It’s a complex business world we live in. Information is available in detail, formats, and sources unheard of only 10 or 15 years ago. Suppliers bring new products and services to market at a lightning pace, while government overwhelms us with new laws and regulations by the hour.

Doing business in such an environment makes it important for managers to know the company’s code of ethics, both internally and as it pertains to supplier relationships. Also, it’s important to know the code’s precepts are available to (and reviewed by) all suppliers.

Defining Ethics

Dictionary definitions of ethics vary to some extent, but are generally similar. According to Merriam-Webster’s dictionary, ethics are “the discipline dealing with what is good and bad and with moral duty and obligation.”

Business ethics can be defined as ethical rules and principles within a business or commercial context. Most businesspeople understand the overall requirements of ethical conduct when conducting business — much of it is common sense — and many of them must sign ethics agreements.

There are specific areas of business activity that lend themselves well to establishing a code of ethical conduct. These areas include information, reciprocity, conflicts of interest, equal opportunity, competition, communication, and gifts and entertainment.

Any ethics agreement should, at the very least, address each specific area of business activity, in light of both the company’s and supplier’s ethics codes. Thus, the first step in the negotiation and creation of an ethics agreement should be for both the company and the supplier to find common ground and discuss their respective codes of ethics.

✔ Keep Information Private

The information revolution has gone well beyond anything a fleet manager could have dreamed of only a few years ago. Documents are in electronic form, and can be accessed anywhere in the world. Written letters and memos have become e-mails, tweets, and blog entries, and the information contained in them is open to just about anyone. Such information, as it pertains to fleet relationships, can include rates and pricing, credit and financial information, business plans, and even personal information.

Here are examples of ethical violations on both sides of the fleet “desk”:
A supplier provides a customer with a price quote for the continuation of a recently expired contract, hoping to keep the customer from bidding the business out. In an attempt to do the best job for the company, the fleet manager is tempted to “shop” that bid to other suppliers, knowing they would be willing to undercut the price to take the business. There is nothing illegal about bidding out, unless the customer is bound by a confidentiality agreement of some sort, but it is highly unethical. The supplier provided the price quote in good faith, and has a reasonable expectation of confidentiality and privacy in dealing with the customer.

On the other side, consider a situation where the supplier is visiting the customer, and, during a moment when the customer is distracted or away from his or her desk, the supplier notices a memo containing pricing from another supplier sitting on the customer’s desk. Again, the supplier has not acted illegally by glancing at the memo, and perhaps the fleet manager should have kept such a memo more secure, but it is certainly unethical for the supplier to write down or retain the pricing that he or she knows should be confidential.

Thus, an ethics agreement should cover the handling of information, in any form, by both the fleet and the supplier. Both parties should agree to keep all correspondence (hard copy or electronic), communications, pricing, financial or credit information, and anything else related to the business relationship completely confidential.

Specific mention should be made of data. Today, suppliers capture and provide data to their customers at unprecedented levels. In the past, such data might be entered into and maintained on site by the customer; however, today an increasing amount of data exists on supplier servers and can be accessed via the Internet. The agreement should require the supplier to keep data confidential and agree to provide it to the customer on demand.

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✔ Reciprocity Can be a Gray Area

Reciprocity refers to a questionable business practice where there exists a quid-pro-quo, on either side, for the provision of goods and/or services or the awarding of business to a supplier. If, for example, a company produces and sells widgets, and a fleet supplier uses widgets, reciprocity would exist where the fleet awards the business to the supplier in return for the supplier purchasing the company’s widgets.

Making the purchase of a product or service dependent on reciprocal transactions, again, is not illegal, but is of questionable ethical character. This does not mean a supplier or customer cannot consider reciprocal business. If the product or service is needed, and the pricing competitive, there is nothing wrong (or unethical) about buying it. But, making the entire relationship contingent upon such transactions is unethical. An ethics agreement should at least mention reciprocity and the circumstances when (or if) reciprocal business is acceptable, expressly prohibiting any quid-pro-quo for either party.

✔ Avoid Conflicts of Interest

Conflicts of interest exist where the actions of an individual or organization call into question the ability of that individual or organization to act fairly or perform the job objectively. From a business ethics perspective, most conflicts of interest occur internally, such as when an employee does work that conflicts or competes with an employer, or having a financial interest in a company that does business or competes with an employer.

But, there can be circumstances where a conflict can exist between a fleet and a supplier. These can range from accepting compensation when speaking at a meeting or conference sponsored by either party, right up to personal relationships with an employee of the supplier or the fleet.

✔ Ensure Equal Opportunity

Both the fleet and supplier should be committed to providing equal opportunity, according to the law. Ethical transgressions may arise when either party specifies that a certain group, including racial, religious, political, or even gender may not be involved in the relationship. Although ethics violations of this nature are quite rare today, it is still important to include a commitment to equal opportunity and non-discrimination in the agreement.

✔ Allow for Open Competition

All business should be transacted in an environment of open competition. Neither the company nor the supplier should act in such a way as to limit or eliminate such competition within the supplier/customer relationship.

For example, a supplier representative who recently joined the company may have signed a non-compete agreement with his or her former employer. Such agreements may go so far as to prohibit that representative from contacting or dealing with the former employer’s customers — and one of those customers might be the fleet.

The ethics agreement should require both parties to provide full disclosure of any prior or existing relationships that might stifle free and open competition.

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✔ Communication

Because communication today is conducted on so many levels and in so many forms, the ethical treatment of communication merits separate treatment in an ethics agreement. Businesses communication 30 years ago consisted primarily of telephone calls and written correspondence. This evolved to include faxes, followed by e-mails, and today encompasses text messages, tweets, and a host of other forms of instant communication. The misuse of any information received through these methods crosses ethical lines.

Fleets are in constant communication with their suppliers, and this includes not only fleet managers and their staffs, but drivers as well. It is the extent and volume of communication that makes its inclusion in an ethics agreement important.

Communications between a fleet and supplier often includes confidential information, such as e-mail attachments with pricing or credit data, even personal observations and criticisms.

A letter, memo, or other form of written or printed communication could be shredded or simply thrown out. An e-mail, unfortunately, is “forever.” Deleting e-mails does not cause them to cease to exist.

An ethics agreement should reference all forms of communication — verbal and written — and require that all of it remain between the supplier and the fleet, be confidential, and not be shared with anyone outside those directly involved in the relationship.

✔ Gifts & Entertainment Ethics

There are only a few areas in business that provide more fertile ground for ethical dilemmas than gifts and entertainment. Both are an accepted part of doing business and will continue to be for the foreseeable future. There is nothing wrong with a supplier expressing thanks for a fleet’s business via a gift or some form of entertainment or vice versa.

The most common form of entertainment is that of a supplier taking a customer to lunch (or another meal) during a visit, and, certainly, no supplier is expecting to retain business based upon a meal. As for entertainment, it can take any of a number of forms — tickets to a show or a ball game, for example. Again, there’s nothing very questionable here.

Where gifts and entertainment can cross the ethical line is when either goes beyond what the company might consider de minimis in value. Providing a ticket to a ball game is one thing; purchasing a luxury box at the Super Bowl is quite another. Inviting the customer to a supplier function, no problem; paying for their travel expenses might be. The ethics agreement should provide both parties with clear limits as to what is acceptable and what is not. Cash, for example, is taboo.

Reviewing Ethics in Business

Negotiating an ethics agreement at the outset of the relationship is a good way to help avoid conflicts and provide both parties with clear ground rules as to what is acceptable and what is not. Doing so will provide the peace of mind that helps a relationship be more beneficial for all parties.

Originally posted on Automotive Fleet

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