Business Ethics and Importance of Ethical Decision-Making - Essay Example

? ETHICS IN THE WORKPLACE by goes here] [your goes here] s [due the paper] Table of Contents Contents Page Abstract 1 1. Introduction 2 2. Literature Review 2 3. Case/Argument Review 11 4. Poor Ethics Contributed to Financial Crises 12 5. Summary 13 6. Conclusion 13 Abstract This research paper was about the extent to which ethical conduct is an important element of modern organisations, and how does employee corporate citizenship fit into this as a practical manifestation of ethics in the workplace. In the study, the researcher also included a brief review of the extent to which poor ethics contributed to the recent global financial crisis. A comprehensive literature review was done to gather information about the importance of ethics and corporate citizenship in building a positive image of the company in the minds of the public. A case analysis was done to prove the arguments about importance of ethics and corporate citizenship. The research proved that ethical decision-making, professional ethics, and corporate social responsibility play a vital role in improving organizational performance and productivity. 1. Introduction The concept of business ethics refers to a set of defined ethics that are required by a company to maintain its reputation in the market. Business ethics not only increase organizational value but also improve organizational effectiveness. Some of the core principles related to ethics that increase organizational effectiveness include ethical decision-making, getting facts from potential perspectives, recognizing and managing ethics, reducing the occurrence of ethical dilemmas, and using cross-functional teams while implementing an ethical management system in the company. Ethical conduct has become one of the main elements of a successful business. Employees of any company or organization need to show corporate social responsibility to fit into the definition of ethics as a practical manifestation of ethics in the workplace. In this paper, we will examine the extent to which ethical conduct is a vital element of modern organisations. We will also show how employee corporate citizenship proves as a practical manifestation of ethics in the workplace. Moreover, we will also focus the extent to which poor ethics have contributed to the recent global financial crisis. 2. Literature Review 2.1 What are Business Ethics? Business ethics refer to the conduct that employees and managers show while carrying out business activities (Stark, 1993, p. 41). Ethics are the backbone of the success of any business. Ethics take the business to the heights of success because they inspire people and all institutions related to the business (Joyner & Payne, 2002, p. 298). If a company does not incorporate business ethics in its daily activities and processes, it cannot achieve its goals and objectives in an appropriate manner. “Business ethics, like most areas of ethics, often tends to focus on principles of actions, on the action itself and its consequences” (Frederick, 2002, p. 30). According to Quinn (1997, p. 119), “business ethics is an area of growing public, corporate and academic concern”. In companies, ethical behaviors promote self-respect, self-esteem, and protection of basic rights of individuals and groups of people (Stark, 1993, p. 44). Business ethics also refer to the moral foundation on which employees build their professional careers. Typical definition of business ethics refers to the wrongness or rightness of behaviors (Lewis, 1985, 377). Some examples of ethical behaviors include fairness, truthfulness, honesty, respect, equality, sincerity, and helping other employees in fulfilling their job responsibilities. Employees need to show these behaviors to ensure discipline within their organization which in turn leads to increased organizational effectiveness. 2.2 Ethical Business Policies Murphy (1988, p. 907) states, “a company should both organize for ethical business policies and execute them”. Execution of ethical business policies includes implementation of ethical practices, such as, ethical leadership, proper communication between employees, and proper delegation of responsibilities (Murphy, 1988, p. 907). Making legal use of power is also one of the main business ethics. People within an organization need to make legal use of power in order to decrease manager-employee conflicts and increase harmonization between different business departments (Stark, 1993, p. 46). Managers also need to use their power positively to increase business (Lewis, 1985, 379). They should take appropriate decisions regarding any business matter in order to reduce employees’ perception regarding misuse of power. They can eradicate all sorts of discrimination through ethical decision-making. Such approach results in conformity between employees that leads to improved job performances and increased organizational effectiveness. 2.3 Importance of Ethical Decision-Making Ethical decision-making is of the most important elements of organizational success and improved performance (Trevino, 1986, p. 602). It refers to the process in which managers and employees take decisions based on some standard rules and regulations. Ethical decision-making is a process that makes employees take ethical decisions regarding any particular matter (Trevino, 1986, p. 602). Ethics play a vital role in making a decision reasonable and acceptable for all people involved in a workplace conflict (Joyner & Payne, 2002, p. 299). Employees and managers can make use of a number of decision-making approaches to make fair decisions (Trevino, 1986, p. 603). They can use utilitarian approach to incorporate ethics into their business activities. This approach helps employees take decisions that are able to bring maximum benefits to the concerned people, as well as minimizes the risks associated with decisions (McDonald & Pak, 1996, p. 981). Ethical decision-making is the heart of business ethics as all issues related to the workplace revolve around it. Common good approach is another useful way to make ethical decisions. The main focus of this approach to ethical decision-making is to assist employees in taking such decision that should not only resolve the conflicts but also improve the quality of life of all parties involved in conflicts (Argandona, 1998, p. 1094). Another common way towards ethical decision-making is the fairness approach. This approach helps managers and employees assess and examine different ways to treat people without any discrimination. This approach is linked closely with the provision of justice to conflicting parties in such a way that it is consistent with economic rationality (Schweitzer & Gibson, 2008, p. 287). 2.4 Importance of Adhering to the Code of Ethics Business ethics are the code of behaviors that employees of a company need to incorporate in performing their job related activities (Joyner & Payne, 2002, p. 298). Business ethics have diverse range of values that apply to daily business interactions with other businesses and companies, as well as to the dealings with customers on one-to-one basis (Creyer, 1997, p. 425). A number of businesses harm their reputation by not adhering to the code of business ethics (Creyer, 1997, p. 423). They just earn a reputation of being in business, but they cannot earn a good name which is essential to expand the business to other markets. Managers of such businesses are only interested in making good money, they forget the importance of incorporating ethics in business practices. Such businessmen are generally capitalists, they ignore every other thing relevant to the image of their businesses. Although they take good steps to evaluate and expand their business to earn money, but they ignore a very critical aspect of doing good business because of which sometimes they lose reputation while earning money. Those companies the managers of which do not give importance to business ethics face critical conditions, such as, losing customers, decreased business share in market, and low business image in the minds of the public. It is a fact that when companies do not conduct their businesses ethically with customers, the customers feel bad and are left with no other choice than to go to other companies to meet their needs. “Whether a firm behaves ethically or unethically may also have a significant influence on consumers’ purchase decisions” (Creyer, 1997, p. 421). This argument supports the viewpoint that ethical or unethical conduct of a company puts a direct impact on the buying decisions of customers. Customers like to go to those companies for purchasing which value customers, welcome them graciously, and provide after-sale services properly. Business ethics is the backbone of any successful business in today’s competitive market. Today’s business environment has become so much competitive for every industry that only those companies achieve desired level of success which base their functions on strong ethical values (Lewis, 1985, 380). All focus towards moneymaking makes managers of a company forget the importance of ethics which adversely affects the value of the company in the long run. Although such approach brings money to the company, but that is just a short-term achievement. These days, only those companies are successful which conduct their businesses by fulfilling all legal and ethical requirements. Using ethical ways to conduct business, companies do not lose their customers who are the real sources of increased productivity and market share (Creyer, 1997, p. 424). However, some companies outweigh the value of business ethics when they start earning high volumes of profits in the early years of their businesses. They also outweigh the amount of fines that they receive on ignoring government laws, policies, and business ethics. However, at some point in future, when they start losing their customers and their business image starts devaluing in the minds of customers, they realize the importance of incorporating ethics in their business practices. 2.5 Ethical Conduct: Responsibility of Managers and Employees Both managers and employees hold the responsibility to show an ethical conduct while carrying out their job responsibilities (Lewis, 1985, 379). They need to eradicate the use of all such behaviors that can cause problems for their companies. For example, they should not involve themselves in bribery to get personal and professional favor. Although bribery can bring them some benefits, but it can put an adverse impact on the image of the company because the body that provides money to some employee to get some work done will know that the employees of this particular company has no moral obligations as they prioritize money over their professional obligations. Such cases reflect negative norms and culture of a company which puts a spot on the image of the company. A company needs to incorporate strong ethical values to be successful in market (Joyner & Payne, 2002, p. 300). The need to show ethical conduct flows from top to bottom equally. However, managers need to be more responsible to show ethical conduct because employees always do what they see. If they see that their managers are responsive, honest, fair, and truthful, the employees will be inspired and will try to show these behaviors in their routine works. The mindset of managers creates the overall culture of a company. Ethics is not a constricted concept having little meanings for employees and managers (Joyner & Payne, 2002, p. 298). It is a very broad concept that surrounds a number of moral behaviors and characteristics, such as, truthfulness, honesty, friendliness, responsiveness, respect, and loyalty. Showing an ethical conduct is obligatory for employees, as well as for managers. Managers need to treat of their employees in a fair manner in order to create a good image of them in the minds of employees. This approach of managers works for the company in two ways. First, it builds a good reputation of the company among employees, second, employees feel themselves secure financially and professionally while working for such companies which prefer performance to bias. Transparency in activities is also one of the highly appreciated ethical conducts of managers. Managers should not hide the logic behind any decision because it gives rise to doubts in the minds of employees which consequently affects their performance. Moreover, managers should also deal with their subordinates courteously to make them feel relaxed, valued, and appreciated. Employees of a company also need to realize the importance of distinguishing between right and wrong while carrying out their job responsibilities. Whatever they do, whomever they deal with, and the way they deal has a direct link with the image of their respective companies. Therefore, they need to show responsibility and ethical behavior to promote the name of their company not only among the companies with which they do business but also among the customers. Ethical conduct of employees leads to increase in the number of customers of a company (Creyer, 1997, p. 422). An increase in the number of customers not only improves business productivity but also help the company expand its business in international markets. Ethical conduct improves customer relationship which is a key to attract more customers (Creyer, 1997, p. 422). Long-term customer relationship based on trust, sincerity, and friendliness is like lifeblood for any company or organization. A company with a large customer base has more chances of achieving market domination and competitive edge and all this can happen through incorporating business ethics in all business activities. Therefore, conducting a business ethically is essential for any company or organization to flourish in today’s competitive market. 2.6 Employee Corporate Citizenship Employee corporate citizenship is a core aspect of business ethics as it relates to the benefit of others through ethical conduct. Employee corporate citizenship refers to the concept of showing willingness to contribute in the betterment of society. It is one of the key obligations of any employee because it has direct connections with the betterment of overall society. Every employee needs to show his/her willingness to do something for the benefit of the society. Corporate citizenship is the key towards success of a business in today’s competitive market (Joyner & Payne, 2002, p. 301). It is also included in the business strategy of a company. Managers and employees need to show business ethics in every area of their professional lives. They need to incorporate corporate citizenship in their business ethics in order to become more responsive to their social and moral obligations (Lewis, 1985, 379). “Corporate citizenship may be desirable for society as a whole, it is unlikely to be embraced by a large number of organizations unless it is associated with concrete business benefits” (Maignan & Ferrell, 2001, p. 457). Corporate citizenship leads to improved levels of employee commitment, increased customer loyalty, development of a respectable image of the company, and improved business performance (Maignan, Ferrell & Hult, 1999, p. 455). Employees, the main source of a company’s strength to show corporate citizenship, travel across the boundaries to carry out their business activities. They show good behaviors toward others which not only build a positive image of them but also of the company. Earlier studies have proved a direct relationship between corporate citizenship of socially responsible employees and organizational commitment. In a study, Peterson (2004, p. 296) proved that “the ethical measure of corporate citizenship was a stronger predictor of organization commitment than the economic, legal, and discretionary measures”. Corporate citizenship is a fruitful business practice that generates both internal and external benefits for a company (Maignan, Ferrell & Hult, 1999, p. 455). “Good ethics can have a positive economic impact on the performance of firms” (Joyner & Payne, 2002, p. 297). Management of any company or organization needs to incorporate ethical values into their business activities to promote a good corporate culture. According to Goodpaster (1991, p. 53), “much has been written about stakeholder analysis as a process by which to introduce ethical values into management decision-making”. An approach should be developed regarding stakeholder analysis that should clarify the legal role of ethical considerations in decision-making to the managers (Goodpaster, 1991, p. 53). 3. Case/Argument Review My arguments regarding business ethics and employee corporate citizenship are as follows: Business ethics are the main source of a company’s success as it leads towards improved organizational effectiveness and employee performance. Business ethics need to be organized in a proper manner for effective execution. Managers need to show ethics in all of their activities because they are the biggest inspirational sources for employees. Ethical decision-making is a good way to ensure the implementation of business ethics. It also injects a sense of security in employees which results in improved job performances and organizational effectiveness. Employee corporate citizenship is a marketing approach that reflects a good image of the company. Employee corporate citizenship is also an ethical approach to inject social responsiveness in employees. Circumstances where these issues can be proven: These arguments can be proven in every company and organization where managers have implemented a proper ethical system to carry out business activities. An environment where managers and employees follow the ethical code of standards can portray the validity of these arguments. Moreover, an environment where demonstration of employee corporate citizenship is included in the responsibilities of employees can also validate the arguments. Some examples of top ethical organizations of 2011 include The Aerospace Corporation (U.S.), Timberland (U.S.), Ford Motor Company (U.S.), National Australia Bank (AUS), The Westpac Group (AUS), and Australia and New Zealand Banking Group (AUS). Circumstances where these issues cannot be proven: I think ethics are backbone of every successful system so there is no case in my view where these arguments cannot sustain. 4. Poor Ethics Contributed to Financial Crises The world has faced multiple financial crises in the recent times. Along with many other reasons, such as, poor management and improper decisions, poor workplace and business ethics have also been a main reason of recent financial crises. Excessive leverage, improper risk controls, all focus towards profit generation, and destroyed organizational values have been the main sources of recent financial crises. It is obvious that when any of these factors will be there, threats to economy will continue to occur. 5. Summary Business ethics are the basis of a company’s success as it leads towards improved employee performance and overall organizational effectiveness. There needs to be a proper implementation strategy to execute ethical approach towards business. Although both managers and employees need to adhere to the code of business ethics, but managers need to be more focused, as they are the biggest inspirational sources for employees. Ethical decision-making is a good way to guarantee the execution of business ethics. It injects a sense of security and fairness in employees that results in improved job performances and organizational effectiveness. Employee corporate citizenship is a marketing approach that reflects a socially responsive image of the company. It is also an ethical approach to inject social responsibility and accountability in employees. 6. Conclusion Summing it up, business ethics refers to a set of defined ethics that is required by a company to maintain its name in the market. Business ethics not only add to the organizational value but also improve organizational effectiveness. Employees of any company or organization need to show corporate citizenship to fit into the definition of ethics as a practical manifestation of ethics in the workplace. Business ethics are the moral foundations on which employees build their professional careers. Some examples of ethical behaviors include making ethical decisions, showing respect to customers, keeping privacy, being socially responsive, and helping other employees in fulfilling their job responsibilities. Businesses need to adhere to ethical norms and values because all focus towards moneymaking makes managers of a company forget the importance of ethics which adversely affects the value of the company in the long run. Employee corporate citizenship is a core aspect of business ethics as it relates to the benefit of others through ethical conduct. A company needs to incorporate strong ethical values to show the flow of ethical conduct in all levels of an organization. Therefore, companies need to design and implement a proper ethical code of standards because it ensures improved organizational performance and effectiveness. References Argandona, A 1998, ‘The Stakeholder Theory and the Common Good’, Journal of Business Ethics, vol. 17, no. 9-10, pp. 1093-1102, Springerlink, viewed 12 October 2012. Creyer, E 1997, ‘The influence of firm behavior on purchase intention: do consumers really care about business ethics?’, Journal of Consumer Marketing, vol. 14 , no. 6, pp. 421 – 432, Emerald, viewed 12 October 2012. Frederick, R 2002, A Companion to Business Ethics, Blackwell Publishers Ltd, Oxford. 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