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Business Ethics : Business Essential Organizations

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Question:

Describe about the Business Ethics for Business Essential Organizations.

 

Answer:

A business ethics program is essential for any organization. It helps to establish the identity of a company. A business ethics program must be such that the values of the organization reach a wide range of stakeholders. For an effective ethics program, special emphasis must be laid on elements like high commitment level by the board of directors and executive management and statement of the fundamental values of the company. An ethics program must have ethics orientation training for the employees. There must be proper communication between the management and the target audience. The program must have the capability to investigate in case of any allegations and wrongdoings. Also, there must be a formal reporting, operation and implementation of the ethics discussed in an ethics program. Moreover, there must be audits periodically by external and internal auditors.

In order to carry out an effective ethics program, the company must establish procedures and standards to detect and prevent criminal conduct. The board of directors or the governing authority must exercise oversight and assign overall responsibility to the personnel at high level. Along with conducting ethics programs, it is important to provide a confidential reporting of the activities, enforce and promote the program, and respond to the detected criminal conduct so that any further criminal activity can be prevented (Kaptein 2015).

Corporate social responsibility is defined as the self-regulation that is integrated in to business model. CSR policies are self-regulatory mechanisms. Corporate social responsibilities include management of waste so that pollution is reduced. In involves contribution to programs of education and society. On the other hand, business ethics is a kind of professional or applied ethics. It examines the morality or ethical principles or ethical problems that may arise while running a business. Business ethics is the conduct of an organization and refers to the values or standards that the organization practices (Rossouw and Vuuren 2010).

While social responsibility is the responsibility of a company towards the society and environment, business ethics is the conscience of what is good or bad. Things like honesty, keeping promises, integrity, loyalty, respect, fairness, obeying laws, accountability, caring, and respecting are business ethics. Efforts to make environment cleaner and greener, philanthropy, volunteering, and treating employees in a fair and ethical manner is social responsibility (Servaes and Tamayo 2013).

Business ethics is important for a business as it helps to build customer loyalty, retain good employees, creates a positive working environment, and keeps legal problems away. Unfair treatment of consumers would drive them away. If dedicated and good workers are not rewarded, they would soon leave the company. Business ethics must be employed not only by the management but also by the employees. Conducts like theft and fraud are detrimental for both the company and employees and must be completely avoided.

 


Individual factors like values, morals, knowledge, personal goals, and personality affect the ethical behavior of a person within an organization. More knowledge about a subject would prompt a better ethical decision. Lack of an appropriate knowledge may lead a person to an unethical path. Values are the standard or judgment of an individual. Lying to achieve success or win contracts are deemed as unethical and is a wrong way of running a business. Morals of a person also influence the ethics of an individual.  Morals are developed by people because of cultural norms and these cultural norms affect ethics largely. Pushing a person to buy a product that would not be beneficial is not a sign of good morality and hence not ethical. Lastly, an individual’s personal goals affect the ethics of a workplace. If a person’s only goal is to acquire money without thinking about the consequences, the act is unethical. Also, the personality is an important factor in determining the ethical conduct of a person at work. People with a tendency to take more risks tend to be unethical (Ferrell and Fraedrich 2015).

The behavior and personality of the manager, reward system, selection system, explicit policies and rules, and the kind of values adopted within the organization are some of the organizational factors that affect business ethics (Carroll and Buchholtz 2014).

White collar is a crime committed by government and business professionals. First defined in 1939 by Edwin Sutherland, white collar crime is “a crime committed by a person of respectability and high social status in the course of his occupation.” Crimes like labor racketeering, bribery, identity theft, forgery, Ponzi schemes, cybercrime, embezzlement, and fraud are some of the white collar crimes (Piquero and Clipper 2014). Research says that people with antisocial personality disorder or narcissistic issues generally indulge in white collar crimes. Such criminals start with smaller crimes and eventually commit larger crimes. Excessive self interest leads people to commit white collar crimes. White collar crimes are thus mostly psychologically induced crimes. Such criminals deem misconduct as a route to success. Moreover, excessive desire to increase profitability and corporate efficiency lead individuals to white collar crimes. Illegal dumping of waste without any management is also a crime. Companies try to escape such waste management system as it is not cost effective. They are unable to accept the responsibility for their actions (Levi 2013). Mostly fraud and misleading advertisements are designed to increase profits and disable competitors.

There are two types of stakeholders to which a company must owe a degree of social responsibility. Stakeholders can be categorized into primary and secondary stakeholders. Primary stakeholders are the internal stakeholders and engage in the economic transactions of the business. It comprises suppliers, employees, creditors, and customers. Secondary stakeholders on the other hand, are external stakeholders who may not engage in economic transactions directly. Communities, business support groups, media, activist groups, and the general public are the secondary stakeholders (Harrison and Wicks 2013). A company must be responsible to both the primary and the secondary stakeholders as the action of the company may affect these groups both directly or indirectly. Companies must show their responsibility towards its employees for they are the most important stakeholders of an organization and contribute their expertise and labor to an organization. Employees are directly involved with the growth of a company and hence must be given most priority. The board of directors, stockholders, partners, donors and funders are some of the other important stakeholders of an organization. Stockholders are also one of the most important and powerful stakeholders as they own the shares of the company. They are economically involved with the company. They have the right to buy or sell shares, obtain dividends when declared, nominate directors, vote for the directors and keep the assets after liquidation. Though secondary stakeholders are not directly involved with the economy and finance of a company, they are essential and may impact a company largely. Environmental activists and general public for instance, may oppose the actions of a company if it violates environmental rules and harm the ecological balance. Such protests are a negative publicity and generate ill will for the company (Bourne 2016).

Bribery is one of the major tools of corruption and is used by individuals and companies around the world to buy things or contracts or labor. Bribery is considered a sin and has different names in different countries. For instance, it is named la mordita in Latin America, baksheesh in the Middle East, bustarella in Italy, hai go or hung pao in Hong Kong, dash in some parts of Africa, pot de vin in France and schmiergelder in Germany.” (Rose-Ackerman and Palifka 2016). It is a concept argued by many organizations and individuals that companies are not expected to adhere to ethical practices in places where corruption and bribery is very high. In most countries, it is very common to bribe government officials, locals, and other stakeholders to negotiate contracts and deriving the best out of them. In some countries, bribing agents is very much acceptable. Those who employ the agent may disclaim responsibility at any moment. In some other countries, government officials and general public accept bribe as they are not paid adequate salary. In such situations, people are bribed to induce them to do what they must do. This kind of bribery also called grease may take the form of extortion. Maintaining secrecy while payment is also a kind of bribery and is considered improper. The definition and intensity of bribery thus varies from country to country depending on the ethical standards of the population, their economic standards, and society in which they live. Implementation of a worldwide legislation and regulations and a strict implementation of those rules may reduce this form of corruption to some extent (Cuervo-Cazurra 2016).

 


Corporate governance can be defined as a system of rules and regulations, processes, and practices employed by the government to control and direct the company. It mostly involves balancing the interests of the stakeholders such as management, shareholders, financers, community, government, and customers. Corporate governance provides a framework to a company for obtaining its objectives. It encompasses internal controls, management system, action plans, corporate disclosure, and measurement of performance of a company (ArAs 2016.). The direct primary stakeholder that influences corporate governance is the board of directors as they represent a company’s shareholder. It is the board that makes decisions on the behalf of shareholders and takes care of a company’s financial well- being. The board looks after the firing and hiring executives, setting broad goals for the company, ensuring adequate resources for the company, and looking after proper management system of the company (Tricker 2015).

One of the major issues regarding corporate governance is that of the responsibilities and roles between the boards and shareholders. A company may oversee management of risk. It may not identify and assess the risks that might emerge as a result of increasing footprint. Another issue is that of auditing and financial reporting.

Corporate social responsibility or corporate conscience is a kind of corporate self-regulation incorporated into a business model. It is a self-regulatory mechanism to ensure the active compliance of a business with the laws and monitor the activities. It maintains the international norms and ethical standards of a company. It is argued that firms that operate with a CSR perspective are bound to have long-term profits. On the other hand, some critics argue that CSR distract a business from its economic role (Carroll 2015). The corporate responsibilities of a company can be organized into a pyramid whereby the economic responsibility of a company comes at the bottom. It is the basic responsibility of a company. The next in the pyramid is the legal responsibilities. A company must abide by the laws to ensure a smooth, profitable running of the company. Environmental law, security regulations, and criminal law are some of the laws that a company must adhere. The next is the ethical responsibilities which include fair wages, paying dues to employees, and creating a friendly working environment. Philanthropic responsibilities are placed at the top of the pyramid. This responsibility comes into play once all the other responsibilities are met. This responsibility include an effort to benefit society, donating services, engaging in projects that are beneficial for the environment or engaging in charitable programs and donating money to charitable trusts (Korschun et al 2014).

There are seven key steps that must be considered while implementing an effective ethics program in an organization or company. Firstly, a company must establish procedures and standards to detect and prevent criminal conduct. The company must effectively communicate the right standards and procedures. Secondly, a company must give specific responsibilities to the committee of executives or the senior executive. The board of directors must see that the plans are implemented properly. It is equally important that the employees understand their responsibility and follow the procedures. Thirdly, a company must not give any role to a person who has a record of criminal activity. However, the company must consider the degree of misconduct. Fourthly, a company can make ethical programs effective by implementing programs through training and education. They must be given proper education and training about accounting, favors and gifts, unfair trade practices, labor standards, confidential information, and organizational property. Fifthly, it is crucial to audit the program to make sure that the elements of the program are implemented properly. It is necessary to see the effectiveness of the program periodically. A company must provide guidelines to the employees to monitor and report any misconduct. Next, there must be appropriate incentives so that employees are encouraged to comply with the programs. This would help them to impose necessary disciplinary measures if employees fail to comply with the programs. Lastly, after misconduct has been identified, a company must address them and take proper measures to correct them (Beeri et al. 2013).

 


The word teleological has been derived from the Greek work telos meaning end, goal, or purpose. Teleological is thus the study of ends, goals, and purposes. A moral theory is teleological when it defines and explains the right actions. For instance, a moral theory maintaining the rightness of an action and achieving the goal is theological theory. Aristotle’s theory of ethics and Utilitarianism are examples of teleological ethics. Teleology is result- oriented ethics. It is also known as consequentialism. It generally focuses on the purpose of every action that a person takes and their consequences. It examines past experiences to analyze the present actions (Berker 2013).

Deontological perspective on the other hand is duty- based ethics. They are mostly the moral duties taught to an individual as a child. People are molded from their very childhood through deontological ethics. Deontological ethics assesses the rightness or wrongness of an action. It is based mostly on the obligations and duties of a person towards another person or living things or the environment. It is based on moral values and beliefs. While teleological ethics is based on the outcomes and results of the actions of an individual, deontological ethics finds its basis on the absolute duty of man towards mankind. Here the action is given more priority than the results (Conway and Gawronski 2013). 

Yes, my understanding of ethics has changed after studying this subject. Ethics is mostly the general behavior of a person towards another person. Earlier I thought that ethics is regarded as the morality of a person. But now, after studying the term, I came to know that ethics is applicable individually as well as in an organization. It is a highly regarded term in business. It has various perspectives like the teleological and the ontological. Various ethical programs are conducted and organized by companies so that they experience a hassle free and smooth running. There are ethics while considering environmental concerns. They are environmental ethics. Not only an organization, but individuals within a society must also abide by those moral codes and inculcate within them environmental ethics to protect the environment and help to achieve ecological balance. Ethics is thus, the concept of right or wrong.

(a)   Sexual Harassment

Sexual harassment comprises unwelcome sexual acts and advances on the part of the employees in a workplace. Sexual harassment is, in fact, a form of discrimination towards the opposite sex or the same sex as well. The sexual conduct of a person may hamper the performance of an employee to a great extent. Sexual harassment may not necessarily be physical abuse. It may arise from sexual innuendos, sexual jokes or lewd pictures targeted at a specific person or posting offensive pictures openly on bulletin boards. However, the perception of sexual harassment may be different for both men and women. Two types of sexual harassment have been recognized at workplace- hostile working environment and quid pro quo. For instance, if a superior demands to have sexual relation with him/her to retain the job of an employee, or providing some other benefit, it is quid pro quo sexual harassment. An unwelcome, abusive or offensive work environment is ground for legal action. Such sexual harassments may be analyzed in court. Making unwelcome sexual comments or acting in a sexually inappropriate way or touching a person is hostile environment sexual harassment (Salman et al 2016).  

 

(b)  Corporate Intelligence

In the present times, transparency, accountability, and conduct are not sufficient to raise stakes and take business decisions. The competitive market shows that warranties are not enough to retain a high position in business. Some business firms tend to have more hegemonic power despite fewer resources. On the other hand, firms with less business resource tend to have more power. Any information about a business must be gathered in an ethical and legal way. However, getting information through unethical and illegal ways are issues which are noteworthy (Parello 2015).

The given scenario may present the issue of ethics. Being personally related to the accountant, the decision on the part of the buyer may be biased.  The buyer may ignore the ethical requirements that are not fulfilled by the accountant. Moreover, the opinion of the buyer may be biased towards the accountant. There may be people who are more desirable than the brother. Being personally related, the auditor may not behave professionally and may raise questionable issues. The buyer may not investigate into the business policies of the firm, clients, business activities, and owners that is run by his brother. The conflict in interest may arise as a result of conflict between professional obligation and self- interest. Inaccurate financial records may be placed in financial reports and this may lead to corporate scandals.

While expanding a business globally, several ethical issues may crop up. The first ethical issue that may probably arise is that of operations. When companies expand their business globally, they develop local operations. Any normal practice considered illegal in the home country may be deemed legal in the host country. For instance, it may be highly essential to provide safe working conditions, provide proper wages and take care of environmental hazards in the home country. However, such parameters may not be considered by the local companies in the host country. In such a situation, the profitability of foreign companies may be at stake while small businesses compromise with such issues. This is an ethical issue for the operation manager of the foreign country (Weiss 2014).

In many countries, companies from foreign market may not have to give high taxes. The low tax jurisdiction avoids the companies to pay high taxes through transfer pricing. In such a scenario, the low tax operation of the company lets it to transfer high costs to its home country. In this way, the company can retain most of the revenue locally. The companies thus pay very low tax while earning huge profits. Such transfer prices are often considered unethical and illegal (Matten 2015).

 An ethical issue considered highly in the present scenario is that of environment. All foreign countries do not have environmental legislations. Because of this, companies ignore the issue of environmental pollution and discharge toxic wastes into the environment thereby posing severe threat to the environment. Limiting the environmental footprint may be an ethical approach on the part of the company. Thus, going beyond local laws to protect the environment is an ethical standard that all companies must strive to maintain. Companies must ensure that the locals are not affected by the industrial pollutants generated from factories (Ferrell and Fraedrich 2015).

Corruption is another arena in which one may find severe business ethical issues. In most countries, bribe is very normal and is a daily aspect. Such corrupted practices are a result of competition in the local as well the international market. Offering money and other materialistic things to political parties and government officials are unethical. These are forms of indirect payment. However, implementation of strict policies and regulations may solve the problem to a great extent (Armstrong et al. 2013).

 

References

ArAs, G., 2016. A handbook of corporate governance and social responsibility. CRC Press.

Armstrong, R.W., Stening, B.W., Ryans, J.K., Marks, L. and Mayo, M., 2013. International marketing ethics: problems encountered by Australian firms. Asia Pacific International Journal of Marketing.

Beeri, I., Dayan, R., Vigoda-Gadot, E. and Werner, S.B., 2013. Advancing ethics in public organizations: The impact of an ethics program on employees’ perceptions and behaviors in a regional council. Journal of Business Ethics, 112(1), pp.59-78.

Berker, S., 2013. Epistemic teleology and the separateness of propositions. Philosophical Review, 122(3), pp.337-393.

Bourne, L., 2016. Stakeholder relationship management: a maturity model for organisational implementation. CRC Press.

Carroll, A.B. and Buchholtz, A.K., 2014. Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.

Carroll, A.B., 2015. Corporate social responsibility. Organizational Dynamics,44, pp.87-96.

Conway, P. and Gawronski, B., 2013. Deontological and utilitarian inclinations in moral decision making: a process dissociation approach.Journal of personality and social psychology, 104(2), p.216.

Craft, J.L., 2013. A review of the empirical ethical decision-making literature: 2004–2011. Journal of Business Ethics, 117(2), pp.221-259.

Cuervo-Cazurra, A., 2016. Corruption in international business. Journal of World Business, 51(1), pp.35-49.

eon Rossouw, D. and Van Vuuren, L., 2010. Business ethics. Oxford University Press, 2010.

Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson Education.

Harrison, J.S. and Wicks, A.C., 2013. Stakeholder theory, value, and firm performance. Business ethics quarterly, 23(01), pp.97-124.

Kaptein, M., 2015. The effectiveness of ethics programs: The role of scope, composition, and sequence. Journal of Business Ethics, 132(2), pp.415-431.

Korschun, D., Bhattacharya, C.B. and Swain, S.D., 2014. Corporate social responsibility, customer orientation, and the job performance of frontline employees. Journal of Marketing, 78(3), pp.20-37.

Levi, M., 2013. Regulating Fraud (Routledge Revivals): White-Collar Crime and the Criminal Process. Routledge.

Matten, D., 2015. Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford University Press.

Parello, C.P., 2015. Model of corporate intelligence, secrecy, and economic growth. International Journal of Economic Theory, 11(2), pp.205-229.

Piquero, N.L. and Clipper, S., 2014. White Collar Crime (pp. 5531-5538). Springer New York.

Rose-Ackerman, S. and Palifka, B.J., 2016. Corruption and government: Causes, consequences, and reform. Cambridge university press.

Salman, M., Abdullah, F. and Saleem, A., 2016. Sexual Harassment at Workplace and its Impact on Employee Turnover Intentions. Business & Economic Review, 8(1), pp.87-102.

Servaes, H. and Tamayo, A., 2013. The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), pp.1045-1061.

Tricker, B., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.

Weiss, J.W., 2014. Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.

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