Business ethics is the study of suitable business policies and practices that influence behaviour. Business ethics, if adhered to, ensures a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment (see Alexandra Twin, 2019).
The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. Business ethics goes beyond just a moral code of right and wrong; it attempts to harmonise what companies must do legally while maintaining a competitive advantage over other businesses. Fordham professor Robert Hurley suggests that customers or employees may well think that certain people or companies are ethical; that is, moral, honest, and fair: but that does not mean they should trust them. Trust, says Hurley, “comes from delivering every day on what you promise, as a manager, an employee, and a company. It involves constant teamwork, communication, and collaboration.” Trust comes from asking how likely the people you’re dealing with are to serve your interests, how much they have demonstrated concern for others, how well they delivered on their promises, how much they try to keep their word, and how effectively these skills are communicated.
Firms display business ethics in several ways including; equality or discrimination at workplace, racial or sexual harassment, corporate sustainability, corporate governance, corporate citizenship, insider trading, bribery, corporate social responsibility, and fiduciary responsibility. The law often sets guidelines for business ethics, however, other times business ethics provide a basic directives that businesses can choose to follow to gain stakeholders’ approval. These major ethical perspectives are discussed below.
All businesses have basic ethical and legal responsibilities; however, the most successful businesses establish a strong foundation of corporate citizenship, showing a commitment to ethical behaviour by creating a balance between the needs of shareholders and the needs of the community and environment in the surrounding area. These practices help bring in consumers and establish brand and company loyalty. many companies around the world are voluntarily adopting and implementing a broad range of sustainability practices as a response to emerging challenges and stakeholder expectations across the environmental, social and governance (ESG) domains. In doing so, they try to integrate corporate sustainability into their strategy, business models, and organizational processes and structures (Eccles, Ioannou and Serafeim, 2014). These domains are further explained below.
Adam Hayes defines corporate citizenship as a company’s responsibilities toward society. The goal is to produce higher standards of living and quality of life for the communities that surround them and still maintain profitability for stakeholders. There is a growing demand for socially responsible corporations, encouraging investors, consumers, and employees to use their individual powers to negatively affect companies that do not share their common values. Companies go through different stages during the process of developing corporate citizenship. Companies rise to the higher stages of corporate citizenship based on their capacity and credibility when supporting community activities, a strong understanding of community needs, and their dedication to incorporate citizenship within the culture and structure of their company.
Corporate governance is the system of rules, practices, and processes by which a firm is directed and controlled so that the interests of corporate owners and other stakeholders are protected. Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, senior management executives, customers, suppliers, financiers, the government, and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure. Good corporate governance is an essential foundation for achieving a strong ethics culture within an organisation. A company’s board of directors is the primary force influencing corporate governance. Bad corporate governance can cast doubt on a company’s reliability, integrity, and transparency; all of which can have implications on its financial health.
Environmental sustainability is defined as economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Our economic system has brought prosperity, but it has also led to unsustainable business practices because it has assumed that natural resources are limitless, which they are not. At present, when the companies’ aim is creating a high market value, their management must focus on all the aspects of the company’s impacts that will, in turn, provide a comprehensive view of the company. Such impacts include the company’s environmental behaviour in the meaning of responsibility for the environment (Kocmanová, A., Dočekalová, M. 2011, pp. 203–208).
In the United States, the U.S. Chamber of Commerce, which is supposed to represent the views of business, has been resistant to climate change legislation. However, several companies like Levi Strauss, Apple, Tiffany, Exelon, Pacific Gas & Electric, PNM Resources, and Mohawk Fine Papers have resigned from the Chamber in protest. Perhaps, then, business can begin to take the lead. After years of being slow to address climate change, major corporations including industrial giants that make products ranging from electricity to chemicals to bulldozers have begun to call for limits on global warming emissions.
The Equality and Human Rights Commission defines diversity as “where many different types of people are included”. Workplace diversity relates to age, disability, gender, race, religion and belief, sexual orientation and other protected characteristics identified in the UK Equality Act 2010(3). Significantly, it also includes differences in areas such as values, thinking and viewpoints, socio-economic background, experience and knowledge. Companies that are committed to diversity are making an ethical undertaking to recruit and treat employees fairly and without discrimination. Diversity in the boardroom sets a leadership example and sends a powerful signal to all employees about the company’s approach to equal opportunities.
Another factor that exerts its toll on an organizations human resource and eventually negate business ethics is sexual harassment. Sexual harassment can be defined as unwanted sexual attention that creates an adverse work environment. This means obscene gestures, sex stereotyped jokes, sexually oriented posters and graffiti, suggestive remarks, unwanted dating pressure, physical nonsexual contact, unwanted touching, sexual propositions, threatening punishment unless sexual favours are given, obscene phone calls, and similar verbal or physical actions of a sexual nature (Rotundo, Nguyen, & Sackett. 2001). The harassment may be by a member of the opposite sex or a member of the same sex, by a manager, by a co-worker, or by an outsider.
Globalisation or the global economy refers to the increasing tendency of the economies of the world to interact with one another as one market instead of many national markets. The global economy has primarily been enhanced by global transportation in form of air travel and instant electronic media exchange made easy by the emergence of the internet and the world wide web. The arrival of the web quickly led to e-commerce, or electronic commerce, the buying and selling of products and services through computer networks. This has led to world economies increasingly being tied together, connected by information arriving instantaneously through currency traders’ screens, CNN news reports, twitter feeds, text messages, and other technology. Money, represented by digital blips, changes hands globally in a matter of keystrokes. The global economy refers to the increasing tendency of the economies of the world to interact with one another as one market instead of many national markets. Air travel, the internet and world wide web allows everyone to be global resulting in rapid business start-ups, company mergers etc.
Corporate sustainability is a corporate strategy whose objectives are towards long-term company growth, efficiency, performance and company competitiveness; achieved by the incorporation of economic, environmental and social aspects into corporate management (Beattie. A, 2019). Beatie urges that corporate sustainability in investment falls under the terms ESG for environment, social, and governance or the acronym SRI (chen. J. 2019) which stands for socially responsible investment. It has three main pillars: economic, environmental, and social. They are informally referred to as people, planet and profits.
The environmental pillar is most critical. Companies are focusing on reducing their carbon footprints, packaging waste, water usage and their overall effect on the environment. Companies have found that practices that are beneficial to the planet can also have a positive financial impact. Lessening packaging material usually reduces overall cost on those materials, for example Walmart’s zero-waste initiative.
A sustainable business should have the support and approval of its employees, stakeholders and the community it operates in. considerations include child labour, fair wages, racial and sexual harassment, and safety at work environment.
To be sustainable, a business must be profitable. That said, profit cannot trump the other two pillars. In fact, profit at any cost is not at all what the economic pillar is about. Activities that fit under the economic pillar include compliance, proper governance and risk management.
In conclusion, business is a growing field of concern as organizations continue to expand and economies tending to a globalized environment. A critical understanding and Adherence to the pillars of business ethics benefits the organization, environment and communities alike. However, neglecting these practices often lead to legal battles, mistrust from stakeholders and unhealthy financial returns.
References:
- Beattie. A. (2019). Business: Business essentials. Business ethics. Corporate sustainability. Retrieved from https://www.investopedia.com/socially-responsible-investing-4689738
- Chen. J. (2019). Business: Business essentials. Business ethics. Corporate social responsibility. Retrieved from https://www.investopedia.com/terms/c/corp-social-responsibility.asp
- Hayes. A. (2019). Business: Business essentials. Corporate citizenship. Retrieved from https://www.investopedia.com/terms/c/corporatecitizenship.asp
- Hurley. R. (2011). The Decision to Trust: How Leaders Can Create High-Trust Companies “Trust Me,” The Wall Street Journal.
- Kinicki. A., Williams. B. K. (2016). Management: A Practical introduction (7th ed.). McGraw Hill Education.
- Kocmanová, A., Dočekalová, M. (2011). Corporate sustainability: environmental, social, economic and corporate performance. Acta univ. agric. et silvic. Mendel. Brun.
- Rotundo. M., Nguyen. D.-H & Sackett. P. R. (2001). “A Meta-Analytic Review of Gender Differences in Perceptions of Sexual Harassment,” Journal of Applied Psychology, pp. 914–922.
- Twin. A. (2019). Business: Business essentials. Business ethics. Retrieved from https://www.investopedia.com/terms/b/business-ethics.asp.
- United Kingdom. UK public general acts. (2010). Equality act 2010. Retrieved from http://www.legislation.gov.uk/ukpga/2010/15/contents
