It May Be Legal, but Is It Ethical?

It's the holiday season and with it comes a familiar sight at American front doors - the brown-clad United Parcel Service driver, whose strike "victory" over the behemoth company cheered the hearts of millions.

The UPS drivers are delivering more than holiday packages. By their presence, they are a reminder that the legal and financial merit of a company's position may matter little in the court of public opinion, and that a company's reputation may rise or fall on how it handles sensitive human resources issues.

By and large, the American public didn't believe that UPS treated its part-time workers ethically, by paying them less than full-time workers for the same work. Faced with that kind of public sentiment, UPS was forced to yield to Teamster demands.

Too often, companies miss the ethical viewpoint. Assured by their lawyers that their stance is legally correct, or by their accountants that their position is fiscally sound, executives dig in. But they're making a mistake.

Today, a company has to pass two tests: First, are its actions legal? That's for the court to decide. If so, are they ethical? The public will be the judge of that.

People quickly form opinions about individual companies, and about the business community in general, by applying a universal set of values to others' actions. Ethical reasoning isn't complicated. Typically, if behavior doesn't meet the "smell" test, it stinks.

For example, there's nothing illegal about a Disney executive collecting $90 million for 14 months of work, or JWP Information Systems firing an employee who missed work to care for a sick child, just as there's nothing illegal about companies firing employees who have no written contract or union protection.

So why should any company care about what the public thinks? Because public opinion is an important gauge for managers to use in spotting trends and anticipating the future, so their companies can succeed. Trends in marketing, product cycles, and consumer tastes usually are easy to spot, although business history is littered with glaring examples of corporate blindness. But today human brainpower is our most important economic resource. Trends that affect employee loyalty, retention, productivity, and behavior, therefore, are just as important as marketplace issues. As UPS found out, customers often form their opinions about a company based on their perception of how it treats its employees.

There's another reason to pay attention to ethics. Companies that treat employees with consideration create a climate that nurtures ethical behavior within the organization. The opposite also is true. In a recent survey by the Ethics Officer Association, about half of more than 1,300 employees surveyed admitted to engaging in unethical or illegal behavior, citing pressures of work, family demands, and frustration with the company.

But this statistic will change as company cultures change. In the last few years, the trend in this society has been toward a public reaffirmation of values. Words such as "responsibility," "family," and "respect" have taken on important meaning to most Americans, while the level of cynicism toward business grows.

Company executives who celebrate their righteousness over employees should look around. They may be missing the movement toward ethical treatment of employees, which is helping enlightened companies win in the court of public opinion and in the marketplace.

For a positive example, executives need look no further than those same UPS drivers, many of whom will be delivering colorful jackets and shirts made of Polartec, from such mail-order retailers as Lands' End and L.L. Bean. The story of Malden Mills, maker of Polartec, is a reminder that ethical treatment of employees breeds financial rewards.

When Malden Mills burned down two years ago, its president, Aaron Feuerstein, continued to pay his mill workers during the months it took to rebuild. He wasn't legally required to do it - and it wasn't in his short-term financial interest - but, as he explained, his own core moral values would permit nothing less.

The resurgent success of Malden Mills proves that Mr. Feuerstein's decision also made good business sense. It is a lesson for all executives.

* Dawn-Marie Driscoll is an executive fellow at the Center for Business Ethics at Bentley College in Waltham, Mass. W. Michael Hoffman is the executive director of the center. They are co-authors with Edward S. Petry of 'The Ethical Edge: Tales of Organizations That Have Faced Moral Crisis.'