Do Business Ethics Still Matter?

Do business ethics still matter?   I never thought I would be asking such a, seemingly heretical, question.  The thought of businesses operating without a system of moral and ethical beliefs to guide them is, well, it’s frightening.  Chaos would seem to be the logical outcome of such an environment.  Since our economy is not in a state of total disorder, why am I asking this question?   I ask it because I continue to see examples of companies whose questionable cultures and/or activities are being rewarded rather than penalized.

Have we reached the point where there really is no such thing as bad publicity?  Have short attention spans made bad behavior irrelevant?

Take the case of Facebook. On March 17^th of this year, it was revealed that Facebook had allowed Cambridge Analytica to harvest personal data from over 85 million of its subscribers.  The world, it seemed, was outraged.  The FTC launched an inquiry.  Congress summoned CEO Mark Zuckerberg to answer questions.  Subscribers were aghast, some even cancelling their accounts.  News outlets predicted that Facebook’s stock price would suffer.

It did suffer slightly . . . for a few weeks.   Facebook’s stock closed at $185.09 the day before the scandal. Fifty five days later, an extended time-out if you will, it once again exceeded that price, closing at $185.53.  So, where is the deterrent to unethical business conduct?  Apparently, it’s not coming from Wall Street.

Yet, that’s not how “the system” is supposed to work. Consider this excerpt from a March 31, 2018 Investopedia article entitled, “Why is Business Ethics Important?”  It describes a very different investment community:

“The reputation of a business in the surrounding community, other businesses and individual investors is paramount in determining whether a company is a worthwhile investment. If a company is perceived to not operate ethically, investors are less inclined to buy stock or otherwise support its operations.”

Facebook may be an extreme case but other recent ethical under-performers, such as Wells Fargo and Volkswagen, have rebounded relatively quickly from their stock price “punishments.”  It would seem that the public, or at least the investing public, has a short memory.  Or, have these companies, all of which are “too big to fail,” now become “too big to be held truly accountable for ethical failings?”

Who knows?  I have no firm answer to the question that heads this blog.  I sincerely hope that business ethics still matter but, to modify a topical cliche, “Don’t investment bank on it.”