Business Ethics and the Organization’s Responsibility

Abstract

This paper explores the notions of business ethics and responsibility. The concepts of ethics and legislation are studied and compared. The ideas of business ethics and corporate social responsibility (CSR) are discussed; the key notions of business law, including business torts and employment legislation, are considered. The specific difficulties that international and multinational companies have to face are pointed out.

The notion of ethics is much vaguer than that of the law, but its importance for business has been highlighted by numerous studies. In order to understand why adhering to the law is not sufficient and why ethics is considered to be beneficial for businesses to the point of becoming a competitive advantage, this paper researches a number of relevant concepts and ideas. Upon considering all the topics mentioned, certain conclusions regarding the significance of business ethics and law are drawn.

Legislation and Ethics

Both ethics and legislation are used to regulate human relationships in every sphere, including business. Even though it is a common belief that ethics is beyond and above the law (primarily due to the fact that it is used to describe more situations), it could be useful to mention that the latter is much more precise and stable (Blodgett, 2011).

Adhering to it, therefore, is easier and a violation of the law is followed by punishments of different severity, while an unethical decision connected to an issue that is not regulated legislatively cannot be officially punished.

Another popular view on the law and ethics relationships suggest that they are interrelated and interconnected (Blodgett, 2011). Indeed, the law appears to be stemming from ethics, and even though their fields do not always coincide, they definitely overlap, as they support and complement each other.

Given the relative optionality of ethical behavior, a business may choose to either observe only the law or include the principles of both law and ethics in its corporate governance. It has been proved, however, that the latter strategy is can be more beneficial for business as it helps to improve its corporate image and reputation (Blodgett, 2011). The relationships between business, ethics, and legislation are going to be discussed further in the next sections.

Business and the Law

As it has been pointed out before, the law tends to stem from ethical principles. It happens as the scandals connected to unethical behavior prompt the law to develop. As the world changes and new issues concern people, new laws arise, new restrictions appear. For example, as the concern of the environmental state of our planet grew, companies got used to taking into account certain environmental regulations; complying with the law has proved to be much more effective than attempting to disregard it (Peterson, 2012).

Apart from that, a particular part of the legislation is devoted directly to the sphere of business and may be related to as the business law. For example, the specific kind of torts, business torts presuppose “wrongful interference with the business rights” (Miller, 2014, 95). Such violations may include, for example, unfair competition, or wrongfully interfering with the business relations of another.

Businessmen must also take into account that they are responsible for the quality of their products and that it is legislatively stated (Jones, 2011). Apart from that, every stage of the relationships of employer and employees are also legislatively regulated through the labor and employment regulations (Miller, 2014). For example, discrimination must not be the basis for the denial of employment as well as an employee’s dismissal.

Adhering to the law is obviously ethical while violating it would most often be considered a violation of ethics as well. However, as it has been mentioned, ethical principles tend to incorporate a much bigger variety of situations, and business ethics is not an exception.

Business Ethics

Business ethics “denotes the special responsibilities which a person and a citizen consent to when he becomes a part of the business world” (Tuan, 2012, p. 550). Therefore, it incorporates the ethical rules that are used to assess and possibly regulate the actions of people involved in a business.

In order to understand the peculiarities of this group of ethical principles, let us a look at the corporate social responsibility (CSR), a new business ethics strategy that appears to be gaining popularity nowadays (Warren, 2011). This is a set of ideas based on the ethical principles of justice and “concerned with the commitment of companies to contribute to sustainable development, stakeholder interests and enhancement of societal conditions” (Tuan, 2012, p. 550). These ideas encourage businessmen to realize the responsibility they hold for their actions. Taking into account the impact that modern businesses have on the economic, social and environmental development of their countries and the world in general, one has to admit that the adoption of this strategy by modern businesses could be appreciated.

However, it should be taken into account that just like any other ethical principle the CSR does not compel, it recommends and encourages. As individual companies adopt and modify these recommendations, their own ethical codes are created. The latter include both legislative rules and the ethical guidelines that an enterprise chooses to use, most often those related to the values of “integrity, honesty, fairness, trust, and responsibility” (Blodgett, 2011, p. 41). Therefore, it is obvious that the major principles guiding business ethics are essentially those that are usually accepted by the society in general. At the same time, ethical codes tend to differ depending on the specifics of a business, its strategies, and its desired image (Blodgett, 2011).

While adhering to the law is inevitable for any legal business, ethics is essential only for those businesses that intend to build positive, ethical image and keep their customers satisfied. Since nowadays customers are quite knowledgeable and demanding, exhibiting an ethical behavior and following sound ethical guidelines should help a company increase its reputation (Pullen & Rhodes, 2014).

Globalization: International and Multinational Companies

The new age of international trade has brought along new legislative and ethical issues for multinational and international companies. Being more stable and easier to manipulate, the legislation that is used to regulate international trade and related issues appeared as soon as the need for it became apparent (Peterson, 2012).

The international labor organization was founded in 1918; the United Nations (founded 1948) offered its general consumer guidelines appeared in 1985; the organization for economic co-operation and development first suggested its Guidelines for Multinational Enterprises in 1994 (Warren, 2011). Therefore, while the nature of the law makes it possible to introduce international legislation, the problem of cultural, confessional and ethical differences is still acute and will most certainly stay acute for as long as cultural differences exist.

It is necessary to point out that as long as the cultural peculiarities do not directly violate the ethical norms of a company or community, they must be respected. It is obvious that confession- or culture-based discrimination is unacceptable and should be fought as any other discrimination. Even though the role of women in Islamic cultures may seem unacceptable to feminists, they must respect the freedom of choice of their peers.

At the same time, corporate ethics should not get erased because of the principles of tolerance and indiscrimination. Maintaining the corporate ethics and keeping its integrity is crucially important since, even though ethical principles may change with time, they should be relatively stable (Warren, 2011). Some kind of equilibrium between respecting cultural differences and respecting its own corporate ethics must be found by every international business.

Conclusions

While adhering to the rules of legislation is an obligation, following the principles of ethics is less compulsory but highly recommended. As the previous section suggests, there is no such thing as a “universal ethics”. Since it is not entirely moral to regard one culture above another, we might conclude that the ethical principles of any society are not the “superior justice” of any kind and are just as imperfect as the complex and stiff rules of law.

Still, while it may be not objective to regard ethics as a set of rules “superior” to the law, this conventional view presupposes that adhering to ethical principles is valued by the society. Therefore, the companies that include ethical guidelines in their strategies tend to improve their reputation and stakeholders’ trust. This fact turns ethical behavior into a kind of a competitive advantage which can be considered a rather immoral, but effective motivation for modern businesses.

References

Blodgett, M. (2011). Substantive Ethics: Integrating Law and Ethics in Corporate Ethics Programs. Journal Of Business Ethics, 99(1), 39-48. doi:10.1007/s10551-011-1165-6

Jones, L. (2011). Introduction to business law. Oxford: Oxford University Press.

Miller, R. (2014). Business law today. Mason, Ohio: South-Western Cengage Learning.

Peterson, E. (2012). Compliance and ethics programs: competitive advantage through the law. Journal Of Management & Governance, 17(4), 1027-1045. doi:10.1007/s10997-012-9212-y

Tuan, L. (2012). Corporate social responsibility, ethics, and corporate governance. Social Responsibility Journal, 8(4), 547-560. doi:10.1108/17471111211272110

Warren, R. (2011). Are we making progress in international business ethics? Humanomics, 27(3), 212-224. doi:10.1108/08288661111165240