may yield immediate benefits, they erode the trust that stakeholders, including customers, employees and investors, have placed in the organization. Once trust is compromised, it becomes an arduous journey to rebuild, if not an impossible task.
One pertinent example is the Volkswagen emissions scandal that unfolded in 2015. The German automaker, known for its reliability and innovation, faced severe repercussions after it was revealed that the company had installed software to manipulate emission tests. The immediate financial gains were overshadowed by a tarnished reputation, legal battles and a substantial loss of consumer trust. This case serves as a stark reminder that unethical practices, even in pursuit of short-term gains, can have devastating consequences.
The ripple effect on reputation
Reputation is a delicate entity, painstakingly built over time but easily shattered by a single unethical act. For business owners and CEOs, the long-term success of their ventures hinges on the public perception of their integrity. Consider the case of Enron, once lauded as a paragon of innovation and success in the energy sector. The company’s rapid demise in 2001, fueled by fraudulent accounting practices and unethical conduct, not only resulted in financial ruin but also stained its legacy forever.
In contrast, companies like Patagonia and The Body Shop have thrived by embodying ethical practices. Patagonia’s commitment to environmental sustainability and fair labor practices has become a hallmark of its brand, attracting a loyal customer base. The Body Shop, founded on the principles of cruelty-free products and fair trade, has consistently positioned itself as an ethical leader in the cosmetics industry. These examples highlight that ethical conduct not only preserves but enhances a company’s reputation, creating a positive ripple effect that extends to customer loyalty, employee satisfaction and investor confidence.
Long-term vision and stakeholder value
Business leaders with a long-term vision understand that success is not measured solely in quarterly profits. Ethical practices contribute to the creation of sustainable value for all stakeholders. When CEOs prioritize ethical behavior, employees feel a sense of purpose and commitment, resulting in increased productivity and reduced turnover. Customers, in turn, become brand advocates, and investors gain confidence in the company’s ability to weather challenges with integrity.
One remarkable example is the commitment to ethical sourcing by Starbucks. The coffee giant has consistently emphasized fair trade practices, ensuring that coffee farmers receive a fair price for their produce. This commitment has not only strengthened the company’s relationship with coffee-growing communities but has also resonated with consumers who prioritize ethical consumption. Starbucks’ ethical stance has become a cornerstone of its brand identity and a driving force behind its sustained success.
Building a culture of ethics
For business owners and CEOs, instilling a culture of ethics is not merely a matter of compliance but a strategic imperative. The tone set at the top reverberates throughout the organization, influencing the behavior of every employee. Enron’s downfall was not just a result of a few individuals’ unethical decisions but a manifestation of a toxic culture that permeated the entire organization. Conversely, companies like Google, which famously adopted the motto “Don’t be evil,” emphasized ethical behavior as a core value, shaping the company’s ethos and guiding its decisions.
Reality always catches up with you
I was invited to attend a philanthropic gathering of a multibillionaire family in Germany that is at the helm of one of the largest conglomerates in Europe. This family is using the gathering to portray itself as a great benefactor. They invite many luminaries, authors, artists and heads of state. I was utterly surprised to hear that they were not actually paying for any flights or accommodations or costs of any of the attendees. “No, no,” the head of the foundation said, “We do not pay anything. The attendees should be honored enough to be invited by the family; they should pay for everything themselves.”
Another example was the wife of a European billionaire entrepreneur, portraying herself in the European media as a glorious philanthropist. In reality, the only thing she was doing was funding a small orphanage in Manila with a few kids. Better than nothing, for sure, but her husband disposes over billions of dollars. The cost of upkeep of that orphanage was ridiculous compared to the funds they possess and the media image she was cultivating.
When both of these cases came into the mainstream media, the blowback was huge. Remember: Customers and business partners can leave you in a heartbeat. Holding one’s word, honoring contracts and eschewing unethical practices are not mere moral imperatives. They are strategic decisions that pave the way for sustainable success. INQ
