Importance of Business Ethics - Research Paper Example

Business Ethics Introduction For any business corporation, their main objective remains maximization of profits while maintaining cost at a minimum range. This is an essential aspect to business if at all they have to make returns on capital invested and add value to the people involved. Trading and production activities take place in an environment that consists of the physical environment, people and other business organizations (Paliwal 100). Ethical consideration becomes a significant part in the interaction between the business entity and its environment. Ethic refers the moral standards used to classify an action as either right or wrong based on preferences of the community and context. Several ethical theories exist defining what ethical and otherwise. Business ethics is derived from the ethical theories as the behavior and conduct that any business entity adheres to in their daily interaction with their environment. Business ethics involves the application of ethical values such as integrity, fairness, respect and transparency in business interactions. Business ethics also relates to how business develops its structures produces and delivers its products and services to its clientele (Paliwal 100). Interaction with consumers, suppliers, employees and the wider society should align with ethical practice. Business ethics is very important due to the moral reasons which come with it. According to deontological theory an action is considered to be ethical if it complies to the duties allocated either formally or moral duties. Utilitarian perspective of ethical actions is those that yield greater good for the majority. Personal and community conduct should comply to set rules and regulations for it to qualify classification as ethical. Actions that undermine the rights of other people are unethical especially exploitative behavior even if the victim is not informed of their rights (Paliwal 100). At the same time, some ethical theory as suggested by Plato and others in his school of thoughts indicates that the end justifies the means. Provided the end results are considered to be positive and acceptable then the process is ethical. Importance of business ethics Being ethical in a business is the right thing to do and business should ensure all the business behavior is governed by ethics. Business ethics and corporate governance works together to ensure accountability of the business to all stakeholders (Ferrell 211). Business ethics brings about the cooperation required for a company and the business environment to survive. If customers are unable to trust their suppliers, then the company collapses and business environment will not be conducive. Upholding business ethics therefore enhances trust and confidence on the business by its stakeholders. Business ethics enhances the reputation of a business through Corporate Social Responsibility (CSR) which also improved the image of the company and strengthens the brand. Maintaining business image is part of corporate governance and is of importance since it is a tool in winning loyalty of prospective customers and partners. Ethical administration in business results in investment stabilization. Employee motivation through humanitarian treatment and compliance with set laws and regulations such as the ILO guidelines is required to protect and maintain the company image. Environmental conservation should be a policy issue in all business entities especially in the era of the green revolution. Organizations that deviate from this expectations risk lose prospective investor and customers who may have taken long to acquire. Failure to implement acceptable ethical standards may result in an increased number of regulations and legislation introduced to constraint business ventures. Unethical behavior in a company has financial implications on the company (Weiss 39). Unethical behaviors usually come at a cost to the affected company and may also lead to the loss of jobs to the employees. Financial cost can be quantified in terms of loss of management time, cost of legal battles, business distraction and withdrawal of investors. Business ethics is essential in living up to the expectation of the society and their immediate consumers. Every community has formed perceptions with regard to companies which they expect them to live up to. Publicizing investigations into the allegation of unethical or corrupt behaviour at a number of global companies or individuals associated with them has resulted in reputation damage and lose of investor confidence. Employer treatment has been rated to be above average ethical alignment. For instance during the recently publicized political uprising in Arabic countries the company’s kept close communication with its employees as a way of keeping track of the condition. How to determine whether a business is ethical Corporate governance is the system of arrangements by which a company is directed and controlled to make executives more accountable and responsible to the shareholders. For a business to be ethical, it must have corporate governance structures put in place. A business can only be ethical if of its departments are controlled in a way which allows them to exercise ethics. If these departments address issues like human rights, labor and environmental issues among many other ethics related issue, then that particular business will be regarded as being ethical as it is morally right to do so (Weiss 39). Environmental ethics aims to provide ethical guideline governing the relationship between humanity and nature. The corporate governance issues in a company can help one to determine whether the business is ethical and they include the business activities, business polices organizational structure and corporate culture. All these corporate governance issues should uphold morality for a business to be termed as being ethical. The social systems or institutions in which the company operates like political, legal, economic, community and other systems should uphold morality. For example, if a company has business operations with another company which is not ethical, then the company cannot be ethical. An ethical business will only have a business or partnerships with those businesses which uphold ethics and morality for it to be termed as ethical. Corporate Social Responsibility (CSR) is a moral issue and reflects the organizations activities and status with respect to the perceived societal obligations (Weiss 39). Actions, behavior or morality decisions by an individual or management of a company can be used in determining whether the company is ethical. Moral standards must be upheld by all employees, and management of a company to make the company an ethical one. Analysis of two companies in UAE Arabtec Holdings PJSC Arabtec Holdings PJSC is a construction company in UAE and was founded in 1975. It offers construction services with the UAE growing market being its main focus. The company currently operates in Saudi Arabia, Qatar, Syria, Russia, Abu Dhabi, Dubai and Palestine. Algeria, Egypt and Libya are some of the additional markets which are being developed. The company attributes its success to the value it accords to its investors, suppliers, employees, customers and all other stakeholders when doing business. Its underlying success is also attributed to its corporate governance approach which goes beyond compliance with regulatory requirements. The corporate governance of the country provides a framework for establishing business integrity, responsible business practices and accountability to all stakeholders. Business ethics and CSR in Arabtec Holdings PJSC About us: Corporate Governance-Ethics Policy (http://www.arabtecholding.com/CorporateGovernance.aspx ) Arabtec Holdings PJSC has formulated internal polices which pertains ethical conduct of all its employees. The ethical policies of the company are aimed at identifying the expectations of the workers and to offer guidance to the company on how to handle common ethical problems which may arise in the course of business. The company hopes that with the help of the ethical policy, it will be able to reach greater heights in ethical awareness, avoidance of ethical problems and constituency in the application of ethics. The ethics policies include treating everyone and every stakeholder fairly with mutual respect regardless of their gender, religion, origin and race. About us: Corporate Governance-Corporate Social Responsibility CSR is a corporate self-regulation in Arabtec Holdings PJSC, and it has been integrated in its business model. The CSR policy in the company works as a built-in and a self regulating mechanism to monitor and ensure all ethical standards, international norms and laws are fully adhered to. The company has fully embraced full responsibility for its impacts on the consumers, environment, communities, stakeholders, employees and all members of the public. Some of its CSR activities include the reduction of fossil fuels, minerals and underground metals, reducing dependence on synthetic chemicals and emphasizing on the dependence of natural substances and reduction in nature encroachment. The company promotes public interest by encouraging community development and growth and also works hard to eliminate any practice which may be harmful to the public. The company’s CSR includes public interest which is always put into consideration in decision making. Johnson Controls Inc. Johnson Controls is a global industrial and technology which serves customers from more than 150 countries both in automotive and building industries. Johnson Controls has been mentioned as one of the world top ethical companies and has a branch in Dubai, UAE. Its headquarters is in United States of America. It has been ranked this position for four consecutive years by an Ethiphere. It deals with creating products and services to optimimal energy and operational efficiency of buildings such as lead acid accumulators, hybrid electric vehicles and interior systems. Business ethics and CSR in Johnson Controls Inc Page 6 from 2012 annual report: Environmental, Health and Safety Matters (http://www.johnsoncontrols.com/content/us/en/sustainability/reporting/GRI_report.html.) The ongoing global operations of the company are governed by laws which address the protection of the environment and worker’s health and safety. The company has also expended substantial resources globally both managerial and financial to help the company in complying with environmental laws as well as work safety laws. The company is also highly committed to the protection of its workers and the environment. All this is done to ensure all ethical polices are followed and to enhance its CSR activities. Page 5 of Global Reporting Initiative Report 2011: Ethics and Human rights Internal polices have been put in place to provide the company with guidance in connection to governance, human rights, environmental stewardship and other related aspects in the company. It reviews the policies annually to ensure relevance and the company has an anonymous ethics hotline which is available to all people inside and outside the company. The ethics hotline helps the company in capturing all information which helps in investigating, auditing and implementation of improvement actions. Page 5 of Global Reporting Initiative Report 2011: Environmental The company highly focuses on environmental performance which it applies to its customers. It continues to review its supply chains and operations in order to identify and ensure a continued improvement to make sure all its products are earth friendly. The company is also engaged in sustainability activities and especially in activities which reduce environmental impacts. Page 8 of Global Reporting Initiative Report 2011: Social Responsibility The company strives hard to ensure an environment which is free from any diseases a done which is physically and emotionally safe. It provides its employees with a healthful, and a safe place for work and this has seen the company record a decrease in the number of injuries. The company has also set high standards for safety and for its environmental performance all over the world. The company also offers medical services to all employees all over the world and also sponsors educational programs on the prevention and treatment of serious and common diseases. The company also promotes efficient use of resources to benefit all people across the world. In the last decade for example, Johnson Control Foundation has given millions of cash to support charitable organizations in areas of education, arts and social services. It also has a Blue Sky Involve employee volunteer program for fostering community development. Recommendations and Conclusion Each of the two company’s discussed has an ethics policy which guides the company in terms of moral standings and actions. Ethics should be upheld by each company otherwise any unethical behavior will come at a cost to the affected company. It is therefore important for each company to include the measures taken against any unethical behavior to the offender. This will be very important as the stakeholders will ensure that they do violate the ethics of the company for fear of the consequences that come thereof. It is also important for the two companies to state the ethical code of conduct to be followed by all employees and the relevant stakeholders. The code of conduct should cover several ethical issues like working hours, abuse or harassment, discrimination, forced labor, healthy and safety as well as benefits and wages (Keinert 38) In conclusion, Johnson Control Inc seems to be more ethical than Arabtec Holdings PJSC. Judging from the regulations and company achievements in terms of moral obligations, Johnson Controls Inc is a notch higher than Arabtec Holdings PJSC. The use of 24 hour ethics hotline monitoring system for Johnson Control Inc is an indication of how ethics and morality are taken seriously in the company. Unlike Arabtec Holdings PJSC, Johnson Control Inc has indicated its ethics and Corporate Social Responsibility activities in special reports like annual reports and Global Reporting Initiative Report. This helps investors, public and all other stakeholders to know the level of ethics in the company which also promotes confidence and trust and this may one of the major reason which has made Johnson Controls Inc have over 150 branches across the world; an indication of consumer and investor trust. Both companies need to apply all the attributes of ethics discussed in this course and more so Arabtec Holdings PJSC. The two companies should also build the right culture by increasing their ethics compliance programs as this would influence the ethical outcomes of the companies. Works Cited Ferrell, Odies, Fraedrich,John, Ferrell, Linda and Ferrell. Business Ethics: Ethical Decision Making & Cases. Cengage Learning, 2012, pg 211 Paliwal, Manisha. Business Ethics. New Age International, 2007, pg 100 Weiss, Joseph. Business Ethics: A Stakeholder and Issues Management Approach. Cengage Learning, 2008, pg 39 Keinert, Christina. Corporate Social Responsibility as an International Strategy. Springer, 2008, pg 38 Arabtec Holdings PJSC: Corporate governance. http://www.arabtecholding.com/CorporateGovernance.aspx. Accessed on 16th March 2013 Johnson Controls Inc. http://www.johnsoncontrols.com/content/us/en/about/our_company.html. Accessed on 16th March 2013 Global Reporting Initiative Report 2011. http://www.johnsoncontrols.com/content/us/en/sustainability/reporting/GRI_report.html. Accessed on 16th March 2013 Read More