Ethical Practices in Business - Research Paper Example

? (Assignment) Business Ethics Business ethics is that part of corporate governance that deals with the moral values of managers encouraging them to be transparent in business dealings. Business ethics takes into consideration the interests of all stakeholders. In fact, good business ethics is the foundation of all good businesses. In the present day world where consumerism has become widespread, the importance of business ethics is even higher. The benefits of applying ethical principles in business are plenty. First of all, it ensures that the company survives in the long term as it increases profitability and sustainability. However, the common consensus, most of the time, is that profit and ethics are opposed to one another, and hence, if a company is ethical, it cannot think about profits. In addition, many believe that in order for a company to be profitable, it should necessarily be unethical. In other words, this school of thought gives legitimacy for businesses to be totally unethical to make profits. There are instances in the history that make people believe that ethics and business are totally opposite entities. A perfect example is the Ford Pinto of Ford Motors. In 1978, three people died as the gas tank of the Pinto they drove exploded as it was hit in the rear. It was proved that the company knew that placing the tank in the rear end was vulnerable. However, the expenditure involved in changing the gas tank was $ 11 per car; an amount that is considerably less than the amount the company would have to pay in compensation for the few people who die as a result of explosion. So, the company decided not to change the position of the gas tank. In addition, law declared the company not responsible for the deaths. This incident clearly reveals how company can aim at profit totally neglecting what is ethical. In addition, such incidents generate the opinion that profit and ethics are alien to each other. However, according to scholars, only ethical companies which discharge their social responsibilities survive competitions and turbulent changes in the long term. First of all, a thorough scrutiny proves that what is unethical is not to make profit. To illustrate, a company utilizes scarce national resources and money, time and efforts of its various stakeholders. Thus, the first and foremost ethical obligation for a company is to make profits for its stakeholders. In other words, its ethical duty is to meet the expectations of its stakeholders including employees and creditors. In addition, only a profitable company can fulfil its social responsibilities and welfare commitments. Though it is very evident that making profit is in no way against profitability, as Bandyopadhyay points out, there certainly are ethical questions about the methods adopted to make profit, and also about the amount of profit being made. A look into the business world proves that there are many large organizations that have successfully adopted ethical practices according to socially accepted norms. A look into World’s Most Ethical Companies Rank list helps learn how these companies turned ethical; according to this, UPS, one among them, reveals that ethics is the company’s business strategy (World’s Most Ethical Companies Ranking 2008). They claim that being a good corporate citizen is an important element that keeps the company successful. The company that has operations in more than 200 countries does have an ethics program that meets international demands. The company has written ethics policies and a culture that reinforces the written policies. Another company that deserves attention at this stage is Google. Within 10 years of its establishment, the company is into a number of programs aimed at reducing its environmental impacts. As a part of this step, the company addresses challenging issues like climate change, poverty, disasters and disease. In addition, the company encourages its employees to participate in such initiatives. In addition, there are many companies like Xerox, Starbucks, Aflac, Kao Corporation, and so on and on. Thus, it becomes evident that being profitable is in no way an obstruction to adopting ethical principles in transactions. A look into the corporate social responsibility of these all companies provides an insight about the ways these companies adopt to be ethical in their operations. Some of these steps are leading by example, rewarding and recognizing employees, considering environmental and social impacts while making business decisions, proper life/work balance, and encouraging selflessness in employees through voluntary charitable works. The problems faced by a company that resorts unethical ways of operation are enlisted by Jacques Cory. According to Cory (8), a company, under no circumstances, should behave in a flagrant, unethical manner. The company has the responsibility to stick to ethics even when the company ceases to exist. In fact, there are many excuses put forward by those who believe that profitability has nothing to do with ethics. According to some, business is a jungle where only the strong ones survive, while according to many others, everything is allowed in a war. However, one should remember the fact that when the company resorts to unethical means, all its employees are getting virtual green signal to go unethical for personal motives. Thus, in the long term, the company will not survive as it is highly likely to fail in its own internal functioning and in attracting customers. Thus, it becomes evident that ethics should be kept in the forefront of business because the cost of the lack of ethics will be much higher than the cost of having a strong ethical base in the long term. There are people like Albert Carr who claim that business is a game where one should adopt the game player’s attitude instead of the notions of morality. In the game, (as in Cory, 9), it is legitimate to bluff if you are not holding a good hand. However, this argument has its own demerits. First of all, if business is like poker where one can bluff, all other human relations including parent-children, friend-friend, and husband-wife can be termed poker where one is bound by no rules. A look into the reasons for unethical behavior proves that nearly all reasons ranging from incentive fees, unreserved obedience to the superior’s directives, and short-term benefits can lead to unethical behavior. Though it is generally said that ‘crime does not pay’, in the business world, being ethical is not the easiest, nor the most profitable way of action as it requires self-sacrifice, reduced personal gains, or bearing costs and burdens. However, history proves that despite all the difficulties, being ethical has its own benefits. For example, it is observed that the companies that promote ethical conduct enjoy considerable amount of employee motivation and loyalty. This fact is very evident in the case of IBM. Yet another obvious benefit is that customers are ready to pay higher prices for the products if they come from ethically operating companies. For example, Hewlett Packard is a company that enjoys considerably higher profitability because of its ethical conduct towards its customers. There are innumerous other companies according to Cory (12) that enjoy high market share because of their ethical practices; some of them are Borg-Warner Corporation, General Mills, Quaker Oats, Advanced Micro Devices, Chemical bank of New York, Champion International, and Levi-Strauss. At this juncture, it is necessary to look into the Tylenol capsule issue that shook the very foundations of Johnson & Johnson. When seven people died of consuming Tylenol capsules, the company resorted to highly expensive ethical practice that cost the company about $ 50 million. However, this ethical act paid back in the long term. This act helped the company regain its image and recover its losses. As a result of this act, there was a rise in trust and confidence in the company’s services resulting in record sales and prosperity. According to Francis and Mishra (3), there are many more benefits in being ethical. The first benefit is that it gives the employees the satisfaction that they are operating openly and honestly. This will be followed by greater degree of employee commitment and retention. Secondly, it considerably improves the company’s business reputation in the long term. Thirdly, it acts as a strong defense in legal proceedings, and the possibility of being accused of improper behavior reduces considerably. Finally, the improvement in reputation makes it easy for company to collect capital and to find investors (Francis & Mishra, 3). However, one cannot ignore the fact that the development of a strong set of ethical principles that is consistent with the cultural requirements of all the multiple hundreds of nations as many companies claim is not an easy task. This is so because the moral assumptions of a society are created by the social contexts. According to Jones, Parker, and Bos, “What would be seen as plainly right in Kenya might not be so straightforward in Indonesia” (Jones, Parker, and Bos, 15). In addition, a look into the business world proves that this difference in the perception on ethics is not only related to geographical areas. In fact, even in the same society, one can see young and old, black and white, gay and straight, right wing and left wing, upper class, middle class, and lower class, men and women, and so on. So, the concept of an ethical generalization that covers all these people with considerably different outlooks is a near impossibility. A research conducted by the Southern Institute for Business and Professional Ethics(as in Robinson and Rutland), revealed that short-term pressures make companies resort to ethical compromises. In addition, it is found that only one-third of the private companies and two-third of public companies possess a board-level ethics committee. Also, it was found that only 44% of the private companies and 63% of the public companies had an executive as ethics officer. Thus, it becomes more than evident that despite the renewed interest in following ethical principles in business practices, only a few companies follow the same. From the study, it becomes evident that though sticking to ethical principles is helpful for companies in the long term through improved employee loyalty, dedication and retention, sustainability, profitability, social image, and investment, only very few companies have managed to implement a satisfactory level of ethical principles in their operations. As evidences prove, the ones that encourage ethical practices enjoy considerably higher degree of public attention affinity and respect. As a result, these companies are highly likely to be around for long, while the ones that try to make some quick bucks are highly likely to get rejected by the public as they come to realize the unscrupulous practices involved. So, considering the fact that the trend of consumerism is on rise, it is necessary for companies to turn ethical in their operations for the sake of long term survival. Works Cited Bandyopadhyay, Parimalendu. Business Ethics and Profits. Faculty Column. Web 20 June 2011 World’s Most Ethical Companies Ranking, 2008. Web 20 June 2011 Read More