Commonalities in thriving companies
In 2006, Siemens, a Germany company with a long history and a reputation as being one of the world’s most important technology brands, brought itself enormous shame through a highly publicized corruption scandal. Its executives were charged with creating slush funds worth 460 million euro ($575 million) to bribe politicians and public institutions in countries the company did business with. The damage was colossal. It lost billions when its stock price plunged, it was levied heavy fines and its good name was tarnished. Most of all, it was shunned by the people of its own country.
Its new CEO, Peter Loscher, promised a “cultural revolution.” New corporate standards to prevent corruption were carried out. Employees willingly participated and obliged with restructuring endeavors. Their determination and sincerity touched Germans, and consumers began to place faith in the company and the brand again. Siemens today continues with its anticorruption campaign and is deemed as one of the cleanest companies.
Its turnaround underscores the importance of ethical management. A successful company can easily lose public confidence and fall from grace if it is found with unethical practices. Ethics have become a key virtue for corporate sustainability and viability.
I have been contributing to enforcement of ethical management through ombudsman activities at Korea Midland Power, one of the state power operators. The role of a cleanliness ombudsman is to offer supervision and evaluation in major projects and corruption-prone areas as a third eye. It also recommends and advises areas to improve on in the system, practices and operations.
The company, whose goal is to build its name as a “global ethical company,” has revised its ethics code, improved its website to offer easier accessibility and strengthened ethics education for employees. Participation from employees is crucial. Ethics must be practiced in everyday life and function as a normality. Ethics should be valued just the same as the corporate name.
Investor guru Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” It is a thought to ponder on.
*Heo Shik Professor at Chung-Ang University School of Economics