Ethics in the world of business

INTRODUCTION.

ETHICS.

Ethics are principles and standards that guide behaviour in the world of business. Ethics can also be defined as the right or wrong, acceptable or unacceptable behaviour within an organisation. Ethics are more of a theory or system of morality in the world of business. Ethics are determined by key stakeholders of an organisation.

Examples of ethical acts are as follows below:

v Honesty and truthfulness.

v Ensuring good working conditions of the employees.

v Employment of all kinds of personalities.

v Good customer care and services.

v Fair treatment to all the employees.

Examples of unethical acts are as follow below:

v Conflict of interest.

v Stealing.

v Alcohol and drug abuse.

v Lying to supervisors.

v Discrimation of certain employees.

Moreover there are key influences that determine ethical behaviours in an organisation such as personal values of an individual, supervisor influence, senior management influence, lack of punishment and co- worker influence. Furthermore when an employee acts ethically it brings about peace, harmony and good relationships within the organisation at large.

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PROFIT

Profit can be defined as making of progress in a business. Profit is a high target for many organisations and there are ways or techniques used so as to maximise the generation of profits. Profits always make an organisation grow stronger and stronger and a business that does not make profits leads to failure of the business and affects the employee’s performance. There are two sides of profit making motives in many organisations for example the ethical way and unethical way of generating profits.

ETHICS AND PROFITS.

Ethics are very important in any organisation as well as profits. Ethics helps to determine the behaviour of the organisation while profits help the growth of the organisation. It is quite realistic to state that Ethics and Profits go together in the benefit of the organisation at large together with it’s employees. SIMON CAULKIN says, “It’s a marriage of opposites which can be made to work”.. With the above statement it shows that ethics and profit can be balanced against each other meaning that existence of ethics in an organisation can lead to profits.

Every business owner wants to make a huge amount of profit. Focused and smart business owners will maximize profits by ethical means. Unfortunately, not all businesses do this nowadays. You can always find large numbers of the other types such as the greedy tycoons, whose motives for making profits is always fast and unethical in all means.

FACTORS THAT SHOW ETHICS AND PROFIT CAN BE BALANCED AGAINST EACH OTHER.

CODES OF ETHICS.

Organisations that have codes of ethics tend to be performing very well. Good values and morals in an organisation lead to good decision making and thus maximisation of profits. Codes of ethics guide employees to act accordingly for example to deliver good customer care and services that attracts customers and thus increase profits through sales. Companies with codes of business ethics or conduct produce an above average performance when measured against a similar group without codes of business ethics or conduct. The co-operative bank in the United Kingdom is an example of an ethical organisation which is branded as an ethical organisation.

CORPORATE SOCIAL RESPONSIBILITY AND ACCOUNTABILITY.

Social responsibility and accountability exists in the business world with the main aim of making profits. McWilliams & Siegel, (2001) describe CSR as “actions that appear to further some social good, beyond the interest of the firm and that which is required by law.” Corporate social responsibility and accountability guides organizations to act ethically and by abiding to ethical rules and regulations it helps in the whole process of profit maximization of the whole organization. Corporate Social Responsibility is viewed, as a set of policies,practices, and processes which are integrated into business operations, supply chains, and decision-making processes within the organisation and usually include issues related to business ethics, society investment, environmental well being, governance, human rights, the marketplace as well as the workplace. Socially responsible organizations have enhanced brand image and reputation. Consumers are always drawn to brands and companies with good reputations in Corporate Social Responsibility related issues. An organisation regarded as socially responsible always benefit from its reputation within the business community by having increased ability to attract potential customers and trading partners. Reputation is not easy to attain but through Corporate Social Responsibility with relation to business ethics it helps organizations secure a respectable name and ability to maximize profits. Moreover corporate social responsibility guides the behavior of the organisation.

FAIR TREATMENT AND WAGES.

Employees work at their best performance when they are well treated with the management. Fair treatment and wages is one of the aspects of ethical issues that organisations needs to abide to so as to keep their employees. According to Moskowitz, (1972); Parket & Eibert, (1975),Soloman & Hansen, (1985) “Firms may actually benefit from socially responsible actions in terms of employee morale and productivity “. Employees morale can be increased by the management through rewards and acknowledgement of their performance in a period of time. Generation of profits becomes more easier and realistic when there is a good and reliable workforce such as motivated employees. Organisations that improve working conditions and labor practices often experience increased productivity and thus leads to profit maximization.

Ethical principle:

Respect for autonomy

This Ethical theory can be used to guide the management on how to manage and control their employees by giving them a freedom of speech and choice of acting ethically.

Taking a long time view.

Business ethics often helps the profitability of a company when they take a long-term view of their business. In this case an organistion needs to view and reflect on its policies and procedures and determine what is acceptable and what is not acceptable. Many organisations are looking for ways to make cash in the short term unethically, but the ethical organisation is the one that does it the right way by taking a long time view. This means working on customer loyalty, quality products, service, trustworthy and honesty. When organisations take this approach, they definitely build up the reputation of being a good and reputable organisation, and their ethical ways lead to long-term profitability thus ethics and profit go hand in hand. Bill George from Harvard Business School (2008) states that, “Good ethics is good business. There is a direct correlation between behaving ethically and creating long-term shareholder value.”

Level of trust.

Ethical organisations are linked with the highest level of trust form the management together with their employees. Always people want to feel they can trust others, for instance customers are to feel that they can trust the sellers. Whenever a customer walks into a store he or she expects not to be cheated and with the presence of ethical organisations customers feel more comfortable to deal with any business deal as they believe on the reputation of the organisation. The trust that customers are seeking is always manifested in individuals such as the owner, a sales person, or other employees of the organisation. When a customer has a good experience with organisations that treats them ethically, they are more likely to go back to the organisation and thus give them more of their business which leads to maximization of profit.

Good ethical practices.

When an organisation devises good ethical practices such as recruiting according to the level of experience and qualification of the candidates it ensures that the best workers are hired. This creates efficiency and improves productivity. This is displayed by increased level of sales and thus leads to profits. Acceptable ethical acts enhances morale in the company which is achieved through ensuring that reward and recognition of employees is done in an acceptable way. Enhanced morale improves the production sector as well as the product selling activities. The sales staff triples their efforts whereas the production staff improves their mode of delivery. This translates into increased revenues of the organisation. The practice of ethical behavior in an organisation can help to reduce costs of unnecessary acts of unethical acts such as negligence, customer complaints and carelessness at workplace.

LOSS OF CUSTOMER LOYALTY

Customer loyalty is very important in the prosperity of any business. Organisations needs to maintain good customer service skills so as to keep their customers. Due to unethical acts that exist in some of the organisations it leads to loss of customer loyalty where as the customers do not feel the urge to come back to the organistaion. For instance a sales person of a company trying to sell some of the products in a high street and decides to add up the prices so as he can get something out of the sales which is against the company’s policies and procedures. Another scenario would be for a new or returning customer to come into contact with a worst customer service that is encountering with an aggressive and rude sales assistant. There is a saying that “A CUSTOMER IS A KING” which makes customers demand that extra care and attention while shopping.

Loss of customer loyalty which is due to the existence of unethical acts will not bring about profit making to the organisation. Customer satisfaction is quite important in the whole process of profit making therefore ethics are very important in the generation of profits.

AN EXAMPLE OF A SCENARIO WHICH SHOWS ETHICAL AND UNETHICAL WAY ORGANISATIONS ACT:

THE HARD PATH.

Advertise, Construct brand image, marketing strategies and do all the sales. This whole process involves money, effort and tremendous commitment of the employees together with the management at large. Lastly the end result is generation of profits.

THE EASY PATH.

An organization bribes its way through the government and other sources which would help it create a niche market in ashort period of time. Often the amount of money and efforts spent on bribes is less than any amount spent in any production and sales of products without bribes.

Which is considered to be the best path?

‘The ethical way’ without a doubt but it is astonishing to find out how many organizations will opt for the easy way of generating profits. In today’s world of business and globalisation the key issue is results which is a huge generation of profits. According to the above scenario organizations feel that their stakeholders will absolutely appreciate the fact that they generate wealth and huge amounts of profits for them by whichever means in this case they would definitely go for the unethical way.

ETHICS AND PROFIT CAN NOT WORK TOGETHER DUE TO THE FOLLOWING ASPECTS:

There are organisations that sacrifice their moral values for the sake of making profits. There are unethical acts which take place in the organisations such as falsifying records and reports, lying to the customers and so many more acts but get away without being noticed and still make a tremendous profit.

Bribery

“A bribe is a remuneration for the performance of an act that’s inconsistent with the work contract or the nature of the work that one has been hired to perform”. William H. Shaw & Vincent Barry (2004). Bribery is one among common unethical acts that exist in the world of business. Bribery is a form of giving gift or money to another person for personal benefits in return. Many organisations use a form of bribery in one way or another with the aim of generating profits. Many unethical organisations get away with acts of bribes but still are able to generate tremendous amounts of profits. Bribe is illegal and unethical because it contradicts the whole idea of a free and open market for all organisations. Example of a bribery act according to a journal “Travellers Guide To Gifts and Bribes” Harvard Business School Review, is as follows below:

GHANA

“A customer enters customs to clear several goods. He notes high stacks of forms, strewn loosely on a single table. The clerk admits his papers will be “DIFFICULT” to find, raises his eye brows and awaits the customers reply”.

Exploitation of the multinational corporations.

The multinational corporations are corporate organisations that operate on a global scale without significant ties to any one nation or region. These multinational corporations have been greatly criticized due to the fact that they are engaged in unethical behaviours. These multinational corporations transfer jobs to countries where there is low wages and bad working conditions. The labour in such countries helps these multinational corporations save a great deal on labour costs and they gain by generating profits through exploitation of labour. According to the journal from The Magazine Of Rice University (2005), the report shows how multinational corporations have led to increase in inequality and poverty in the countries where they make their investments.

Production of harmful products.

There are organisations which produce products which are highly harmful to the environment and human beings but through the sales of their products they are able to generate profits. When a product is branded as harmful it proves to be unethical to the society. For instance tobacco products are highly harmful to human health but companies like sweet menthol, Aspen, May fair are enjoying the benefit of their sales of the cigarettes and therefore become more and more profitable. Professor John I. D. Hinds (1882) explains the harmful substances that are harmful to human beings in relation to the prosperity of many tobacco companies profits.

Profit as the main business goal.

Laura Houston stated that “Without Profits you can not exist, and without ethics you can still exist. It takes profit to run any business, from the moment you open the door it is all about the money” www.helium.com . According to the above author profit is the main motive for the existence and growth of the business. In this view it does not matter how unethical a business can act but what matters is the end results which has to be profits. There are factors such as high charges of taxes imposed on the business society which makes the businesses concentrate on maximization of huge profits in any way they can be it ethical or unethical way and thus to say profits leads the way for ethics.

“A business exists to make a profit. If the business doesn’t make a profit it will cease to exist” as stated by Laurie Mueller www.helium.com a business activist in favour of profits to ethics as the activist believes that organizations perish form the business world if at all it fails to generate profits and there is no room for changes or redesigning of the strategies and policies.

CONCLUSION

“Many businesses and business leaders have set a poor example of business ethics and tried to take shortcuts to success and profitability. Recent years have shown clearly that these shortcuts and shunning of ethics leads to disaster and ruin in the long run”. www.helium.com . According to the above statement it is quite clear that ethics are vital in any long run of a successful business. Ethics guide the behavior and vision of an organisation. There has been several cases of illegal use of organizations funds done by the CEOs of the organizations and that has led to imprisonment and loss of public reputation. An example is the case of Tanzanian bank executive officer who worked in the Bank of Tanzania had to be sent in prison because of the fraud case he committed.

The most successful, respected, reputable and profitable organizations understand the advantages of business ethics and always work according to the ethical ways of management. Employees of such organizations are well motivated and have good working relations with other employees together with their customers. Moreover business ethics can not only be profitable but also important in the success of any other business. The students view of ethics is that profit is what keeps a business grow but ethics is the solid foundation of the end results.

According to the students view ethics are very important and worth practicing. Ethics and profit should go hand in hand meaning that ethics should be the foundation of a profitable organisation. Ethics helps to bring peace, harmony and creates a good working environment between employees and the management at the work place and between employees and customers at large.

Ethical organisations proves to be customer focused organisations which attract many customers and thus generation of profits. Ethics brings about customer satisfaction that leads to customer loyalty which is an advantage to the ethical organisation. Ethics are important in all aspects of life as it is the solid foundation of what the society is build up. Unethical organisations often do not last for a long period of time in the business world as being unethical has a price to pay.

Ethics has a big role to play in the whole process of management sector as it covers in several areas of the management such as human resource department, accounts department, sales marketing and production department. In this case ethical companies have a greater advantage over their competitors as they are able to set up their strategies ethically and finally attract customers.

Management of the organisations are the ones to strengthen the ethical behaviour in the organisations. Employees need to be motivated by their superiors so as to create a conducive working environment for everyone. All in all ethics and profits should go together but it is wise for organisations to be ethical and generate profits ethically rather than being unethical.

References

Andrew Crane & Dirk Matten (2004) 2nd Edition Business Ethics.

Bill George (2008) Professor, Harvard Business School, Harvard Business School Review, “Travellers Guide To Gifts And Bribes”.

Helium: where knowledge rules. http://www.helium.com/items/1734272-business-ethics-can-be-profitable [accessed on 09/02/2010 at 15:14]

www.haas.berkeley.edu [ accessed at 12.30 on 9 /02/ 2010]

Prof. John I. D. Hinds, Ph.D., The Use of Tobacco (Nashville, Tenn: Cumberland Presbyterian Publishing House, 1882), p36

The Magazine Of Rice University (2005) volume 62 No 1.

McWilliams, A., and D. Siegel (2000) “Corporate Social Responsibility and Financial

Performance: Correlation or Misspecification?” Strategic Management Journal, 21 (5): 603-609.

Moskowitz, M. (1972) “Choosing Socially Responsible Stocks.” Business and Society Review, 1: 71-75.

Roman, R. M., S. Hayibor, and B. R. Agle (1999) “The Relationship Between Social and Financial Performance.” Business & Society, 38: 109-125.

Tutor 2 u. http://tutor2u.net/business/gcse/finance_profit.htm [Accessed on 25th January 2010 at 14:20]

William H. Shaw & Vincent Barry (2004) 9th edition “Moral Issues In Business”, USA: Thomson Wadsworth.