Economics of ethics — Ethics expert presents on the cost of unethical corporate behavior

When people don’t trust each other, it becomes very hard to work together, said Kristy Grant-Hart.

Kristy Grant-Hart, ethics expert at the UI college of business and economics, presents on the cost of unethical corporate behavior October 30 in the Administration Auditorium.

Grant-Hart, international compliance and ethics expert, presented on the economics of ethics in business at the annual ethics seminar by the Allen/Deloitte Ethics and Leadership Initiative and UI titled “The Economics of Ethics and Integrity: What’s It REALLY Worth?”

Grant-Hart works with companies as an ethics consultant, specializing in anti-bribery and anti-slavery issues.

She said unethical behavior can cost a corporation.

Tesco, a British grocery chain, was embroiled in a series of scandals that eventually cost them –   $13.5 billion just from the company’s declining reputation, she said.

“A lot of senior executives who grew up before social media don’t get it,” Grant-Hart said.

She said cost comes in the form of fines too, such as Wells Fargo, who was fined $185 million following an investigation into an incentive structure that lead the company to create accounts for people without their authorization.

“One of my clients is a huge international tech company. I was working with them when they found a $20,000 payment in Russia. They did the right thing and investigated,” Grant-Hart said. “That investigation cost them $8 million in legal fees.”

She said if a company didn’t have a history of unethical behavior, it wouldn’t have to investigate every little thing — trust speeds up work and lowers costs.

“You have to be careful to make sure what you say and what you do are congruent,” she said.

Generally, Grant-Hart said people don’t think that is the case for their company leaders — only 36 percent of employees believe their leaders act with honesty and integrity.

“On average, the whistleblowers who call the government have already called their company three times,” she said.

Uber had over 600 sexual harassment complaints that were ignored prior to federal investigation. However, she said being ethical has a cost too.

She said complying with ethics laws, such as the Sarbanes-Oxley Act, an accounting reform law, can be very expensive. But over time, strong trust in every direction is a net gain.

She said there are many emotional benefits of acting with integrity — distrust creates anxiety and transparency increases trust to make for better employees.

Nishant Mohan can be reached at arg-news@uidaho.edu or on Twitter @NishantRMohan

 


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