There are several reasons that managers must be honest and ethical. First, lying doesn't scale. Anyone who wishes to grow his/her organization or interact with a growing array of people will not be able to remember which lies he told which people. As Richard Nixon once said, "You can only lie so far."
Secondly, you will retain your self-respect which will make you more confident. Also, you will set a precedent with you subordinates. You can not let your ethics slip and expect the rest of your organization to maintain good ethics. Compromised ethics will metastasize throughout your organization. Your employees are likely to think that you will be unethical towards them which will reduce their loyalty towards you. Finally, your competitors will know when you are lying or acting unethically which means that your clients will soon know about your lapses in honesty and your unethical business practices.
You must be a good judge of character when entering into a business relationship or making a hiring decision. While the terms of the deal may seem favorable at the outset, dealing with an unethical person will eventually backfire. You never know when such person will misrepresent the facts or your business, skim profits or falsify (expense or sales) reports. As Warren Buffett said, "You can't make a good deal with a bad person."
Nevertheless, when your back is against the wall and the survival of your company is at stake, you can't sacrifice your entire enterprise and the livelihoods of all who depend upon it, on the alter of political correctness. You cannot let the self-appointed guardians of ethics badger you into destroying your business. Business--by virtue of producing goods that people want and by paying people for services that they render to the enterprise--is in and of itself good. Do not subject yourself to browbeating by special interest groups that unfairly castigate you for not paying your employees more, hiring workers in developing countries and charging prices that the market will bear. Unbridled ethics mongerers have no responibility to employees, shareholders or the community. Adam Smith said, "Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience." In fact, much of the ethical hysteria is propogated by those who wish to clear their own consciences. As Carrie Bradshaw in Sex in the City suggested, "Those who tell their spouses about an extramarital affair do so to clear their own consciences and with no regard to the pain that such admissions inflict on their husbands or wives." You have to make difficult business decisions that affect the viability of your company and there is often no value added to having them opined upon by so-called business ethicists.
Sometimes you are confronted with a choice of bad alternatives. You have to choose the least of the bad alternatives. This is the predicament that Winston Churchill found himself in when you allied with Stalin to defeat Hitler. Churchill knew about the Gulag and mass executions ordered by Stalin. But he said, "If Hitler invaded hell I would at least make a favorable reference to the devil."
One day in 1955, Israeli Prime Minister David Ben-Gurion received a letter from a noted Israeli philosopher named Yishayahu Leibowitz complaining about innocent Palestinians at risk for being inadvertently killed in Israeli operations to root out terrorists. Ben-Gurion's reply? "Were all human ideals to be given to me on the one hand and Israeli security on the other, I would choose Israeli security, because while it is good that there be a world full of peace, fraternity, justice and honesty, it is even more important that we be in it."
At the outset of the Civil War, President Lincoln believed that it was absolutely essential that Maryland not join Virginia and seceded from the Union. Had Maryland actually gone to the Confederacy, the Union's capital would have been 75 miles inside of Confederate lines. This would have been an impossible situation as the White House, Treasury, Washington Navy Yard and other institutions of crucial importance to the Union would have been surrounded by the Confederacy. President Lincoln had Federal troops seize Baltimore and the state of Maryland. He also suspended habeas corpus privilege on points along the Philadelphia-Washington route. That meant Union generals could arrest and detain without trial anyone in the area who threatened public safety.
Still, David Ben-Gurion and Abraham Lincoln were extremely virtuous men. Without these men, two of the world's shining flames of democracy would have been extinguished. It is more important to safeguard wonderful institutions than to become a footnote of a failed enterprise in return from winning accolades from some "ethical pontificator".
