The Importance of Ethical Behaviour in Modern Business - Essay Example

You Ethics and Policies: Leadership Responsibilities You You 2 This work illustrates the importance of ethical behaviour in modern business. Seeking a distinctive ethical position satisfies both internal and external influences in regards to societys views on morality and can serve to classify one organisation as a business leader in establishing ethical policies. In todays world of high expectations for proper business behaviour, a code of conduct statement that publicly highlights steps to reinforce corporate actions can serve to make the company appear reputable. This work shows the relationship between organisational leadership and the implementation of ethical values. You 3 Ethics and Policies: Leadership Responsibilities Ethics can best be defined as standards of moral behaviour that are accepted by society as right versus wrong (Nickels et al, 2005). Businesses, as much as an individual, are held accountable for their actions in relationship to societys ethical expectations. Most modern companies are struggling to emerge profitable and reputable in a market that is saturated with competition. One of the tactics used to increase positive visibility in the business world is in establishing a distinctive ethical position. As much important as a companys mission or vision statement is the establishment of a Code of Business Conduct and Ethics annual report. The purpose of this statement is to apply ethical standards to all employees, directors, officers, and possibly subsidiary groups that define disciplinary actions for those who breach the code of conduct. What this serves is to separate the company from any possible negative assessments of its policies on behalf of consumers and to send the message that any deviation from ethical code will be immediately corrected through new initiatives or employee accountability for the act. In establishing a distinctive ethical position, most companies tend to address issues such as conflicts of interest, confidentiality, fair dealings with other entities, compliance standards, and sometimes cultural ethical standards when dealing with international organisations. The publicity gained from such an ethics code aids not only the business by securing its ethical actions, but also serve the communities, shareholders, and can prevent costly legalities brought on by unfair business practices. These types of lawsuits can be as minor as a breach in employment policy to as extensive as misrepresenting company earnings to inflate company stock. In a world where multiple businesses have been flattened due to false representation of company revenue, offering a You 4 distinctive ethical position also allows those who stand to profit from successful operations a feeling of confidence in the businesses practices. It is quite clear to see the external pressures for a company to conduct acceptable business, but often, the internal mechanisms at work in driving employee compliance to a code of ethics is not as apparent. To offer a more substantial view of a companys moral code, businesses sometimes turn towards advertising to highlight company initiatives to the consumer audience. Marketing statements such as "We have your best interests in mind" or "We treat your problems like our problems" send a clear message of the companys level of respect and its interest in exceeding consumer expectations. These attempts at creating a distinct ethical position aid in driving customer satisfaction and, assuming no negative publicity for breach of ethics, can drive profitability as the consumer views the company as an entity worthy of trust. It has been said that actions speak louder than words and a company who presents itself, on paper, as a business with a firm ethical policy must also demonstrate those actions possibly by chairing committees regarding pollution issues, employment/race initiatives, or simply community involvement. Corporate social responsibility affects everyone who is directly involved with the companys operations and those who utilize its products or services. Offering a visual and written presentation of a companys awareness to ethical practices will, likely, drive increased profitability in the long term. You 5 As mentioned, external pressures on an industry to conduct ethical business often serve to drive the companys ethical policies. No more apparent are these pressures than on British Airways (BA), an international airline that serves the UK and foreign nations. In the early 1990s, British Airways was under continuous scrutiny for supposed unfair business practices called the BA "Dirty Tricks" campaign, in which BA was cited as using slanderous comments against competitor Virgin Airlines, who was overtaking British Airways most lucrative routes. In the lawsuit, BA was ordered to pay 3.5 Million pounds both to Virgin and its leadership. Emerging from such negative publicity is not an easy task and, arguably, became the catalyst for the creation of British Airways Code of Ethics. Outside of attempting to reduce the negative impact of the "dirty tricks" legal battles, British Airways, as an international carrier, must take into consideration specific factors when creating its expectations for proper business practices. First, BA must adhere to cultural awareness, considering that many of its passengers hail from foreign nations. Though a rather simple pressure on the airline, it must train all of its flight attendants, airport clerks, and all other employees who deal with customers to recognize cultural differences and utilize a non-discriminatory policy based on religion or race. To effectively ensure compliance to such a directive, British Airways must conduct proper training dealing with international customer service and ensure that each employee has a clear understanding of the companys expectations regarding discrimination. Chief Executive Rod Eddington categorises British Airways key ethical goals as part of the "BA Way" in that the company takes a survey-based measure of community respect (Eddington, 2005). You 6 More pressure for increased security has also been exerted on the airline industry, especially since post 9/11 terrorism. As an entity that, essentially, carries the lives of its passengers in its hands, British Airways has recognised its crucial role in providing a safe environment for its passengers. As part of the "BA Way", the airline recognises that in order to drive a business with sustainable growth and to improve market share, it must earn the trust of its customers by providing a sense of overall security when flying BA. In the same respect, the employees must also feel safe (not limited to just flight attendants and pilots) in their working environment. Internal pressures from employees as well as external from customers has given British Airways just cause to reinvent airline safety measures. BA also recognises a growing concern about environmental issues and noise reduction at key airports, including Heathrow. As part of an ongoing process to illustrate the companys awareness of these issues, BA has taken an active role in implementing programmes designed to reduce engine noise and lessen harmful engine emissions that serve to negatively impact societys views of the airline. Environmentally sound policies, as part of British Airways corporate responsibility, also indicate to the public that the company is willing to change its practices to best meet the needs of the community at large. You 7 All of the issues involving ethical business begin with strategic planning and directives that start from British Airways leadership. First, communiqués from the Chief Executive which highlight improvements must be communicated to everyone who serves to influence the operational future of the airline. Strategic objectives are the first step in securing positive ethical programmes, however, these objectives cannot be carried out without the participation of the entire employee population at BA. British Airways states that financial success is a critical objective to their business. Understandably, a company cannot function without proper investments both financially and to the communities it serves. The Chief Executive must ensure that all officers involved in financial reporting conduct their accounting with the utmost accuracy. To guarantee compliance to these ethical standards, proper training must be conducted for every employee involved in monetary transactions within British Airways. A checks and balances system must be incorporated so that quality-monitored departments are providing accurate information for shareholder income reports. Offering justified financial figures starts with effective leadership. As much as any other company, BA must have a strong operations management system and human resources department. Operations management is crucial in monitoring the internal processes of the airline as this system of managers oversee flight capacities, regulation of incoming material necessities, flight maintenance, and many other factors both major and minor that affect the daily operations of the flights. Failure to provide effective operational awareness could, in a worst case scenario, ground flights because of improper resource allocation. Following a traditional management hierarchy that moves from the top down puts more pressure on senior leadership to ensure employee productivity in aspect to operations and ethical necessities such as safety. You 8 An effective HR department in British Airways would work hand in hand with operations for implementing ethical training, proper staffing for security needs, and promoting compliance to all corporate ethical policies. Essentially, in order to drive total compliance to ethical expectations, there is little difference in management structure for an airline than that of any other company. To ensure that a relationship is built with the community, the senior leadership must ensure that all areas involving public relations are well-staffed. British Airways is actively involved in international initiatives that focus on community involvement. In BAs "Change for Good" partnership with UNICEF, British Airways has gained momentum in creating a positive image of the entity by direct management involvement with human services. Lastly, from an organisational standpoint, British Airways must develop relationships with its suppliers, distributors, customers, and contractors in order to ensure an external compliance to its ethical code. Sometimes, requests for a company to "push aside" its ethical policies come in the form of external influence. Suppliers, perhaps in British Airways case a fuel supplier, might find BAs request for environmental compliance to be a strain on its profitability. As a leader in presenting positive image in regards to ethics, the company must develop strong leadership to deny deviation from its environmental policies. This cannot be accomplished without a disciplinary system designed to hold individuals accountable for damaging the companys image. As indicated, British Airways must constantly monitor its organisational structure and its employees to remain a leader in ethical responsibility. You 9 Much of the discussion surrounding British Airways Code of Business Ethics has been surrounding the consumer and the community. In the same respect, ethical issues such as confidentiality and misuse of information should be addressed. BAs ethics statement speaks of protecting the companys own interests and relates directly to the employee. BA believes that employees owe a duty to their company and play a crucial role in helping to advance the business interests. Employees are instructed that disciplinary action will be issued against the employee should they take an opportunity away from the company using falsely acquired private information. Such a situation may not seem crucial, but damage to a companys business opportunities can mean a lower stock return due to decreased profitability. It is logical to assume that job security is a major factor in the employees objectives, and mishandling confidential information could jeopardise that security. In essence, the employee must recognise his role in aiding the airline and not take advantage of BA. Another ethical issue facing British Airways is in employee relationships. As part of fair dealing, BA has expressed in its Code of Business Ethics that no employee can take unfair advantage of anyone through manipulation or any other unfair practice. But in terms of fair dealing, the airline must conduct the same principle of business. In 1999, the European Commission fined BA six million pounds to running a programme that gave higher commissions to travel agents who sold higher numbers of BA tickets. It was determined, legally, that BA violated fair competition laws through the incentives programme. As a forward measure, British Airways has likely reprimanded all employees who were involved in the commission programme and has set ethical standards to which employees must now conform when dealing with travel agencies. You 10 Another aspect of ethics when relating to large companies, such as British Airways, is in the publics expectations that a portion of the entitys profits should benefit those in need. As part of BAs ethical practices policy, they have donated one million pounds in cash and cargo space for support efforts with the Asian Tsunami that devastated the region in December 2004. Setting the example of leadership in assisting the victims, customers of British Airways donated 800,000 pounds in conjunction. Establishing a task such as this major relief effort is not an easy process as it most likely involved utilizing a large amount of its employee resources to ensure that the relief effort was a success. By publicly endorsing the use of its airspace, cargo area, and financial resources, British Airways helps to maintain the ethical premise that it maintains compassion for those who are afflicted. Societal ideals surrounding ethical treatment of those in need most likely acted as the catalyst for the relief effort, but the impact to the business image has most assuredly been enhanced as a humanitarian agency. In light of BAs historical negative publicity, it is not unreasonable to assume that ethical codes of conduct remain on the forefront of the companys objectives. Because British Airways is largely a service organisation, creating partnerships based on trust and cooperation must be the target of their publicity campaigns. In order to make its policies appear credible, BA has most likely adopted a significant portion of its resources into establishing continuous improvement initiatives, including ethical campaigns. Most of the literature available in relation to BA shows that the company takes its ethical policies very seriously and holds significant accountability for anyone who breaches the companys expectations. Much of the discussion surrounding BA deals with the company striving to You 11 maintain a positive image throughout the international community. The capability of BA to successfully implement new ethical policies definitely lies in utilising employees skills. As an ethical leader, British Airways must offer due compensation and reward for the positive adherence to the ethical code of conduct. Throughout history, companies that fail to reward hard-working staff often come under fire for unfair labour practices. British Airways announced recently that the company has created an incentive programme designed to recognise outstanding employee performance. One might argue that fair compensation is not necessarily an ethical responsibility, but in order for the company to maintain profitability through consumer confidence, the day-to-day activities of the employees must reflect the ethical mission of the company. To illustrate, a ticket agent who acts dismissive to foreign customers due to ethnicity, will surely drive away that customers further business. If the company notices a substantial increase in consumer satisfaction, most likely the increase is due to fair treatment of passengers. This recent implementation of an incentive programme sends the message to customers and employees alike that the company takes its ethical policies very seriously. In essence, the proof is in the proverbial pudding, and British Airways seems focused on distributing employee reward. One last ethical issue facing BA lies in securities laws and insider trading. It is illegal for an employee of the company to issue undisclosed investment/financial information to outside entities for the sake of financial gain. As part of British Airways ethical policies, such insider information trading is strictly prohibited. Though the legal understandings of investing based on privy information is relatively common knowledge, the evidence points to BAs firm stand on distributing that it is an unacceptable practice, which sends the message to all of the investors that BA stands for integrity. You 12 Whether British Airways attempts at establishing an ethical code of conduct are genuine to its true belief system may never be known. However, it is clear that BA has allowed the community to carry a fair share of negative opinion about the company. In contrast, the entity (whether acting under pressure or not) has taken a distinct leadership position against its competition when it comes to addressing ethical issues. BA has even recognised the possibility for waivers to its ethical code and invites employees and officers to contact the Company Secretary with issues surrounding its ethical policies. What this seems to encourage is a free exchange of ideas or that the company allows room for continuous improvement, which is a commodity in regards to distributing ethical expectations. It would seem that the company realises that its future profitability and ability to increase market share rest on consumer and investor opinion. To invest in a company that plans for the future is a wise investment and it would seem that British Airways is well on its way to becoming a company worth benchmarking because of the stand it takes on conducting proper, ethical business activities. You 13 References Nickels, W., McHugh, J., & McHugh, S. (2005). Understanding business. 7th ed. : McGraw-Hill Irwin. p. 102. Eddington, R. (2005). Corporate responsibility report 2004/2005. Retrieved Mar. 14, 2006, from www.britishairways.com/travel/corpresp05fwd/public/en_dm. Read More