Why acting ethically is good business.

In my corporate finance classes I always make a point to stress that in the absence of large information asymmetries, acting ethically is generally also acting in shareholders' best long-run interests.

Why? Because the market place is a hard disciplinarian and few people (customers, suppliers, or investors) want to do business with firms that are not acting ethically.

Consider for a second, if you knew XYZ company was dumping toxic wastes, would you willingly do business with them when there are alternatives? MBA Depot (which incidentally is just a great site) provided a bit more evidence on this topic this week with a 2003 paper by Montgomery and Ramus, they conclude:

"more than 97% of the MBAs in the sample said they were willing to forgo financial benefits to work for an organization with a better reputation for corporate social responsibility and ethics."

Of course any survey is at least somewhat suspect and it is easy to say one thing and do another, but 97% is a pretty high number! It is also pretty encouraging!