From moral standards to corporate responsibility, let’s uncover the essence of ethical business practices.
What is Business Ethics?
Ethics can be defined as a systematic attempt that governs the sense of right or wrong and the values worth pursuing in life. Word ethics is defined in the dictionary as standards of conduct or moral behavior. High standards of ethical behavior demand that a firm treats each party it deals with fairly and honestly.
Business ethics refers to carrying out business as per self-acknowledged moral standards. It is a structure of moral principles and a code of conduct applicable to a business.
Business ethics applies not only to the manner in which the business relates to a customer but also to the society at large.
It is the worth of right and wrong things from a business point of view. Business ethics not only talk about the code of conduct at the workplace but also with the clients and associates.
Companies that present factual information respect everyone and thoroughly adhere to the rules and regulations are renowned for high ethical standards.
Business ethics implies conducting business in a manner beneficial to societal as well as business interests. Every strategic decision has a moral consequence.
The main aim of business ethics is to provide people with the means to deal with moral complications.
Ethical decisions in business have implications such as a satisfied workforce, high sales, low regulation costs, more customers, and high goodwill.
Some ethical issues for business are the relationship between employees and employers, the interaction between organization and customers, the interaction between organization and shareholders, the work environment, environmental issues, bribes, employee rights protection, product safety, etc.
Importance of Business Ethics and Values
Business ethics and values are the subject of increasingly great attention today in light of the numerous scandals involving unethical and unlawful actions on the part of entrepreneurs in different countries.
Business ethics and values ensure a shared vision endorsed by the business group or the business society; it must be consistent with and reflect basic business ethics and values. This business vision can help clarify what different values will have to prevail for the desirable future to be realized.
Drivers of Unethical Business Behavior
According to Timothy, F. Veiga, Golden D., and Dechant Kathleen (2004), three main drivers of unethical business behavior stand out in the business world:
- Faulty activities and oversight by entrepreneurs or by top management implicitly allow the overzealous pursuit of personal gain, wealth, and other self-interests.
- Heavy pressures on company managers to meet or beat performance targets.
- A company culture that puts profitability and good business performance ahead of ethical behavior.
Consequences of Business Ethics Failure
Business ethics failure can result in costs, fines, penalties, civil penalties arising from lawsuits, stock price declines, administrative clean-up costs, and other costs like customer defections, loss of reputation, higher turnover, and harsher government regulations.
The Importance of Trust and Ethical Behavior in Business
Therefore, running a business with a higher level of trust among the stakeholders is essential. Ethics is behavior that conforms to moral principles and values, and business ethics is the discipline of developing and practicing business relationships that conform to these moral principles (Alford, 2005).
Strategic Benefits of Business Ethics Programs
Currently, many businesses design formal ethics programs, including creating a code of ethics for trusting customers.
A. Devero (2003) identifies the following key strategic benefits to businesses that have ethics:
- Build employee loyalty, thereby reducing hiring and training costs.
- Reduce theft and other anti-company activities.
- Drive sales and build customer loyalty.
- Create community goodwill that can support tax advantages and strategic alliances.
- Attract quality applicants with minimal investment in recruitment.
- Maintain loyal vendor relationships, reducing the loss of suppliers and unexpected cost increases.
Businesses can gain a competitive advantage through the appropriate management of business ethics, or managing company values.
15 Principles of Business Ethics
Business ethics is the application of ethical principles and standards to business behavior because the concept of ethics is involved with the concepts of morality, immorality, right or wrong, fair and unfair. Business ethical principles are the same as ethical principles in general.
However, recently, many businesses, particularly corporate businesses, have been involved in unethical business activities like corruption scandals, etc.
Business ethics emerged from divine guidelines, experience, giant corporate house interest, and the existing legal system.
Consequently, it has to maintain the following principles:
- Be Trustful
- Keep an Open Mind
- Meet Obligations
- Have Clear Documents
- Become Community Involved
- Maintain Accounting Control
- Be Respectful
- Ethical values
- Relative term
- Interest of society
- Business social relationship
- Provides the framework
- Facilitates protection of social groups
- Not against profit-making
- Needs willing acceptance
Be Trustful
Recognize that customers want to do business with a company they can trust; when it is at the core of a company, it’s easy to recognize. Trust is defined as assured reliance on the character, ability, strength, and truth of a business.
Keep an Open Mind
For continuous improvement of a company, the leader of an organization must be open to new ideas. Ask for opinions and feedback from both customers and team members, and your company will continue to grow.
Meet Obligations
Regardless of the circumstances, does everything in your power to gain the trust of past customers and clients, particularly if something has gone awry. Reclaim any lost business by honoring all commitments and obligations.
Have Clear Documents
Re-evaluate all print materials, including small business advertising, brochures, and other business documents, making sure they are clear, precise, and professional. Most importantly, make sure they do not misrepresent or misinterpret.
Become Community Involved
Remain involved in community-related issues and activities, thereby demonstrating that your business is a responsible community contributor. In other words, stay involved.
Maintain Accounting Control
Take a hands-on approach to account and record-keeping, not only as a means of gaining a better feel for your company’s progress but as a resource for any “questionable” activities. Gaining control of accounting and record-keeping allows you to end any dubious activities promptly.
Be Respectful
Treat others with the utmost respect. Regardless of differences, positions, titles, ages, or other distinctions, always treat others professionally and courteously. Recognizing the significance of business ethics as a tool for achieving your desired outcome is only the beginning.
A small business that instills a deep-seated theme of business ethics within its strategies and policies will be evident among customers. Its overall influence will lead to a profitable, successful company.
By recognizing the value of practicing admirable business ethics and following each of the 7 principles, your success will not be far off.
Ethical values
Business ethics is concerned with morality in business in today’s business world, a community firm is a large part of society, and its action is bound to have a direct impact on the well-being and welfare of the society. Business affects society in terms of what products it supplies.
Therefore, the business community must conduct its activities with self-control, self-check, and self scarifies . i.e. acting with less concern for you than for the success of the joint activity. And always keeping in mind the interest of the community at large signifies ethical values.
Relative term
Ethics is a relative term in the concept of morality and immorality. It differs from one individual to another or from society to society. What is moral to one may be immoral to another.
Interest of society
Business ethics implies that business should first do well to society and then to itself. Business is an important institution and has a social responsibility to protect the interest of all those groups who are directly or indirectly related to the organization like employees, shareholders, and consumers, etc. to contribute to the real success of the business organization.
Business social relationship
Business ethics set the terms and standards to understand the societal relationship of business. It indicates what society expects from business and what it thinks about the business.
Provides the framework
Like an individual, business is also bound by social rules and regulations. Business is expected to restrict its activities within the limits of the social, legal, cultural, and economic environment.
Facilitates protection of social groups
Business ethics gives protection to consumers and other social groups such as shareholders, employees, and society at large. The business should give priority to social interest or social good. Such an ethical approach creates a good name, add status to business, and helps in its growth and expansion.
Not against profit-making
Business ethics is not against fair profit-making. However, it is against making a profit by cheating and exploiting consumers, employees, or investors. It supports the expansion of business activities but by fair means and not through illegal activities or corrupt practices.
Needs willing acceptance
Business ethics cannot be imposed by law or by force. It must be accepted as self-discipline by businessmen. It should come from within. Businessmen should go for ethical trade practices on their own and not by force of law.
Relationship between corporate social responsibility, corporate citizenship responsibility, and sustainable development
Ethical responsibility of business is another concept of corporate social responsibility to find a balance between businesses’ economic responsibilities to reward shareholders with profits, legal responsibilities to comply with the laws of countries where they operate, ethical responsibilities to abide by society’s norms of what is moral and, and philanthropic responsibilities to contribute to the noneconomic needs of society.
Corporate Citizenship vs. Corporate Social Responsibility
Many business scholars use corporate citizenship responsibility instead of corporate social responsibility. Still, corporate citizenship expects companies to go beyond consistently demonstrating ethical strategies and business behavior by addressing the unmet noneconomic needs of society.
The Role of Corporate Sustainability
In contrast to corporate citizenship, corporate sustainability involves strategic efforts to meet the needs of current customers, suppliers, shareholders, employees, and other stakeholders while protecting and perhaps enhancing the resources needed by future generations. Sustainable development’s one component is corporate business sustainability (Gamble & Thompson Jr. 2009).
Business Ethics and Sustainable Development
Therefore, business ethics elements that stand out in sustainable development are corporate social responsibility, corporate citizenship responsibility, and corporate sustainability. Business ethics reduces the risk of reputation-damaging incidents, and that can lead to increased buyer patronage.
The Impact of Ethical Businesses on Socio-economic Challenges
As the world is facing a catastrophic socio-economic divide, poverty, and unfair treatment among people, ethical businesses are essential to contribute to reversing the order of sustainable development.
Conclusion
Generally speaking, business ethics is a normative discipline whereby particular ethical standards are advocated and then applied. It makes specific judgments about what is right or wrong, which is to say, it makes claims about what ought to be done or what ought not to be done.
While there are some exceptions, business ethicists are usually less concerned with the foundations of ethics (meta-ethics) or with justifying the most basic ethical principles and are more concerned with practical problems and applications and any specific duties that might apply to business relationships.
Business ethics can be examined from various perspectives, including the perspective of the employee, the commercial enterprise, and society as a whole.
Very often, situations arise in which there is a conflict between one and more of the parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas it would be bad for the company, society, or vice versa. Some ethicists see the principal role of ethics as the harmonization and reconciliation of conflicting interests.
Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards, as in the case of multinational companies that operate in countries with varying practices. The question arises, for example, oughta company obey the laws of its home country, or should it follow the less stringent laws of the developing country in which it does business?
To illustrate, United States law forbids companies from paying bribes either domestically or overseas; however, in other parts of the world, bribery is customary, “accepted” way of doing business.
Similar problems can occur in child labor, employee safety, work hours, wages, discrimination, and environmental protection laws.
Business ethics should be distinguished from the philosophy of business, the branch of philosophy that deals with the philosophical, political, and ethical underpinnings of business and economics.
Business ethics operates on the premise, for example, that the ethical operation of a private business is possible those who dispute that premise, such as libertarian socialists, (who contend that “business ethics” is an oxymoron) do so by definition outside of the domain of business ethics proper.
The philosophy of business also deals with questions such as what, if any, are the social responsibilities of business; business management theory; theories of individualism vs. collectivism; free will among participants in the marketplace; the role of self-interest; invisible hand theories; the requirements of social justice; and natural rights, especially property rights, about the business enterprise.
Business ethics is also related to political economy, which is economic analysis from political and historical perspectives.
Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses from economic activity, and is the resultant distribution fair or just, which are central ethical issues.
