Business Ethics In Organizational Life
It is believed since ages that the goal of a business is only to make profit and therefore, managers use all possible means to achieve this goal. But recently, sound business administrators have come up with the conclusion that while profit maximization is a major goal, it is not the only goal. Many times this goal has to be sacrificed if a corporation wants to attain long term survival and growth. And for this continued survival and growth businesses are increasingly becoming aware of their rights and obligations towards general public. Profitability is only considered desirable as long as a business fulfills its responsibility, safeguards the rights and brings no undue harm to the ‘members of an organization’.
According to modern management literature, these groups of people are referred to as ‘stakeholders’ which includes all those people who are directly or indirectly affected by the activities of the organization. Organizations are being encouraged continuously to act in a socially responsible way. Profits and socially correct behavior are today inextricably linked due to increased customer base. Customers have made it clear upon businesses that they would not tolerate any irresponsible behavior on their part therefore; managers are expected to keep in mind this attitude of customers and work in a responsible way. Managers now regularly come across situations in which they have to make decisions that have a dimension of ethics and social responsibility. (Fortune, 1992)
Business ethics and corporate social responsibility play a very vital role in the success of a business. These both enable an organization to become a part of the community or society in which it is functioning. Let us first define these concepts and explain the effect each has on the corporate life.
Ethics refers to the moral principles and values that govern the behaviors of a person or a group with respect to what is right or wrong. It basically sets standards in conduct and decision making as to what is good or bad. (Velasquez, 2006)
Business ethics deals with the internal values of an organization that are a part of corporate culture and helps in taking appropriate decisions concerning social responsibility and external environment. Business ethics helps an organization to refrain from those activities which can harm someone and benefit others.
Establishing a business on the lines of ethical behavior helps a business to complete its day to day activities smoothly without any conflicts, disputes or grievances among the people. A corporation which sets ethical standards for itself has a good public image and support and their operations are not viewed suspiciously by the law and government authorities. Secondly, the employees are treated on a fair basis and their morale increases which in turn increases the productivity. Feelings of job commitment and satisfaction are enhanced among the employees which gives a boost to their confidence and improves management-employee relations (George, 1986).
Thirdly, customers trust the working of an organization and show increased loyalty. This is also able to attract more business to the company as new customers are impressed by the ethical standards and show increased confidence in the transactions of a company. Once ethical standards are developed in an organization then everyone behaves in a desirable fashion and people who violate the rules and regulations set forth are strictly punished. Ethics has raised the image of a profession or an organization and they can reach to higher levels of success and prosperity by following sound ethical practices.
This refers to the impact of a company’s actions on the society as a whole. The organizations are responsible to take such decisions that will do no harm to the welfare and interests of the society as well as the organization itself.
Today many businesses are involved in social actions. For example, Ben & Jerry ice-cream company contributes in the conservation of rainforests. Another example is of McDonald’s which was virtually compelled to give up Styrofoam containers. (BoatRight, 2003)
There are conflicting theories on the practice of social responsibility in organizations. Classical theorists argue that maximization of profits should be the sole objective of the organizations which should be there only responsibility. They should only discharge the legal duties and have no such responsibility towards the larger community or society. On the other hand, experts supporting the contemporary view believe that an organization works as a social institution and has responsibility towards the welfare and interests of the people in its social background. An organization should not only think about making profits rather it should shoulder its duties as a responsible citizen and serve the society. In today’s global world, these both point of views are not acceptable rather an intermediate approach should be adopted which lies somewhere in between these two extremes.
The extent to which ethics and social responsibility should be pursued in the decisions of an organization involves a heated debate but this can be understood by discussing arguments for and against social responsibility. (Cooper, 2004)
Arguments in Favor:
The arguments for business involvement in social activities include:
- Public favors and supports those organization who fulfill economic and social goals.
- Such organizations have continued long run survival and growth along with long run profits.
- When an organization becomes socially responsible, it does the right thing thereby, improving its public relations and enhancing public image.
- Different schemes of corporation to plant tress and grass creates a better environment and better community since this community is a source of its workforce as well as the consumers of its product and services.
- Government officials impose less regulation on these firms since their activities and operations are reliable.
- Social problems can be handled effectively by these organizations since they have a lot of resources which can be used for this purpose. Any delay in addressing these problems can become a future problem for the organizations.
- Enforcing ethical behavior in organizations has put a stop to the man-handling of laborers and improved their condition.
- Pollution due to waste material generated by factories has decreased.
- Ethical programs have raised teamwork and productivity in organizations. Employees feel more motivated to work thus increasing their performance since their values are aligned to the corporate values.
- Ethical practices ensure that organizations become more responsible towards the law and work within the legal framework.
- The socially responsible behavior takes into account the long run interests of its shareholders and stakeholders.
- Managing ethical values strengthens the relationships and trust in the organizations, reinforces the organizational culture and creates consistency in the standards and qualities of the products and services. (Davis, 1990)
Arguments in Against:
Major arguments against the involvement of business in social responsibility programs include:
- Resources are diverted in ethical and social responsibility programs due to which economic efficiency of an organization reduces and there is a loss of profit maximization.
- These programs also increase the cost of doing business due to which the product is sold at higher prices in the market thus making it difficult for an organization to reach economies of scale.
- A business already has a lot of power and the society gives it a more social influence.
- Managers and employees are trained to deal with the organizational problems, they might not have enough skills and expertise to deal with the social problem
- A business should have a single purpose. By involving itself in social activities, economic goals can suffer as well as the social goals.
- Business should not get involved in socially responsible actions unless and until there is accountability established of business towards the society.
Whether companies should be involved in social activities or not requires careful examination of the above mentioned arguments and then take a decision. The benefits seem to outweigh the limitation and the trend seems to be toward greater social responsiveness. (Sims, 2003) The public expects from the corporations to be actively involved in ethically and socially sound programs. Businesses which do not wish to take an active part in these activities will gradually fail and invite customer and public disfavor.
George Bernard once declared that every profession is a conspiracy against the public. The issue of business ethics and corporate social responsibility is receiving increased attention because companies are realizing that for their survival and future success they must invest in ethics and shape policies and procedures through which they can attain a respectable position in the society and in front of their customers. Since the demand is growing for corporate social responsibility, corporations are being increasingly emphasized and pushed to set their business practices according to legal and ethical standards to foster social responsibility.
Once this is done customers become loyal and the organization gets a superior position in the society. It functions like a corporate citizen whose aim is to think about the well being and interests of the people surrounding it. Ethics and social responsibility have redefined the ways of doing business to improve organizational performance. Corporations are committed to the social and moral values for benefitting the society on the whole. It is the responsibility of the organizations to ensure that their activities are not harming their employees, neighborhood and overall external environment and this purpose is adequately served by allowing the organization to behave in an ethical and socially responsible way.
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