Business

Thursday March 5, 2009

Firms need to remain ethical

By EUGENE MAHALINGAM


Those cutting corners to make profits will lose in long run

KUALA LUMPUR: A company’s business ethics is the first casualty in an economic downturn, according to London-based Chartered Institute of Management Accountants (CIMA) president Glynn Lowth.

“Companies will try to cut corners, take short cuts or do anything just to achieve it (profits),” Lowth told StarBiz after the CIMA-IIM (Malaysian Institute of Integrity) Debate on Ethics 2009 here yesterday.

“I understand that going into tough times, it would seem better to take short cuts but in the long term, they would see that an ethical business would be a better business,” he said.

Lowth, who was one of the panellists at the debate, said there was evidence to suggest that companies would be more profitable if they conducted their businesses in an ethical manner.

Glynn Lowth

“We’ve done some works with the Institute of Ethics (a Britain-based organisation) and looked at companies that subscribe to ethical policies and found that they make more profits than companies that seem not to.

“Customers and business partners notice their ethical practices and would want to deal with them more. There is a better payoff by being more ethical in business,” he said.

The other panellists at the debate were CIMA Malaysia divisional president Chandra Mohan Balasubramaniam, Minority Shareholder Watchdog Group chief executive officer Rita Benoy Bushon and Telekom Malaysia Bhd group chief internal auditor Hashim Mohammed.

Citing scandal-hit Satyam Computer Services Ltd of India, Chandra said confidence in a company would be hampered if it was not seen to be performing in an ethical manner.

Quoting Montek S. Ahluwalia, the deputy chairman of India’s Planning Commission, he said: “Confidence grows at the rate that a coconut tree grows but falls at the rate that the coconut falls.”

Bushon pointed out that the element of ethics must be a top-down initiative for it to be effective. “The people at the top occupy a position of trust and they have a fiduciary duty to ensure that business is run in a proper manner.”

Hashim said company CEOs should be made accountable for decisions related to ethics as well as profits.

“Companies should consider remunerating their CEOs for ensuring good ethics just as how they are remunerated to ensure good profits,” he said.

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