Ethical Standards in Business

Introduction

Ethical standards in business relate to the study of moral awareness, character, and conduct that are applicable to business firms and professionals. The main questions arising in ethical consideration are: what is right, proper, and just in its present context? These terms and questions are going to become more important in a future business environment. The study of business ethics can be seen from different directions of business. Business Ethics relates to the need for ethical values in business decisions and plans. All business activities are based on two types of performance-based on which its success rate is measured. These are Economic Performance and Social performance. “Business ethics consists of a set of moral principles and values that govern the behavior of the organization with respect to what is right and what is wrong. It provides a framework on which the organization could be legally governed. The employees have to inculcate ethical reasoning for the operationalization.” (Business ethics and Standards). A business firm needs to give priority to its economic performance and, at the same time, also be required to ensure its social performance and responsibility to society. This study discusses the problem of an organization’s social performance and economic performance. The economic performance deals with an organization’s main objectives, like profit, revenue, and cost, and the social performance of an organization is correlated to its responsibilities to society. In other words, the social performance of an organization takes into consideration the ethical values in business. Ethical values are very important in business. The applicability of ethical principles is crucial for leading the business towards the goal of accomplishment. Even though the implementation of ethics in business is an oxymoron, the adaptability of ethical principles in business is essential.

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Moral Standards

Moral standards mainly relate to values of fairness, honesty, respect, and truth. These standards define what is right and wrong. A manager needs to ensure that all these values are imbued in the activities of the business. Each individual develops his/her own values and beliefs through exposure to the cultural and religious context. Generally, their surrounding background environment influences these values and norms. These values and norms, in turn, influence all activities they indulge in. People believe in the rule of laws and regulations, and on the basis of this, it is possible to govern human conduct in society. The moral standards are mostly positive. Society prescribes a minimum set of moral standards that help to govern the behavior of an individual within a community. Moral Theory means “a set of moral principles which systematically link moral beliefs to one another by means of a set of coherent moral principles. A theory in any area offers the opportunity to define terms in uniform ways and to relate a set of ideas to one another in a consistent manner. The moral theory does the same thing with moral ideas.” (Moral Concepts and Theories). The lack of relationship between moral standards and legal requirements is highly influencing business and society. Moral standards are the means of judging whether an act is right or wrong. Moral standards are mainly based on emotional selection rather than rational determination. The moral standards of members of a society may be based on a lack of information that leads to corporate conduct. So moral standards determine the rightness or wrongness in human behavior.

Corporate Social Responsibility (C S R)

Corporate Social Responsibility can be understood as an organization’s responsibility towards its stakeholders, including society. Profit maximization can be stated as the main aim of all organizations. The economic performance of the organization is gauged in terms of the volume of profit it makes. Another area is the organization’s social performance that relates to its responsibility to society. Corporate responsibility deals with these areas of business ethics – Sustainability and growth, environmental management. CSR deals with the manner in which an organization balances its responsibilities to its stakeholders and to others. Due to the proper application of the concept of CSR, it is very necessary to take into account the needs, demands, and requirements of different stakeholders. “A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. (Commission Green Paper 2001) “Promoting a European Framework for Corporate Social Responsibility,” COM (2001) 366 Final. (Corporate Social Responsibility, 2007). It is very clear that CSR implementation of which helps us to overcome various social and other environmental as well as economic problems to a great extend. Both business strategy and the concept of CSR should be merged together for the effective functioning of a business enterprise. Through the applicability of CSR, every business organization aims to incorporate several activities like economic, environmental, social, and other relevant factors. It helps to improve the potential skill and ability of a business firm.

There are several tools using for the proper maintenance of an effective CSR, which vary as per the different situations prevailing within the organizational surroundings. The CSR tools are providing its major area of attention towards principles and code of conduct and some other ethical issues and concepts. The principle of CSR is giving stress on adequate improvement for the industry as a whole. The emergence of Corporate Social Responsibility helps to maintain the co-relation within and outside the enterprise. The essential aspect of CSR is that to maintain operational plans, policies, and procedures throughout the organization.

Conflict of Interest

Conflict of interest deals with a category of person or group of persons whose interest of benefits is in direct conflict within the interests or benefits of the company. Employers are prohibited from interfering with extraneous activities other than their responsibility towards a company, or in some times, which are in conflict with, or prejudicial to the interests of the company. It provides a way for possible behavior for the organization in its strategic planning and routine operations. It is very important in the modern business world to achieve business success and improve an organization’s image. All organization has their own ethical codes to ensure their social obligation. These are applied in their day-to-day operations. The moral responsibility of an employer is to provide a better work environment for their employees. Unfortunately, even passage of these laws and regular inspections may turn work environments into unhealthy and even dangerous zones. The modern business world is beset with the challenges of higher competition. Employees play a very important role in a business firm. Good employee welfare and a cordial employee-employer relationship are essential for organizational success. “Conflict of interest should be assessed in terms of whether the interests or personal circumstances of the staff member could influence, or could appear to influence, the performance of duties assigned to that staff member. If the staff member is in doubt as to whether a conflict of interest exists, the staff member should implement the procedures set out in the Conflict of Interest Policy and Procedures.” (Conflict of Interest, 1999).

Conflict of Interest occurs when the members of an organization are in a position to influence the decision made by others. At present, conflict of interest helps only in increasing the competitive levels of the organizations.

Business ethics is a system, which deals with the moral principles in a business environment. It provides a way for possible behavior for the organization in its strategic planning and routine operations. It is very important in the modern business world to achieve business success and improve the overall image of the organization. All organizations have their own ethical codes to ensure that in the fulfillment of their social obligations, these ethical codes are applied to their day-to-day operations. Strategic decisions of an organization ensure that their economic goals like profit maximization, volume, and growth of organization are influenced by their employees, customers, and other stakeholders.

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Ethical decisions are not simple choices between right and wrong. In the present day competitive world, many organizations are only focusing on their ultimate goal of profit maximization, and they are not concerned about their means to achieve goals. Modern managers have realized the importance of ethics in business, and so they give more priority to ethics in their business decisions and try to ensure their decisions are ethical. Profit maximization is the main purpose of business, and all managers shall ensure that their activities are ethically oriented towards fulfilling this objective. Theory of ethics describes that all managers are focused on ethical values in all their business activities as well as in their drive for profit maximization. Ethical values are important to management, and the management stresses that their decision is in conformity with ethical norms in their organization’s environment. Business ethics also lays emphasis on the importance of maintaining good relationships and cooperation with employees, customers, and all other stakeholders in the business. All strategic decisions of organizations are influenced by their ethical values in business. These decisions may include the development of a new product or the setting up of a new manufacturing plant, and in all these decisions, the elements of ethical values should be present.

Some organizations only allow a poor work environment for their employees. It is unethical and against the basic tenets of business morality. An organization’s responsibility to its employees is to provide a positive work environment and growth opportunities. Other strategic areas are business expansion and diversification. These strategies may cause the over-exploitation of natural resources and pollution, which could be detrimental to the whole society. The ethical decision in these areas of business is to sustain and nourish the whole society and environment. An organization needs to ensure that they meet social responsibilities before making strategic decisions in the areas of production. All organizations need to protect the environment from pollution and other unethical activities. Strategic decisions of an organization must ensure that their activities do not adversely affect the environment and society. In large utility organizations, the government holds a large part of the stakes. Ethical management activities are achieved by minimizing government regulations in these institutions. All organizations are obliged to obey the relevant rules and regulations framed by the respective Governments. Organizations need to make strategic decisions for their future goal achievement and for policing ethical values in business. “A conflict of interest is a situation in which financial or other personal considerations have the potential to compromise or bias professional judgment and objectivity.” (Foundation Text).

Ethical problems are mainly faced by the management, especially in case of conflict between the economic and social performance of an organization. Ethical problems in management are very significant because the decision taken by the management will affect the other workers in the organization. Business ethics has to be considered as a management discipline. “Attention to business ethics is on the rise across the world, and many companies realize that in order to succeed, they must earn respect and confidence from their customers. Like never before, corporations are being asked, encouraged, and prodded to improve their business practices to emphasize legal and ethical behavior.” (Business ethics and corporate social responsibility, 2005).

Business ethics and social responsibility are close interrelated. The role of ethics in business is the implementation of ethical principles in business and to society as a whole. The ethical issues in a business are reflected highly in its socio-cultural values and how business enterprises react to real-world situations that impinge on inbuilt ethical mores. When Ethical principles are vertically integrated throughout the organization, it leads to the overall development of the business and contributes to the well-being of the whole nation. In business, as also in the field of commerce, ethical principles hold an uncompromising position for decision-making and other processes. It is necessary to maintain a balance or equilibrium between the business laws and the application of ethical principles. Through this, it is possible to maintain the competitive markets, providing protection to the key workers and serve the economy. Ethical dilemmas are conflicts between economic needs and social orientations of a business concern and need to be resolved to usher in an era of growth, development, and prosperity.

Conclusion

It is very important that the corporate is able to strike the right balance between profit maximization and good governance through equitable wage policies, sound administration, and solid ethical values. But this is easier said than done. In todays’ corporate world, management is faced with a plethora of vexing issues to tackle, each often in variance with the activities of competitors and business rivals. The soundness of an ethical policy would lie on the high moral grounds on which it has been established and its practice ability in fast-changing business environments, and also its ability to have flexible options to be able to face challenging situations from any corporate field activity in the future. It is on ethical values that the entire organizational structure is founded, and it is this facet that plays a predominant role in the success or debacle of any organization. The corporate annals of many giant Corporations, present or defunct, bear ample testimony to this truth of this statement.

Works Cited

  1. Business ethics and Standards. BNET Resources. Web.
  2. Corporate Social Responsibility. Enterprise and Industry. 2007.
  3. Conflict of Interest. 1999.
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