Operating an Ethical Business

Introduction

All persons in society, whether in the private or public sector, are involved in ethics. Ethics is defined as the discipline dealing with what is good or bad and with moral duty and obligation. Thus personal ethics has been referred to as the rules by which an individual lives his/her personal life. Business ethics is concerned with truth. Consultants’ fairness and justice and accounting ethics pertains to the code that guides the professional conduct of aspects such as the expectations of society and customers, social responsibility, consumer autonomy, and corporate behavior in the home country as well as abroad (Lee, 2005). There is a big difference between personal ethics and business ethics but they interlock at different stages. This paper will look into the advantages of upholding ethics in the business arena; it will also discuss some theories of ethics and finally analyze how ethics can affect the media (as an example).

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Role of Ethics in Business

Business ethics has become a well-recognized aspect of managing firms today. Due to an increasing interest of society in the responsible behavior of firms, many firms are nowadays concerned about values like integrity and honesty and are developing ethical codes to foster responsible behavior of their employees. Ethically, therefore, managers must produce the greatest good for the greatest number of people, locally and globally, in these days of pervasive globalization of business. Managers should recognize that customers and all other stakeholders of their companies have a right to quality products and services, to meet their existing and emerging needs at affordable prices, all times, and should be guided by fairness and equity as well as impartiality (Moon, Et al, 2001). Managers must institutionalize ethics in their decisions and daily activities thus applying integrity and integrating ethical concepts with daily actions. This can be achieved by:

  • Establishing an appropriate company policy or code of ethics, so as to institutionalize ethics organizational behaviour both at management and board of directors’ level
  • Using a formally established ethics committee
  • Teaching ethics to employees. It has been established that ethical standards vary from society to society and from country to country and should therefore be taught to ensure uniformity in understanding and applicability across the world, particularly in these days of increasing and pervasive globalization.

Ethical Codes and Standards

Countries and companies should institute ethical codes and standards of doing business to avoid the unethical conduct that has been experienced in many companies in recent times. Countries and companies that have enhanced ethical standards in their business environment and there is empirical evidence that companies that have enhanced ethical behaviour perform better, financially, in the long run. Ethical codes go far than most policy statements in that they are focused on what is important in business today and on matters of what are right and wrong in:

  • Product quality;
  • Business dealings; courtesy towards both internal and external customers and suppliers;
  • Employee compensation.

The codes define ethics as a set of moral principles or values used by organizations to monitor the conduct of both the employees and the organization in how they carry out their activities both internally and externally. They define managerial ethics as the standards of conduct and moral judgment used by managers of an organization in carrying out the business and in making business decisions (Dobson, 1997).

Ethical Standards and Corporate Governance

According to Machan (2007), corporate governance involves the manner in which a company is managed to create and distribute increasing value to its stakeholders. This includes the structure of the board (audit, nomination, and compensation committees), management/board relationships, carrying out value creating activities, shareholders ‘ rights, record keeping, information disclosures and management compensation and its disclosure. The holy trinity of good corporate governance is the notion of shareholders’ right to question board/ management decisions, transparency and management’s and board’s full accountability for their actions. Effective corporate governance is where the shareholders have a right to regularly question the decisions of the board and management, the decisions of the board and management are transparent and both are fully accountable for their actions. This is ethical behaviour in its true sense. Transparency and accountability force management and the board to be disciplined and ethical in everything they do. Therefore, ethical boards and management are high in effective corporate governance. There is a direct link and a positive correlation between a company’s competitiveness and financial performance on one hand and the effectiveness of its corporate governance and its ethical behaviour on the other hand.

Ethics and Social Responsibility by Companies

Managerial ethics are related to social responsibility. Social responsibility is a strategic issue in managing organizations today. Ethically, it is the obligation of an organization to involve itself in activities that protect and improve the welfare of society along with its own interests. Corporate social responsibility on the other hand is a term often used in reference to the concept of organizational responsibility as applied to business organizations and the larger environment they operate in. This includes creating and distributing increasing value for all the stakeholders and supporting community welfare initiatives in education, health, and the physical environment. These responsibilities have largely been ignored, and to a large extent, abused in the recent past through shameful, fundamentally flawed and value destroying practices by certain companies. These responsibilities are, however, taking centre stage in managements’ strategic thinking in global businesses today (Kingsolver, 2008). Organizations now feel that they must meet the “Triple p” bottom line expressing the expectations of stakeholders with respect to the firm’s contribution to profit, planet, and people in order to get a ‘license’ to operate sustainably. As a result, it has become more important for firms to integrate corporate social responsibility in their strategic positions and organizational structure. No company can succeed in today’s fiercely competitive business environment without building strong social responsibility programs into its strategy. A good example is Starbucks Corporation of the USA, with its commitment to its global corporate citizenship program. Starbucks is a giant coffee shops owner worldwide. In 2001, the company launched an innovative and refreshingly proactive social responsibility pilot program called the preferred supplier program to attract and reward coffee growing farmers worldwide, committed to socially and environmentally responsible farming. The company reasoned that the farms that took the best care of their employees and land would be the most sophisticated, responsive, and responsible suppliers -just the sort to help Starbuck’s needs to fulfil its aggressive growth plan (Duska, 1999). The farmers who adhere to sustainable environmental practices, responsible social practices, and a given economic criteria are rewarded and paid more and have long-term business contracts. The program helps Starbucks to obtain long-term quality coffee and stem growing criticism of exploiting poor farmers in developing countries. There are four important tools in improving ethical behaviour, corporate governance, and social responsibility in organizations:

  • Have a good code of ethics, social responsibility, and corporate governance prepared for the purpose of guiding directors, managers and employees;
  • Have ethics, social responsibility, and corporate governance committees, at the managerial and board levels, to guide in the development of ethical, social responsibility, and corporate governance standards and to review them to meet the ever changing needs of stakeholders;
  • Do regular ethics, social responsibility, and corporate governance audits, by having systematic efforts to assess conformity with company ethical, social responsibility and corporate governance codes and policies.
  • Constantly review and, where necessary, change the codes, the standards and social responsibility strategies to meet the changing needs of employees and all other stakeholders;
  • Fully invest in areas that improve the welfare of communities in which companies operate, including education, health, support of small and micro enterprises and protection of the physical environment to ensure sustainability in growth of the businesses.

Internalization of Ethical Standards

With globalization of business, there is need for developing international ethical standards and codes to be applicable to all companies in the world. With advances in information communication technology, it will be easy to internationalize and communicate these standards and codes. There is a precedent to go by. The International Accounting Standards Board has been able to develop international financial preparation and reporting standards that are being used all over the world today in preparing financial statements by companies worldwide (Jones, Parker, & Bos, 2005). They were previously not applicable in American companies, but since the recent corporate seals, the Securities and Exchange Commission (SEC) is requiring that they be made applicable to American companies too.

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Theories of Ethics

Consequentialism Theory

Consequentialism ethic theory explains that we take a certain action or thing to be morally right or wrong when we weigh the results that come out of it, which are the consequences that are as a resultant. Every human being has one noble drive that defines what we also do, this drive is happiness, we are made to maximize happiness and all costs minimize sadness. We go to school, work, and we make the life decisions with this drive at our unconscious world (Darwall, 2002). The problem that we now have is that happiness means different to different people, but basically if we can have an ideal situation, and we are confronted by various choices to make, the best choice would be that one that will give happiness to the greatest number or alternatively the best choice is the one that minimizes injury to the greatest number. This concept has been used in various categories to explain a situation and as well can influence the market situation of a commodity either negatively or positively (Goodman, 2009). The theory does not give any consideration on the people that are involved in the system of production but the focus is on the level of utility that the produce will provide. In business there are some consequences that are as a resultant of a certain action; let’s take an example, if a certain program is aired, for example a program that portray witchcraft as paying, then the population that know the negative effect of witchcraft is likely to campaign against the television. The consequences that are likely to be as a result of watching the movie are not favourable and thus the failure of the station can be seen as a result of the consequences. If the business that someone is engaging in is production of flowers, the consequences of such a business should be interpolated. They have a positive influence on the economy of the producing country (which is a favourable consequence) but it affects the environment in a negative way (which is the unfavourable consequence). For an investor who is venturing this business he is supposed to interpolate these and aim to make the consequences as favourable as possible. For example he may channel his social responsibility programs to improving the environment; this will change the image that the people see the business in and the consequences are more likely to be positive and gain to the business before a decision is made, then resultant should be looked into. In this theory “the end justifies the means” (Scheffler, 1994).

Utilitarian Theory

Ethics of value put weight on the individual who is undertaking a certain duty. The main focus here are not the consequences that are produced by the acts, but it is based on the motive or the character portrayed by the person who has made a certain action. The most important thing in this ethics is the development of the desired right virtues that an individual should have at all times (Rasmussen, 2005). The virtues are the ones that will be defining the kind of decision that he is going to take. The pleasure that a certain action is going to give, and to the number of people who are going to get the pleasure is the main concern; if an action is thought to bring more pleasure to a large group, this is the correct thing to do given the available alternatives. The value and the worthiness of the action is the most important thing. The majority rule. This theory puts more weight on the inner feeling of the individual and the physical products are not of essence. It is seen as the theory of quality and not quantity (Singer, 1993).

The criteria and the motive that the business is made up with are of great importance. Using the example of flower business a utilitarian will reason that the aim of the flower firms is to benefit the society. The aim of the flower business is to create employment and to contribute to the economy. This is what is important for now and thus the business is legitimate (Shaw, 1996).

Norm Theory

This means conducting the business in a way that the greatest majority would accept and find as normal. If you are doing something then the entire population needs to be comfortable with the actions. You don’t have to injure one population at the expense of the other. This theory places some relevance to the culture that a certain society enjoys; the business should be in line with the culture of the society. This will determine the success of the business. The set of believe and the way people do things is of importance to the entire performance of the business. If the society believes that doing something is the right thing to do, then a wise investor is the one who does things in line with this belief. He should at all times ensure that the business is in line with the culture. Other than culture, religion is another one that the business man should not be seen as contradicting; at least an investor should be aware of the level of influence that he is going to get from the business environment. If the religion determines the action of the society in a big way, the way out is to put the business in line with this. If so done, the person will see it as part of them and trading with it will be easier, this will determine the success that the business is going to have. For example, if an investor wants to set up pork butchery, and goes ahead and starts one in a Muslim society, the business is more likely to fall. This is because of the norm of the religion, which happens to go in line with their culture. What is ethical has been defined by the norm of the society (Dancy, 2000). We are going to discuss the media as a business that is to a large extent determined by the ethical theories. Its success is as a result of the way it is going to be perceived by the people.

Media/ Radio Station/ Television Channel

The media has a very strong driving force to the perception and the attitude that the public is going to have. This is through the movies that they air as well as the news that they put a lot of weight in. If the media portrays something as morally good, or gives the impression that by following a certain way one will be successful, then the public is more likely to believe this as the truth. For a certain radio station or T.V. station to be seen as of value to the society, it should be channelling those programs that can reinforce believes of the society and if anything is to be taught, then the approach should be acceptable in the society.

Consequentialism and the Media

The consequences that airing a certain program in the station is the point of concern, the end result of the programs should be evaluated even before they are aired. If they are going to produce unacceptable results, then they should not be aired, failure to which the business risks failing. The same happens with print media, what they print should be in line with the accepted behaviour of the society for example; the way that it advocates for the occurrence of crime may be in a direct way or indirect way affect the behaviour of the recipients. It opens a child to the outside environment through the programs. The children are the most affected by what the media says, since their mind is fresh and they may lack the needed guidelines from the parents especially in this era that all the parents are working. They tend to believe the information that is given by the media as the gospel truth. In the streets you will find the children playing in a wrestling ways. They even call themselves names of wrestling personalities as they play. They tend to do what they were watching and may hurt themselves. If this is not rectified, chances that they will become violent people in future are high.

Utilitarian and Media

The programs should be made for the benefit and acceptance of the greatest portion of the people. The programs and the stories aired should be them that can be appreciated by all the people in the society. On the other hand, the timing of the program is of importance. There are the times for family shows; there are those programs that are much made for the youth, children, and the adults. Analyzing the market segment at a particular time is the most important thing to do.

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The Norm Theory and the Media

This has been used to define the emergence of local language radio stations in some parts of the world like the African countries. The programs that the media airs are the most important as far as this is concerned. They should be those that are in line with the general beliefs of the people. As much as some of the cultures cannot be kept further due to the change in the society; the media should not be seen as if to criticize it but should be an element of changing the people’s perception in a way that will be acceptable.

Conclusion

Managerial and appropriate ethical behaviour is central to the success and effectiveness of organizations anywhere in the world today. Businesses are so interconnected, in terms of products and information flows, that ethical behaviour in one country or in one part of the globe has an immediate impact in other countries or parts of the globe. Consequently, attempts should be made by governments and business leaders to incorporate standard management practices in their operations to enhance the efficiency of these flows. Ethical standards and codes are key in this process because of the globalization of the world business today.

Reference List

  1. Dancy, J., 2000, Normativity. Blackwell, Oxford
  2. Darwall, S. (Ed.), 2002, Consequentialism. Oxford, Blackwell.
  3. Dobson, J., 1997, Finance Ethics: The Rationality of Virtue. New York, Rowman & Littlefield Publishers, Inc:
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  5. Goodman, C., 2009, Consequences of Compassion: An interpretation and Defence of Buddhist Ethics. Oxford, Oxford University Press
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  7. Kingsolver, A., 2008, Capitalism: Encyclopaedia of Race and Racism. J. H. Moore. Detroit, Macmillan reference
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  9. Machan, T. R., 2007, The Morality of Business: A Profession for Human Wealth care. Boston, Springer
  10. Moon, et al., 2001, Business Ethics. London, The Economist: 119–132
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  12. Shaw, W. H., 1999, Contemporary Ethics: taking account of utilitarianism. Oxford, Blackwell Publishers Inc., pp. 31-35
  13. Scheffler, S., 1994, The Rejection of Consequentialism: A Philosophical Investigation of the Considerations Underlying Rival Moral Conceptions. Oxford, Oxford University Press
  14. Singer, P., 1993. Practical Ethics, 2nd edition. Cambridge, Cambridge University Press
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