You are on page 1of 8

If you don't have integrity, you have nothing.

You can't buy


it. You can have all the money in the world, but if you are not
a moral and ethical person, you really have nothing.

Henry Karvis.

Ethics refers to a code of conduct that guides an individual in


dealing with others. Ethics is concerned with distinguishing
between good and evil in the world, between right and
wrong human actions, and between virtuous and
nonvirtuous characteristics of people. Ethics is important not
only in business but in all aspects of life because it is the
vital part and the foundation on which the society is build. A
business/society that lacks ethical principles is bound to fail
sooner or later.

A Definition for Business Ethics

Business ethics can be defined as written and unwritten


codes of principles and values that govern decisions and
actions within a company.It deals with issues regarding the
moral and ethical rights, duties and corporate governance
between a company and its shareholders, employees,
customers, media, government, suppliers and dealers.

Henry Ford said, "Business that makes noting but money is


a poor kind of business".

Business ethics can be thought of in many different lights,


and part of the reason that business ethics has become such
a contemporary issue is because it cannot be defined
precisely. Most people believe that in order to meet the
minimum ethical standards, a business must be honest,
obey the law, and not directly infringe on the rights that our
society holds as inalienable human rights. This, however,
does not exhaust the definition of business ethics that many
believe in. Some other ethical issues involve compensation
of employees, job security for employees, hiring practices,
waste management issues, pollution, and conflicts of
interest. Sometimes companies face situations where ethical
choices are in opposition to their interests. An example of
this could be a logging company doing business in forests
around the world. One ethical consideration must be
protecting the rain forest from destruction.
Environmentalists may propose that the company stop
logging completely; however, this may bring up another
ethical issue such as the preservation of jobs for loggers

Business ethics (also known as Corporate ethics) is a form


of applied ethics or professional ethics that examines ethical
principles and moral or ethical problems that arise in a
business environment. It applies to all aspects of business
conduct and is relevant to the conduct of individuals and
business organizations as a whole. Applied ethics is a field of
ethics that deals with ethical questions in many fields such
as medical, technical, legal and business ethics.

Business ethics can be both a normative and a descriptive


discipline. As a corporate practice and a career
specialization, the field is primarily normative. In academia
descriptive approaches are also taken. The range and
quantity of business ethical issues reflects the degree to
which business is perceived to be at odds with non-economic
social values. Historically, interest in business ethics
accelerated dramatically during the 1980s and 1990s, both
within major corporations and within academia. For example,
today most major corporate websites lay emphasis on
commitment to promoting non-economic social values under
a variety of headings (e.g. ethics codes, social responsibility
charters). In some cases, corporations have redefined their
core values in the light of business ethical considerations
(e.g. BP's "beyond petroleum" environmental tilt).
Management and Business Ethics

A companys managers play an important role in


establishing its ethical tone. A companys leaders are
responsible for setting standards for what is and is not
acceptable employee behavior. Its vital for managers to
play an active role in creating a working environment where
employees are encouraged and rewarded for acting in an
ethical manner.

Managers who want employees to behave ethically must


exhibit ethical decision making practices themselves. They
have to remember that leading by example is the first step
in fostering a culture of ethical behavior in their companies.
No matter what the formal policies say or what they are told
to do, if employees see managers behaving unethically, they
will believe that the company wants them to act in a like
manner.

Ethics is related to all disciplines of management like


accounting information, human resource management, sales
and marketing, production, intellectual property knowledge
and skill, international business and economic system. As
said by Joe Paterno once that success without honor is an
unseasoned dish. It will satisfy your hunger, but won't taste
good. In business world the organization's culture sets
standards for determining the difference between good or
bad, right or wrong, fair or unfair.

"It is perfectly possible to make a decent living without


compromising the integrity of the company or the individual,
wrote business executive R. Holland, "Quite apart from the
issues of rightness and wrongness, the fact is that ethical
behavior in business serves the individual and the enterprise
much better in long run.", he added.

The ethical issues in business have become more


complicated because of the global and diversified nature of
many large corporation and because of the complexity of
economic, social, global, natural, political, legal and
government regulations and environment, hence the
company must decide whether to adhere to constant ethical
principles or to adjust to domestic standards and culture.

as rightly said by Robert Noyce, "If ethics are poor at the top,
that behavior is copied down through the organization",
however the other methods can be creating a common
interest by favorable corporate culture, setting high
standards, norms, framing attitudes for acceptable behavior,
making written code of ethics implicable at all levels from
top to bottom, deciding the policies for recruiting, selecting,
training, induction, promotion, monetary / non-monetary
motivation, remuneration and retention of employees.

"Price is what you pay. Value is what you get" - Warren


Buffet

Thus, a manager should treat his employees, customers,


shareholders, government, media and society in an honest
and fair way by knowing the difference between right or
wrong and choosing what is right, this is the foundation of
ethical decision making.

ARE BUSINESS ETHICS IMPORTANT?

Running a business requires adequate consideration to a


number of issues outside the traditional scope of making
money, of which ethics is most certainly one. As our business
grows and becomes more significant, we impact on the lives
and circumstances of people in ways we can only imagine -
through bringing jobs, creating wealth and inspiring others to
grow their businesses. An important part of engaging in this
process is understanding your business ethics, which if not
up to scratch can leave you with a bad reputation and can
even ruin your business, not to mention alienating
employees, suppliers and the local community.

According to International Ethical Business Registry, "there


has been a dramatic increase in the ethical expectation of
businesses and professionals over the past 10 years.
Increasingly, customers, clients and employees are
deliberately seeking out those who define the basic ground,
rules of their operations on a day today...."

Ethics is something of a subjective topic, but it is


nevertheless of immense importance across all areas of
business. From the way in which sales and marketing is
handled through to product development and customer
service, and even to some extent finance, ethics has a
significant role to play in ensuring business success and
ultimately living up to the corporate social responsibility.
Thus adopting a ethics-specific approach to doing business is
critical towards ensuring a legitimate business model with
long term potential.

Business ethics is especially important in dealing with


customers. Maintaining integrity in the customer facing side
of your business is crucial to building client relationships, to
assisting the overall branding efforts. Likewise, it's an
important step in minimising returns and protecting business
goodwill, which will have a tangible effect on the success or
otherwise of your business.

Ethics wise, it's also important to consider how you deal with
customer issues and customer service. While some
businesses are prepared to sacrifice customer service for
pound signs, there is not only a sensible business reason for
providing adequate support but also strong ethics and moral
reasons for providing help and assistance to your customer
base.

On the administrative and strategic side of your business, it's


also important to adopt an ethical approach which takes
account of your various responsibilities as a business - to
shareholders, employees and the community at large.
Embracing these concepts of ethics as part of the way you
do business is vital to ensuring your run an honest,
successful business with the potential to grow and develop
over time, and is one way of ensuring that you develop
relationships across all aspects of your business that are
conducive to success and profitability over the long term.

Ethics is no doubt an important business subject for any


entrepreneur to study, but it also has a wider application
throughout organisations. One man's concept of what is
ethical and for the best may be completely different from
another man's concept, and so it's important to establish a
collective set of ethics that represent the entire organisation
rather than just adopting a piecemeal approach. This can be
installed through training, through creating business policies
and even through careful selection at the HR stage, although
it's important that there are also enforcement mechanisms
within the business concerned, and that ethics remain a
forefront consideration in day-to-day trade to ensure a
unified, morally sound approach to doing business.

There is empirical evidence that illustrates that of the 500


largest corporations in the U.S., two-thirds of them have
committed some form of illegal behavior (Gellerman, 1986).
This fact, combined with the many publicized accounts of
illegal business operations including fraud, insider trading,
and unfair hiring practices, has caused government,
colleges, and businesses to increasingly focus on the role of
ethics in business

Why are ethics important?

Recent events in corporate America have demonstrated the


destructive effects that occur when the leadership of a
company does not behave ethically. One might wonder why
highly educated, successful, and business savvy corporate
professionals at Enron, Tyco, WorldCom, and Adelphia got
themselves into such a big mess. The answer lies in a
profound lack of ethics.

Running a business ethically is good for business. However,


"business ethics" if properly interpreted means the
standards of conduct of individual business people, not
necessarily the standards of business as a whole.

Applying ethics in business makes good sense. A business


that behaves ethically induces other business associates to
behave ethically as well. If a company (or a manager)
exercises particular care in meeting all responsibilities to
employees, customers and suppliers it usually is awarded
with a high degree of loyalty, honesty, quality and
productivity. For examples, employees who are treated
ethically will more likely behave ethically themselves in
dealing with customers and business associates. A supplier
who refuses to exploit its advantage during a seller's market
retains the loyalty and continued business of its customers
when conditions change to those of a buyer's market. A
company that refuses to discriminate against older or
handicapped employees often discovers that they are
fiercely loyal, hard working and productive.
It is my firm belief that a good man or woman who
steadfastly tries to be ethical (i.e. to do the right thing", to
make appropriate ethical decisions, etc.) somehow always
overtakes his immoral or amoral counterpart in the long run.
A plausible explanation of this view on ethical behavior is
that when individuals operate with a sense of confidence
regarding the ethical soundness of their position, their mind
and energies are freed for maximum productivity and
creativity. On the other hand, when practicing unethical
behavior, the individual finds it necessary to engage in
exhausting subterfuge, resulting in diminished effectiveness
and reduced success.

"Non-corporation with the evil is as much a duty as is co-


operation with good" - Mahatma Gandhi.

REMEMBER: GOOD ETHICS IS GOOD BUSINESS