Do Unethical Practices Create Or Destroy Value?

Certainly the answer depends on your point of view. And for whom you are trying to create or destroy value. You could be trying to create value for your company or destroy value for your competitors (colleagues and companies). But your point of view may not be right or ethical.

Definitively, unethical practices and corruption are not correct nor acceptable. They may be convenient. They may be a short cut to ‘success’. They happen because of greed, or laziness or a combination. Sometimes, it is inherent in the character of the executives or the company (read owners). Sometimes executives are pressurised to bend the rules or the law.

Sometimes executives bend company rules, by allowing their employees to take special privileges when the rules do not allow it. As simple as flying when only train tickets are allowed. Or letting the wife travel to a destination where the husband is, instead of his coming home (no extra cost to the company, no harm done). These are minor infractions. Often overlooked. Judgment is required in these (minor) cases.

The major problem is one of being involved in corrupt practices, such as making pay offs for getting contracts, or getting ahead. No one will admit this is correct but hide behind we have to do it, others are doing it, or we have to get ahead, or it is convenient to do so; it happens because of not caring enough, a chalta hai attitude or just being cussed.

My belief is that if businesses, owners and executives decide to fight unethical practices through associations and the press, they will be successful, and value will be created for the larger population than just for the corrupt. It is interesting to read what J. Vinayan in IMJ wrote:

‘Incidence of corrupt or unethical behaviour in an organizational setting is not fortuitous. Whether we are looking at corruption in the HR function or in any other function, it is very often institutionalized, well rationalized and entrenched in the system. Extortion and bribery are much more profitable and entail much less risk when they are organized and disseminated. The vertical and horizontal integration of corruption (at different levels and in different offices) makes for optimal return, reduces the likelihood of being caught and facilitates protection. In addition, corruption is contagious: it creates complicity, it acts as a “demonstration effect” vis-a-vis the other organizational members, provides information about opportunities and the means to exploit them, and creates an atmosphere of impunity. In the end, individual corruption may degenerate into a general situation of favour-currying, subservience, and “protection.’

If the corrupt can gang up, why cannot the non-corrupt?  Are we ninnies, or complacent or at heart, corrupt? Or we just don’t care, and enjoy being bullied and lorded over by corrupt people?

One step is for companies to draw up ethical behaviour rules and enforce them. Industry associations must start programs to fight corruption and corrupt people as a group. It is important for executives not only to know what is right but to do the right things.

A Starwood study suggests that 99% or executives think they are honest.

82% cheat at golf

82% hate those that cheat at golf

72% believe golf and business behaviour parallel each other

Ethical behaviour not only pays, it is the right thing to do and essential to a productive, fair and virtuous society, to paraphrase Archie. B. Carroll in his book, Business Ethics. In reverse, see the cost and destruction of value of unethical people to thousands of employees and society of Tyco, Enron, Arthur Andersen and Indian companies you all can name.

Customer loyalty and trust are linked to the Values of a company and their ethics. Create Value, not destroy it.

Would love your comments and help. We are happy to help others in education and executive education on courses in Value Creation.


Gautam Mahajan,
President, Customer Value Foundation and Inter-Link India

Founder editor, Journal of Creating Value
K-185 Sarai Jullena, New Delhi 110025
+91 98100 60368, 011-26831226

Twitter @ValueCreationJ

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

Explore posts in the same categories: Business & Management

2 Comments on “Do Unethical Practices Create Or Destroy Value?”

  1. The ethical dimension of corruption is very important, as free cash become an addiction. From a business perspective corrupt practices defocus the perpetuators from building value for the business to bringing value for themselves. Eventually not focussing in creating value for the customer destroys the business. We have so many instances littered across all spheres around us.

  2. Dear Mr Mahajan,
    Rightly said. Unethical behaviour never pays off in the long run. This however is something which many executives and employees tend to ignore as trivial. I have, in my several years of third party auditing experience, seen many such organizations who knowingly compromise ethics and justify their actions. On the other side of the spectrum, have also seen extremely ethical approaches, albeit, far & few.
    A country doesn’t become great merely on its economic might and infrastructure but on the strenght of quality of its people. We as a country must strive to weed out corruption and have zero tolerance to unethical practices, particularly which erode value.

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