Impact of Business Ethics - Coursework Example

The Impact of Business Ethics on the Performance of Business Organizations The Impact of Business Ethics on the Performance of Business Organizations Introduction The ethical culture of any given business truly has an impact on the overall performance of the entity. Professional, or applied ethics, addresses this moral behavior that is related to a commercial activity (Jennings, 2012). The ethics demonstrated by a company reflects the firm’s philosophy and commitment in relation to its stakeholders, as well as the consumers that it serves. Most organizations will have a clear and concise written values statement. This reflects, in a way, the companies perspective about various ethical practices and their relation to various stakeholders in the organization. Most commonly, ethics affect the performance of business organizations by defining the extent to which they are trustworthy and honest, engage the community in making positive contributions to the community, and retain customer loyalty that contributes to the economic bottom line. Analysis and Discussion In order to be successful in life, ethics plays a vital role. Companies who regularly partake in unethical business practices may be profitable for a season, but once word gets out that they have unscrupulous in many of the dealings, the public will likely abandon them. The issue, then, is for a business to clearly state their ethical code of conduct and then work hard to live up to those standards. The problem, however, is that large corporations often find it difficult to live up to the high expectations that its shareholders and the public have set for them. It is important, therefore, for concerned parties to understand sound business ethics in order to ensure and guard against failure in this area. According to Jennings (2012), corporate ethics provide pillars on which business operations are built upon. There are many different ways that a corporation can use sound ethical principles to contribute to their overall success. A product corporate social responsibility is one such way that this can take place. Corporate social responsibility involves a process of opening up and maintaining a solid manner of doing business that emanates from business ethics. Combined with this concept, it is way the corporation gets involved and participates in community issues. It has been determined that corporate social responsibility is an essential element in working to ensure the success of a business (Jennings, 2012). The reason why corporate social responsibility is a critical part of ethics in any given company rests in the fact it serves to strengthen the bond between the organization and society as a while. It works to gain the trust of the community and it enable the company to act as a responsible citizen giving back freely and openly to the locality that has embraced. This involves a great deal of mutual trust that must be earned. Consumers, and the community in which a business reside, do not often given people their trust and loyal easily. Having a strong sense of corporate social responsibility will likely lead to strong customer loyalty. Other areas of business ethics that are perhaps equally as critical revolve around honesty, open mindedness, and trustworthiness (Jennings, 2012). Each of these components must be communicated to the public, not only in words, but more importantly, in action. It has already been demonstrated that business ethics are an essential pillar upon which the success of any business organization is built (Jennings, 2012). Some successful multi-national corporations that have lived up to this standard of ethics for decades include Vodafone, AIG, Samsung, and Microsoft. Naturally, others are in this group as well. Other equally large and powerful companies, such as Anderson Cooper and Enron, have crumbled during this time as well, largely as a direct result of unethical business practices. Each of the successful companies mentioned above not only have strong corporate responsibility programs, but they have tried as much as possible to be open and transparent to their shareholders. This transparency and sense of honesty has translated, to a large degree, to a loyal customer base that trusts the products of the company and to shareholders who see it as a viable investment opportunity. With the basis for ethical decision making already being established, it is now essential to analyze certain utilitarian theories in the area of business ethics in order to guide businesses in the right forward moving direction. The importance of this topic is critical, not only to the business itself, but to traders around the globe. There are various theorists over the years who have actually proposed different models that businesses can implement to determine the viability of their current ethics statements and look for ways that can improve upon it. It should be stated up front that there is not one ‘correct’ ethical model. There is no set standard where one company can they are correct, but another disagree. Just as individuals have different values and morals, so do businesses. The reality is, however, that there needs to be some roadmap in place so that businesses can stay between the lanes, so to speak. They will some flexibility in terms of what is acceptable and what is not, but in general they must use the community in which they operate in be their guide. The law can be one such guide that business can use to stay on track with the ethical practices. Simply stated, if something violates the law, then a business must refrain from the practice, even if it proves difficult or painful to do so. The reason why some businesses will opt to let the law be their guideline in nearly every situation is that people have varying opinions on what is ethical. Ethics, in many cases, is a matter of opinion. Such disagreements, however, can be resolved by allowing the legal system to be the primary influencer. This theory goes back to Ancient Roman days. Matters in the community, and in all areas of business, were decided by the Roman legal system. There were laws in place that carried specific penalties for anyone that violated them. In many respects this continues today in the United States (Woiceshyn, 2011, p. 312). The interesting factor here, however, is that there might not be a law currently in place that makes a decision illegal, but some would still consider it unethical. To use the law as your only model, then, could result is losing out in the court of public opinion, even if you win the court of law. This is why many unethical decisions made today, often become illegal as a matter of public record at some point in the future. Businesses can also adopt intersecting ethical models. Some businesses or organizations, for example, will have specific ethical rules that they have adopted. In essence, these guiding principles are specific to them and their organization, but might not apply to others in the area, or even in the same field. In some cases, they might be more stringent than the average company feels is necessary, or possibly less stringent. Other organizations might have their ethical principles follow religious or social convictions (Woiceshyn, 2011, p. 314). Perhaps their line of thinking is more in tune with a particular belief system. To not act in this manner would not necessarily be seen as unethical behavior by most, but it would be contrary to their own values and beliefs. Holding firm to a different set on intersecting ethical standards can certainly have its advantages. Organizations that hold firm to their beliefs even when others do not can gain them some notoriety and appreciation from the larger community. An example of this could be the fast food chain Chick-Fil-A. From their very foundation, they felt it was a violation of their own principles to be open on Sundays. To this day, all of their restaurants remain closed every Sunday, with employees obviously being given the day off. In our Capitalistic society, this is obviously not a popular move, but it has made them popular in certain social circles because they give up profit for principle. This is an example of an ethical model that has served to increase their profitability over the years, even when to act contrary to their business model of being closed on Sundays would not be seen as being unethical in the least. Laura Nash actually developed an ethical model that has become quite famous amongst management personnel in companies trying to strengthen their own ethical practices. We have already discussed law theory and intersecting business models. Behaving in an ethical manner, however, is not always so cut and dry. Nash proposed that businesses, or individuals, go through a series of 12 steps in order to determine their eventual course of action. She proposes a simple first step that many neglect: What is the problem in the first place? It is important a business accurately defines the ethical dilemma before they can actually made a correct decision moving forward (Woiceshyn, 2011, p. 318). Upon doing that, then the business needs to step back and think about it from the perspective of an outsider. How would someone in the community view the problem and how would they likely behave? Often times, when we put ourselves in the shoes of another person, our entire perspective. Analyzing this from our own research perspective, we can see how this step alone can positively contribute to a business. When we pre-determine the way that our actions will be perceived by others, we will often choose the proper course of action (Woiceshyn, 2011, p. 322). Once the problem has been uncovered and management has taken some time to view it from other perspectives, the next logical step is to determine how the situation came about in the first place. If there is an ethical decision to be made, that means that likely means the company has not thought of or dealt with the situation previously. Ultimately, someone must decide the proper course of action to take. Nash recommends that the decision-maker be someone that reasonably expects to hold that position for quite some time. Little can be more ill-time that somebody making a questionable ethical decision, only to then vacate the position. Individuals tend to make better decisions when they know that they will end up being the one responsible for any fall-out in the long run. In this way, Nash predicts that the decision-maker in such cases will work hard to ensure that the right decision is made the first time (Woiceshyn, 2011, p. 322). This allows the company to further their positing of respect and trust within the community. Obviously, the Nash model is a bit more involved than we have time to fully discuss in this paper, but the principles are made clear. Ethical situations occur in a business on a near daily basis. Many of these decisions will never be noticed by anyone outside of the company, and possibly even outside the person making the decision. Other decisions, however, have wide ramifications inside and outside of the company (Woiceshyn, 2011, p. 323). A bad decision can damage the reputation of a company as easily as a great ethical decision can enhance its reputation, increasing the bottom line of the company, and make the shareholders and community happy to no end. Recommendations Business ethics is about more than simply making the right decision. It is about making a positive contribution to the community and to society. It is about impacting future generations in a positive way by leaving a great legacy behind. In order for businesses to accomplish this, they need to have a solid plan of action in place. This plan needs to entail their plan, or ethical model, but which they will make important decisions. Any business that wants to be successful needs to begin by looking at its public image. The choices that they make on a daily basis, and the decisions that choose to abide by, say a great deal about their willingness to live by an ethical standard that is above reproach. Nobody is perfect. Individuals make mistakes. In this vein, it should be noted that companies are no exception. Companies need to adopt and create a solid ethics and value statement. Such a statement provides a basis by which sound business decisions are made. As noted, certain bad ethical decisions may go unnoticed today, but be discovered tomorrow. As such, it is important that companies ensure that this does not take place by adopting one of the ethical models discussed in this paper. In this light, it is important for a company to adopt a sound business model moving forward. It has been established that making good ethical decisions positively impact a company. With this variable being true, it would then make perfect sense for companies to begin to ensure that the decisions they make are not only legal, but are also in line with the value and morals of the community in which they are located. Just because a behavior is acceptable in one location does not necessarily mean it is ok in another. These are just a few of the areas that should be consider when a company considers how it makes decisions and how those same decisions impact the bottom line. Conclusion The goal of any business, obviously, is to succeed. There are many ways to do this. Some do it the old-fashioned way by earning it. Others go about in various ways that are later considered to be unethical. This has been the basis of this entire analytical paper. It is important for businesses to make solid ethical decisions. This is not only good for society, but it is simply good for business (Dugger 4). Operating in an unethical manner might earn an entity good profits for awhile, but it will eventually catch up with them. With that being said, it is important to plan now for the future. Companies must begin to realize that they need to operate ethically. This improves their bottom line, gains favor with the community, and encourages more stakeholder investment. People want to be on a winning team. They want to be a part of something that is not only making money, but is also moving society forward in a positive direction. Making sound ethical decisions may not alway be the most popular thing to do, but it almost always the wisest way to conduct business. References Dugger, W. M. (1991). Organization theory: From Chester Barnard to the present and beyond. Journal of Economic Issues, 3(9), 3-6. Jennings, M. M. (2012). Business ethics: Case studies and selected readings. 7th Ed. Ohio: Cengage Learning. Woiceshyn, J. (2011). A model for ethical decision making in business: Reasoning, intuition, and rational moral principles. Journal of Business Ethics, 104(3), 311-323. Read More