Question

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1. Firms that fail to behave in an ethical manner can incur high costs. What are some of these costs and what is their source?
2. Identify a CEO (or any leader within a firm) whose leadership you admire. What is it about his/her skills, attributes, and effective use of power that causes you to admire that person?

Answer 1

Before diving into the costs associated with unethical behavior, it is important to understand what actually means. Simply put ethical behavior is about doing the right thing, it is more of a behavior than a reaction that should be followed at all times. Ethical behavior is something you do when no one is looking.

Having set the context of what ethical behavior is we can explore the costs incurred by firms that behave unethically. The costs include:-

• Increased risk to business in the form of loss of brand image in case of legal complications
• Increase in misconduct and conflict between internal stakeholders
• Lack of stability and predictability of business transactions
• Chances of bankruptcy as happened with Enron, as soon as the scandal was exposed, the company's stock price collapsed
• Costs associated with employee retention and hiring - Employees tend to leave companies which engage in unethical practices to further business which translates to higher costs of hiring people again and again

One of the companies whose leadership I admire is the most is Dell founded by Michael Dell, it is also one of the most innovative and ethical companies in the world as evaluated by Ethisphere - the global body for rating the most ethical companies. Dell is today one of the largest and the most reputed PC makers in the world only due to the perseverance and mission of Michale Dell who started Dell computers in the year 1984 with his own pocket money.

From the very beginning, ethics and moral behavior formed the foundation on which the company was laid. The company made it amply clear that they value integrity, honesty and moral conduct. Dell has been rated as the most ethical company for 5 years in a row which cannot happen just by chance and is an outcome of the strong leadership principles percolated from the senior management to all the employees, driven primarily by Michael Dell.

Being in the technology space where the company faces cut-throat competition, Michael always ensured that the company does not let its guard down in testing times and always maintained the highest levels of ethical and moral integrity and used it as a differentiator.

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