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Ethics in Business Management

Definition of Ethics and Business Ethics

Ethics is a collection of moral principles that control a person’s or group behavior. Ethics usually determine what is wrong or right with respect to the affected individuals in a realm. Godwin (2015) defines bbusiness ethics as a list of written and unwritten codes of values and principles that control actions and decisions within a business organization. Business ethics is best demonstrated through the acts of fairness, responsibility, respect and integrity. It is the aim of business owners and executives to ensure that all employees understand and practice these ethics. Most companies go a mile further to train all new and existing employees on the ethics of the organization; because, after all it is to the benefit of the company; and an important issue in ensuring the success of the business organization in the long run (Godwyn, 2015). This research paper aims to investigate the different codes of ethics used in business organizations, their benefits, shortcomings and possible solutions to ethic-related problems.

Principles Governing a Highly Ethical Business Organization

According to Mark Pastin (1986) in his book “The Hard Problems of Management: Gaining the Ethics edge,” highly ethical business organizations are governed by four principles: they are free when associating with diverse internal and external stakeholder groups; they believe in fairness to all, and the chief rules insist that other persons’ interest are important as their own. Another is responsibility is individualistic rather than collective, and an individual is responsible for their actions in the organization; and, they view their activities in terms of purpose, which is highly valued by the employees and members of the organization.

Examples of Business Ethics in a Business Setup

An ideal business organization is run by a code of ethics that details the behaviors that are accepted or condemned or both. As stated above, some organizations train their members on the expected code of ethics in line with their jobs. Examples of business ethics are in the areas of communication, conflicts of interest, uniform treatment, social responsibility, financial ethics (Godwyn, 2015), just to mention, but a few. Communication in any business setup is fundamental. Communication can be face-to-face, on phones, by use documents like files, and memorandums, or via e-mails. To prevent the possibility of an individual committing an offence to another, an organization may decide to develop standards for professional communication that prohibit employees from inducing harm or intimidation to another person or group.

Another example of a code of ethics in a business organization is the uniform treatment to all members despite their race, color, culture, lifestyle or religion. Every member of the organization is obligated to a right to fair promotion and development, and an organization can ensure that this code is upheld. By offering sensitivity training to its employees on topics like discrimination and favoritism in the organization, the above problem would be resolved (Akrivou, 2015). These two issues, however, mostly apply to small business organizations.

Key Elements of a Highly Ethical Business Organization

In a business organization, earning a reputation as an ethical organization is a noble thing. However, it comes with immense commitment. Nevertheless, an ethical business that focuses on long-run gains has to concentrate on both financial and ethical success. There are key elements that make a highly ethical business organization stand out from the rest. These key elements are: leadership, values, integrity, respect, loyalty, concern, customer focus, results-oriented, risk taking, passion, and persistence (Akrivou, 2015).

In the leadership of the company, ethics should start from the top management. A business organization whose leaders observe ethics in their operation and decision-making instills an ethical culture in the employees of the organization. A true test of leadership ethics is a situation whereby the leader is to make a decision that is torn between profit and gain or ethical responsibility. A leader who chooses the latter would have helped in realizing an ethical culture in the company (Akrivou, 2015).

On the element of values, most organizations have a clearly described mission that defines its values; but an ethical business organization will live by it. It will communicate its mission that is mostly attached to the code of conduct and ensure that all members observe it in the process of realizing the company’s goals.  Integrity is an essential ingredient in an ethical organization. Such an organization abides by the laws and regulations at the local, state and federal levels. It treats its employees fairly, equally and ensures honesty and transparency in its matters (Godwyn, 2015). This integrity extends to the handling and interaction with stakeholders and other players of the organization.

Respect, another equally important element of an ethical business organization involves mutual respect between members of the organization. Respect is a two-way traffic affair, and an ethical business organization is defined by its employees always practicing this virtue in the administration of their duties. On customer focus, an ethical business organization always focuses its success to customer satisfaction (Akrivou, 2015). These organizations are governed by the adage that states “Customer is Always Right!” Such organizations would go a long way to meet and exceed the expectations of their customers, and will always supply the market with the right products and services.

Ethical organizations are also characterized by passionate staff. These employees have a great desire and motivation in the work they do. They focus on offering outstanding results through customer satisfaction rather than waiting for the day to end and go home. These employees are always excited, concerned, understanding, undiscriminating and always driven to customer satisfaction. In addition to having a passionate workforce, ethical organizations show a sense of persistence in their operations. Persistence is tied to passion, a very instrumental duo in successful business organizations. Such employees would continue putting their best even when the results are not fulfilling (Crane & Matten, 2004). They conduct themselves with integrity, respect, and honor, and their focus is tied to customer satisfaction and the overall success of the organization.

Advantages of Business Ethics

Business ethics in an organization comes with a mammoth of advantages which are important to the success of the organization. Some of the advantages include: competitive advantage of the ethical organization over other competing unethical organizations, Corporate Social Responsibility (CSR) of the organization to the surrounding environment, a business may attract new sources of finance from ethical investors, a business may realize higher revenues through positive consumers’ support, and better employee motivation and recruitment (Crane & Matten, 2004).

            The competitive advantage of an ethical business over its counterparts may be achieved through improved brand, business awareness, and customer support. Improved branding of a company on ethical grounds promotes customer confidence and interest in the products or services of the organization, hence promoting the company’s growth (Velasquez G. & Velazquez M., 2002). Ethical investors would be prompted to channel their resources to an ethically healthy business organization because of the trust and confidence in that organization coupled with mutualism in the ethical sphere. This confidence and trust plus receiving support from investors will in turn be beneficial to the organization. Employees who work in a business organization that practices excellent work ethics would feel motivated to do their work because they know they are protected and appreciated; this positive attribute of the organization will also make the organization recruit most competent individuals, who will be able to support the organization in realizing its goals.

Disadvantages of Business Ethics

With the advantages of ethics in business organization notwithstanding, shortcomings are also present. Some of them include: high costs of running the business like in sourcing from fair-trade suppliers rather than lowest price, high overheads through training and communication of ethical policy, a danger of building up false expectations. Higher running costs may be observed since most ethical businesses sell products at relatively higher prices compared to less ethical ones (Crane & Matten, 2004). High overheads may be incurred in a bid to educate and train the employees on the code of ethics of the organization, and sometimes a company may fall into the danger of developing false expectations on its employees by setting unrealistic and difficult to meet ethical policies (Velasquez G. & Velazquez M., 2002).

Major Ethical Issues in a Business Organization

            A study conducted by National Business Ethics Survey conducted in 1994 and 2000 showed four major ethical issues faced by business organization as employee behavior, employee working conditions, supplier-customer relations, and small business ethics (Velasquez G. & Velazquez M., 2002). Most violations of business ethics revolved around these four areas. Hence, for the success of an organization in realizing an ethically healthy environment, the above issues need to be addressed.

Solutions to Ethic-Related Issues

In spite of the shortcomings and issues related to adherence to organization’s code of ethics, possible solutions can be implemented to help control and curb these problems. Some of these solutions are: creating explicit policies and practices that need to be adhered to by all involved members; hiring the right people into the organization from day one; conducting frequent trainings to develop people’s understanding of the code of ethics (Velasquez G. & Velazquez M., 2002); putting controls in place that identify unethical behavior; leaders should walk the talk in issues that call for application of ethics; and building a culture of transparency, openness, and communication in the organization.

Conclusion

            From the discussion furthered herein, it suffices to conclude that business ethics is a key practice that significantly enhances the success of a business organization. Uncountable benefits come with the application of the right ethics, as discussed in this paper. Successful business organizations built on the foundations of ethics realize magnificent results that contribute to the overall success of the organization in future through the achievement of competitive advantage over their unethical counterparts.