Ethical Behaviour in Business and Non-Profits

Introduction

Entrepreneurial ethics is one of the challenges in forming the culture of civilised business, as ethics in general is the doctrine and the practice of behaviour of individuals according to the ideas about the proper, and the good in the form of ideals, moral principles and norms of behaviour. This doctrine is about the purpose of the person, and about the sense of his/her life. It is system of moral and ethical standards, including obligatory rules of people’s behaviour.

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The recent events have shown that even developed societies, from the economic point of view, are not insured from serious morally-ethical contradictions. The scandals with companies such as Enron, WorldCom, and Vivendi Universal, have forced the world community to take the issue of ethical behaviour in business as serious as any other aspect of entrepreneurial activity. This paper analyzes the issue of entrepreneurial ethics providing a personal reflection on the importance of incorporating such behaviour in shaping my career.

Ethics Defined

Entrepreneurial activity, as well as any economic and professional activity of capable citizens, has legal and ethical criteria, norms, and behaviour rules, the deviation from which threatens the subjects of enterprise activity with negative consequences. The laws of behaviour norms of the entrepreneur and the organizations are established by laws and statutory acts the non-fulfilment of which threatens with serious measures of punishment, up to bankruptcy and imprisonment. Therefore, a very important condition of the development of civilized business is not only the acceptance of the laws regulating enterprise activity, but also the formation of legal culture.

As a general definition, “ethics provide basic rules or parameters for how society conducts any activity in an ‘acceptable manner.” (Frederick et al., 2007). Ethical standards in business represent a set of behaviour indicators of citizens who are carrying out enterprise activity in various spheres of economy, directed towards the satisfaction of market’s requirements, particular consumers, societies and the states.

Entrepreneurial ethics are based on the common ethical standards and rules of behaviour which was summarized in the state and in the world, as well as the professional etiquette shown in this or that field of activity. In regards of the general ethical norms of behaviour, Entrepreneurial ethics are inseparably linked with such concepts, as honesty, conscience, authority, nobleness, politeness, ambition, vanity, shamelessness, hypocrisy, gloating, malignant gossip, revenge, insidiousness, roughness, and other concepts. Apparently, some concepts are connected with positive principles and lines of behaviour, and others – with negative. Only incomplete recitation of behaviour attributes of separate businessmen indicate the complex concept of entrepreneurial ethics which, as a rule, should be based on universal and humane principles, as well as on the common principles of the realization of innovative, competent, lawful, and fair business, contrary to routine, illegal, and incompetent business. In regards of the impact of taking ethical decision in the work place, it could be said that “ethical decision making is a challenge that confronts everyone involved in large or small enterprises.” (Frederick et al., 2007). “When an organization praises, promotes, gives large pay increases, and offers other desirable rewards to employees who lie, cheat, and misrepresent, its employees learn that unethical behaviours pay off.”(Sims, 2003 214)

The importance of ethical behaviour

For modern entrepreneurial ethics the questions of corporate social responsibility are aprioristic. The opinion, that the financial well-being of the company least of all motivate the abidance of ethical standards, is incorrect; the life and the business practice postulated the following statement: «Good ethics mean good business». Otherwise, negative reaction from customers and partners will inevitably lead to considerable decrease in the company’s profitableness, and the spread around doubtful reputation by the mass media will lead to the loss of trust. In that sense, the acknowledged attention of the enterprise toward the ethical standards can be reflected in the company’s public image.

When the values of a company are aligned with ethical behaviour, the marketing and public relations programs can be positively influenced. The importance of acknowledging the entrepreneurial ethics also can be seen through the effect of unethical behaviour on business in general.

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“…unethical practices have a corrosive effect on free markets, free trade and the free enterprise system. Unethical practices subvert the laws of supply and demand and they short-circuit competition based on classical ideas of product quality, service and price. Entrepreneurship cannot survive in unnatural markets.” (Frederick et al., 2007)

Case studies

World practice has a lot of examples of the implementation of ethics in the work places. Although most of the examples and case studies focus on the consequences of unethical behaviour which in most cases led to a scandal on the market, there are a lot of examples of conducting of so-called ethical policy or standards. These standards serve as guidelines for the company’s activity in the market and as an outline of their responsibility. In the profit sector, i.e. an organization which has a primary goal of making an economic profit, an example of an implementation of ethical policy can be seen through the company “Nestle”.

As it can be seen from the website of Nestle and their reports, the company is paying a great attention to the issue of ethical responsibility. “Nestlé believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughout the organization” (2004). Some of other areas of ethical principles can be seen in the following:

  • Nestle insists on honesty, integrity and fairness in all aspects of its business and expects the same in its relationships with all business partners and suppliers of mate­rials, goods and services.
  • Offers its co-operation with the relevant United Nations agencies, governments and the business community in their efforts to deal with the problem of child labour, which include the encouragement of universal primary education and all aspects of eco­nomic development worldwide.

The philosophy implemented by Nestle and the way it promoted its own codes and principles has led to the Nestle restoring its position in the market after the controversial allegations in unethical behaviour. The coverage of almost every moral dilemma in their policy shows that the company is now totally responsible for their actions in the market.

In the non-profit sector, i.e. economic institution that operates in business operations without seeking financial gain, there are also certain ethical standards that outline the main policy in their operations. “For Duska, the first step towards identifying the purpose of business, then, is to realize that business as a social practice was invented to serve a larger social good, in this case ‘‘to help itself (society) develop and survive”(Kline, 2006) Following the ethical responsibility of non-profit organizations, there are diverse results that might be resulted from different studies. Cases of unethical behaviour in the non-profit sector are evident, where “Incidents such as the misuse of funds by executives of the United Way and confusion over plans devised by the American Red Cross to allocate September 11th funds have heightened an awareness of ethical dilemmas within non-profit organizations.” (Pamela and Kelly, 2007). At the same time, a research conducted on the ethical responsibilities of German non- profit organizations shows that, “Those non-profit organizations are especially ethically motivated, as a result of carrying out their organizational purpose according to religious, social or political values and norms.” (Henry, 2004).

Personal reflection

The examples given of ethical implementation are specifically important, especially in outlining the results of ignoring ethical standards in business practice. Although I am still undetermined in the career path I am intending to choose, I am certain that in the time of changing legislations and laws the standards of universal ethical behaviour will remain unchanged. There is an opinion according to which, the problems of business ethics can be considerably simplified or eliminated if translated to legal context and transferred to lawyers. In general this approach can be expressed by the following phrase: “if it is legal, it is moral”. If this approach was accepted, it undoubtedly would simplify many business problems. However the overwhelming majority of experts agree in the opinion that nevertheless it is necessary to establish a distinction between a moral and legal estimation of any phenomenon.

In that sense, I understand the ethical principles in the context of business management as a more powerful tool in regulating the constantly arising dilemmas in controversial issues, specifically in light of the world globalization and the absence of unified standards.

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In that matter, the acknowledgement of the key factors in evaluating ethical risks can be of great importance. For managers of any level the understanding of the bases of ethics is extremely necessary, as he/she is constantly compelled to make decisions. How these decisions will be assessed by colleagues? What will be the consequences of these decisions? The acknowledgement of ethical standards would certainly help answering such questions. It is especially important to study all the components of business ethics in the international business, as with the exception of uniform norms and rules, there is a great variety of national and cultural amendments, rather significant in business relations.

Conclusion

Summarizing this paper, it can be seen that entrepreneurial ethics is an important and influential aspect of business management. The influence of ethical management is not limited to the internal policy of the company, but also promotes the advancement of the company image in the market. The statement that the profit is the only corner stone in business activities is no longer true. A proper model of moral development within the company can be essential in establishing business relations, and can be vital in building the company’s success.

References

(2004) Nestlé Corporate Business Principles. Nestle.

CATANESE, J. (2000) BUSINESS MANAGEMENT: Good Ethics Equals Good Business Practice. Waste Age.

CRANE, A. & MATTEN, D. (2007) Business ethics: managing corporate citizenship and sustainability in the age of globalization, Oxford; New York, Oxford University Press.

FREDERICK, H. H., KURATKO, D. F. & HODGETTS, R. M. (2007) Entrepreneurship: Theory, Process, Practice, South Melbourne, Thomson.

GOODPASTER, K. E. (2007) Conscience and corporate culture, Malden, MA, Blackwell Pub.

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HENRY, S. (2004) Ethical investment of German non-profit organizations – conceptual outline and empirical results. Business Ethics, 13, 269.

KLINE, W. (2006) ‘Business Ethics from the Internal Point of View’. Journal of Business Ethics, 64, 57.

PAMELA, C. S. & KELLY, A. R. (2007) CALL FOR GREATER ACCOUNTABILITY WITHIN THE U.S. NONPROFIT SECTOR. Academy of Accounting and Financial Studies Journal, 11, 75.

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