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Business LibreTexts

11.14: Ethics in Communication

  • Page ID
    48693
  • Learning Outcomes

    • Discuss ethics in communication

    American business woman and lifestyle expert Martha Stewart is famous for her recipes, her home decorating tips, and her jail time. In late 2001, Stewart avoided losses of about $45,000 when her broker came to her with a tip of “nonpublic” information. That tip motivated Stewart to sell ImClone Systems stock the day before it took a 16% drop in the market.

    That tip was an unethical communication. And unsurprisingly, Martha Stewart was tried and sent to prison for using that information to try to save her investment.

    Organizations have to manage sensitive information every day, whether it’s an employee’s personal tax information, news about financial results, or information about upcoming layoffs. Leaders are asked to treat such information confidentially, as leaked information can lead to an ethical issue, either within the company (internally) or for their customers and investors (externally)

    Any communication should follow these three ethical standards:

    • Honesty
    • Refrain from doing harm
    • Fairness to all stakeholders (internal and external)

    Honesty

    Honesty should be a feature of every communication, whether it is directed downward to employees, upward to management, laterally to other peers and departments, or externally. Facts and figures should be correct to the best of a preparer’s knowledge. Precautions should be taken to protect any sensitive information contained within.

    Honesty should also prevail when communicating goals, expectations, decisions, feedback, or judgments to employees.

    Refrain from Doing Harm

    Whether communicating on a corporate or an individual level, the communication should make every effort to cause no harm. For instance, tobacco companies are required to communicate that the practice of consuming their products may lead to physical conditions like emphysema or lung cancer. A company who is aware of a danger like that and doesn’t communicate it would be breaking this rule of ethical communication.

    Fairness to all Stakeholders

    When communicating internally or externally, the organization should attempt to be fair to its employees, customers, and community.

    If a manager were to exert inappropriate control over employees, stockholders or customers, this would be a violation of this standard. Price fixing, bribery, and insider training are examples of behaviors and communications that are exerting unfairness to stakeholders.

    Enron

    Sadly, there’s no shortage of examples where organizations making unethical decisions and creating unethical communications as a result. Take this very famous example of a corporate communications and activities gone wrong:

    Enron made a variety of unethical decisions that led to the demise of the company and the incarceration of several of its C-level executives. Let’s take the ones highlighted in this video one at a time:

    Thumbnail for the embedded element "The Enron Scandal Explained in One Minute: Corporate Recklessness, Lies and Bankruptcy"

    A YouTube element has been excluded from this version of the text. You can view it online here: http://pb.libretexts.org/obhr/?p=292

    Enron started losing money, and executives chose to hide it rather than admit their investment mistakes – An unethical decision that was followed, no doubt, by dozens of unethical communications, both to their employees, who were directed to disguise losses, and to external stakeholders, who read 10Ks and annual reports that suggested Enron was doing much better than it was. This definitely breaks the honesty and fairness standards. No harm has yet been done, but surely that’s to come.

    Media wondered if Enron was overvalued, which put pressure on stock prices, and insiders decided to start “cashing out” – Essentially, these insiders were doing exactly what Martha Stewart had done. The media was only wondering if the stock was overvalued, but, because they were aware of the lies being told, insiders knew it was overvalued. They decided to take their money while they could. Ultimately, the communications that led to these actions were not only lacking in honesty and fairness, but they’re about to do others harm: financial harm.

    Enron filed for bankruptcy – Now, 20,000 jobs have been lost, as well as employee pensions, etc. All the actions and communications that led to this moment violated all three of the ethical standards.

    It’s every individual’s responsibility to communicate and behave ethically in an organization. And any individual who knows that someone else is not behaving ethically needs to make a choice to either do the socially responsible thing by reporting it, or stay quiet. Unfortunately, many stay quiet, because they feel their careers will be in danger if they speak out. The ethical choice isn’t always the easiest, but usually it’s the best.

    CC licensed content, Original
    • Ethics in Communication. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC BY: Attribution
    All rights reserved content
    • The Enron Scandal Explained in One Minute: Corporate Recklessness, Lies and Bankruptcy. Authored by: One Minute Economics. Located at: https://youtu.be/jrEf8uabe7E. License: All Rights Reserved. License Terms: Standard YouTube License