Ethics Fosters Innovation

In today’s business world, where global competition and global markets have created new problems for businesses to solve, innovation has become increasingly important.  And while most companies share in common the struggle to stay operational in this new, challenging market, some of those same companies are unwisely ignoring innovation and their long-term existence as respected businesses in favor of increasing profit margins through unethical practices.  Companies that ignore innovative business practices are ensuring their eventual failure.  Innovation is a must in today’s business world, and ethical business practices supporting a strong employee community are necessary to sustain innovation.

While innovation is a risky business strategy, it is essential for a company’s long-term survival, as Raymond Gilmartin, chairman, president, and CEO of Merck & Co., Inc. said in his speech, “Innovation, Ethics, and Core Values,” to the New Leadership: Visions for the 21st Century, Harvard Magazine/Conference Board:

Innovation as a strategy can be high risk.  But as a means to grow and compete in today’s global economy, innovation offers, I believe, the highest return…Adherence to the highest standards of ethical behavior and integrity inspires confidence and trust, both inside and outside the organization, and thereby helps to create the environment and support necessary to innovate.”[i]

Innovation is aided by ethical behaviors, which in turn foster a sense of community and employee desire to perform.

ETHICAL BEHAVIORS SENSE of COMMUNITY EMPLOYEE ENGAGEMENT INNOVATION HIGHEST RETURNS

A culture of innovation relies on a robust sense of community within a business.[ii]  Feeling secure to offer suggestions, advice, and criticism, and having a vested interest in the success of the business as a whole, enables employees to drive the improvement and brainstorming process.  Unethical practices degrade community cohesion, creating a sense of insecurity and uncertainty in the company.  When employees have a strong ethical code or sourcea to guide their work and to base their sense of belonging on, they are free to envision new directions.  However, when employees are unsure whether their company’s or their own practices are correct, they have no secure foundation to support that freedom.

Arthur Andersen
When a company chooses not to practice ethical behavior, innovation can further suffer as the company loses client and shareholder trust.  As can be seen occurring in many of the business scandals over the past two decades, unethical behavior, such as the deliberately falsified auditing carried out prior to 2002 by Arthur Andersen LLP for Enron, leads to the degradation of the entire company.  The Andersen firm dwindled from around 85,000 employees around the world to just 200 in Chicago who were wrapping up loose ends and closing down the company in 2005.[iii]

The company’s unethical practices led to obstruction of justice charges and ultimately the partnership’s demise.  Even without this legal barrier to their survival, the Andersen firm was already quickly failing due to the eroding trust of their current and potential clients.  Such business practices may serve a company for a short time, but when revealed to the media and public, an unethical company will find its financial standing quickly degrading. When this occurs, the company will have a much harder time selling or implementing innovations that the business and employees create.  It is difficult to convince stockholders on good ideas for change when they are already highly skeptical of your company’s motives.  Likewise it is difficult to sell new ideas or inventions when the public distrusts your products or practices.

In summary, innovation is hampered by unethical practices, while deep-seated business ethics bolster and improve a company overall, and specifically create an environment that is in incubator for new ideas and strategies.  By creating a strong community base and trust among both employees and shareholders, innovations will be more accepted and more forthcoming.  It is clear that ethical practices are a necessity for innovation, just as innovation is the key to success in today’s global market.

  • For Christians, the source of guidance is God, whose will and direction are made known in Scripture. Innovation is in many ways non-conformance to the status quo.  God’s holy word encourages us to be non-conforming:

“Do not be conformed to this world, but be transformed by the renewal of your mind, that by testing you may discern what is the will of God, what is good and acceptable and perfect” (Romans 12:2 English Standard Version).


[i] Gilmartin, R. V. (1999, January 15). Innovation, ethics and core values: Keys to global success. Vital Speeches of the Day, 209-214.

[ii] Pinchot, E. (n.d.). Can we afford ethics. Retrieved November 2, 2007, from www.pinchot.com: http://www.pinchot.com/MainPages/BooksArticles/OtherArticles/CanWeAffordEthics.html

[iii] Mears, B. (2005, May 31). Arthur Andersen conviction overturned. Retrieved November 2, 2007, from www.cnn.com: http://www.cnn.com/2005/LAW/05/31/scotus.arthur.andersen/

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