Corporate Responsibility and Profitability
(i) Ethical business conduct is defined under the Ethical Business Conduct Code. According to Francis (2003: 75), it refers to a guide for all directors, officers and employees in a business organization. The code stipulates the policies that should be adopted in carrying out company activities, while adhering to the spirit and letter of the stated legal requirements, and to maintain the highest quality of ethical business conduct.
Boroughs (2003: 67-74) posited that, ethical business conduct in simple term refers to the moral principles touching on the unacceptable and the acceptable behavior for the business people. Business executives are expected to demonstrate a high sense of conduct and values, fair and honest practices while dealing with the public.
Anyone who is involved in a business whether a big or small, or whether they get involved as directors, employees or as the owners, often face the challenges of moral or ethical dilemmas in their working place. James (2004: 245) observed that, making of business decisions is a complex issue, it requires that a person does a proper consultation on the likely effects that the decision may have to the organization, the people involved, and to the decision maker himself. If a good decision is made, it definitely produces the best results for the organization. If a wrong decision is made, this may lead to a conflict of operation within the organization, and the corporation may be led towards the wrong direction.
Francis (2003: 264-266), expressed that when faced with moral dilemmas, reaching the right conclusion can be a vexing and bewildering proposition. He expressed that people involved in business should always focus on the fundamental principle of fairness, and that this would often lead them to making sober decisions guided on moral principles. The business people who get carried away by issues of legality and profitability in gouging business decisions, often attain skewed ethical choices.
(ii) The proponents of business ethics have shown the importance of ethics, for the success of any business operation. It has been argued that, ethics make a good sense of business for any managers. According to Dickson (2003: 32-36), without having the value of ethics, competition among the companies may be ineffective, either at the international or at the national levels.
Though the exercise of ethical management may not be directly associated with special indicators of the financial profitability, it is not easy to avoid a direct conflict between a firm’s objective of making profit, and ethical practices. It is believed that, implementation of ethical practices in any business supports the development of overall organizational health in three major areas of business. These include, productivity, attraction of customers and minimizes government and agency regulations.
Francis (2003: 123-128) stated that, management practices affect employees as the stakeholders of the corporation. Where the decisions of the managers are done in an ethical manner, the employees would obviously be affected in a positive manner. For instance, a corporation may make ethical issues that may require an effort to observe the welfare and health of the employees, such a decision would definitely have a positive impact on the employees.
Employee advisory programs have been established by many companies, due to the requirements of ethics and has assisted workers with legal problems, mental illness, financial, and family issues. Such steps would definitely boost the morale of the employees and the final result would be, an increase in the productivity of the company.
Ethical practices can also have a positive impact on stakeholders who are outside the internal functioning of the company such as, customers and suppliers. According to Norman (2008), where a company portrays a positive image, this is likely to attract more customers and thus the company would enjoy a competitive advantage in the market. For instance, if a manufacturer dealing with food stuffs guard his image by showing that he concentrates more on consumer health issues other than making profits, such a manufacturer would definitely attract more customers.
Practices of ethical management are said to be effective in minimizing government agency regulation (Holland, 2005: 224). Where the public is sure that a company observes ethical practices, such a company is never bothered by any regulation agencies. On the other hand, a company that acts unethically puts more pressures to the government officials, and the legislators to regulate such companies, so as to ensure that existing regulations are observed.
A major case study against business ethics was advanced by Costa (2006: 74), and has for a long time been referred to as a study in bad argument. The popular arguments advanced to oppose business ethics state that, the ethical duty of any company is to ensure that profits are maximized, this means that businesses should concentrate in studying finance and marketing instead of wasting time on moral issues.
The incentive approach argue that, the only way to encourage ethical practices is to implement legal and financial incentives. According to Roleff (2003: 48-52), this approach stipulates that business people respond well to incentives, but not to ethical issues. Researchers have also argued that, ethics cannot be studied in any meaningful way, because it is an issue of inward feeling and not something to be thought about.
Jeanne & Donna (1999: 77-78), expressed that, while making business decisions, it is appropriate that a person exercise what they feel is right for the development of the business, and that ethical issues should only apply if a person has the feeling of observing them. It has been argued that, corporate directors do not have any responsibility to solve social problems by practicing ethics. For instance, employing a sick person and then making policies to cater for the health of such a person. The reason given is that ethical practices may sometimes divert the attention of the corporate directors from concentrating on maximizing profits, to concentrating on social responsibilities.
(iii) In order for companies to succeed in implementing successful ethical practices, there is need to come up with appropriate strategies, as well as mechanisms that would help to support the practice of ethics within corporations. Kaler (2000: 65), stated that the popularly applied strategy is adoption of an ethic’s program that is able to capture the support of top management within the organization. The strategy is formulated in three steps.
The first step is where the corporate leaders realize that it is important to adopt such ethical practices for the benefit of the organization, and the well being of the workers. The next step is for the corporate leaders to choose which ethical practices would work best for the organization, consider how such a moral decision would affect the business. Thirdly, the leaders should consider the best method of implementing such a moral decision, so as to avoid coming up with undesired results that may have not been experted (Lynn, 2006: 200-201).
There are mechanisms put in place top ensure that a close follow up is done, to see that business people have succeeded in implementing the desired business ethics. Such a machinery has been through the establishment of permanent ethics offices. These offices have been set up and allocated adequate human resources, financial and material support. The responsibility of these offices is to ensure that training programs are put in place, in order to educate corporate leaders on the importance of ethical practices in the making of business decisions.
The human resources availed in such offices are professionals who have the best skills and knowledge that is used to advise any business people who may need consultation, on issues of business ethics. Affirmative action and implementation of ethical policies have also been used as mechanisms for ensuring that successful ethical practices are realized.
(iv) The Code of Ethics and Business Conduct is the main legislation governing the ethical practices in business operation. This code is a statement that sets out the principles that should be adopted, and the ethical standards for conducting business with a high degree of integrity. The code sets the obligation, responsibilities and standards, and the principles of ethics that an organization should adopt, it also shows how this should function. The main objective of this code is to provide guidance to workers, on how to deal with dilemmas that may cause them to make alternative decisions. According to Richard (2005: 44), the purpose is to make one concentrate on moral issues while making decisions, so as to achieve the set objectives of the company.
As stated in the code, the main purpose of the article is to promote ethical and honest conduct, as well as handling business conflicts in the right manner, and using fair dealings conduct while conducting business. According to Walter & Powell (2007: 23), the objective of the code is to ensure accurate, fair, full, and clear disclosure of information within the company. To promote adherence with the acceptable government rules,and regulations. To ensure that the legitimate operations of a business are well protected, including the assets of the company, any confidential information within the organization, corporate opportunities, and to deter wrong doing.
(v) It is appropriate and important to promote and support ethical practices during making business decisions of any nature. The aspect of ethical, or rather moral principles, bind both the top leaders and the employees within the organization. The leaders in the organization are supposed to make their decisions considering ethical values. Such a consideration would mean that, while considering the interests and the need to maximize profits for the company, the well being of the employees, and the well being of the outside stakeholders, such as the need of the customer is put in place (Scott, 2004: 66-67).
Such decisions based on ethical considerations are likely to yield positive results, to the employees, this may in effect boost their morale and result to high productivity for the company. A company that is able to create a good image, and to show that it gives priority to the interests of the consumers, other than maximizing profits is likely to attract more customers.
According to Jeanne & Donna (1999: 88), ethical practices bind the employees. The requirement of the code is that employees should in discharging their obligations, conduct business with a high degree of integrity. The main objective of this code is to provide guidance to workers on how to deal with dilemmas that may force them to make alternative decisions. The code requires that, the employee must be thorough in observing full, fair, accurate and proper disclosure of any information that may be beneficial to the company.
An employee is supposed to adhere to regulations and government rules while conducting business, and to ensure that his obligations are carried out in a legitimate manner. The employees are also bound to ensure that the assets of the company are well protected, and that confidential information is kept as so. If the provisions of the ethical code are closely observed, there is definitely bound to be a good working environment, suitable for producing a high output (Sethi, 2005: 66-68).
(i) In conducting business at the international level, it is important that a company applies business ethics conduct. The code of business serves to guide companies on how they can efficiently operate both at the local and international level, by maintaining the highest business standards, while at the same time complying to the applicable rule (Ross, 2006: 73). With this guidelines, the operations of a company are likely to run smoothly due to the fact that, the code requires that business follows the applicable law, by doing this a company is able to conduct legitimate practices, and avoid legal conflicts at the international level.
Maintaining high ethical practices is likely to make the environment of the company friendly to the international consumers, investors and any other stakeholders who may be having an interest in the company. This is in fact one of the best strategies that would see the survival and success of any business at the international level.
Sethi (2005: 45-47) posited that, in operating business at the international level, a company is supposed to observe the principle of just and fair dealing. This principle should mainly be applied while companies undertake to enter into international contracts. For the contract to be legal, it is important that a company gets into the agreement in good faith. This means that, the intention of the company is to ensure that the contract will work out for the benefit of all parties.
This is likely to yield the best results that will enhance the operation of the company. Good faith is also used as a defense in case of conflicts between parties to the contract. A person may clearly show that, he entered into the agreement in good faith, and that he has been carrying out his duty with the aim of accomplishing the provisions of the contract, if this facts are well proved and relevant, they may help to exempt a person from liability in case of conflicts arising from international contracts.
It is important that the welfare of the employees is put into consideration when making decisions of a business at the international level. Employees are the key determinants of the success or failure of the company at any level. When a company applies ethical practices to look into their health and wellbeing, this boosts their morale and results to improved productivity.
According to Abel & Hatfield (2003: 33), employees and corporate leaders should be obligated by the ethical practice to adhere to the international legislation, and the applicable laws to ensure protection of the assets of the company, and to protect confidential information within the company.
(ii) Researchers have argued that, international business ethics is very important in promoting norms of the global civil society, and hence promotes perpetual peace within the global community. A good illustration of this is shown in the emergence of the republican business ethics, where ethics has been defined as development of corporations meant to be for the common good. The international republican ethics expressed the aspect of corporate citizenship with dignity, responsibility and integrity. Integrity is important and appears as self imposed norms, applied in the functioning of international corporations (Friedman, 2004: 345-346).
International business ethics is thus credited for ensuring accountability, and trust among members of the international corporations. Integrity is evaluated as an important aspect of corporation business ethics for international business norms. It has been argued that, it is only through ethical practices at the international level, that the human rights of the citizens can be observed, the only way through which corporations can gain trust with each other so as to attain a smooth environment for conducting business.
Walter & Powell (2007: 66) observed that, dealing with the principles of corporate ethics and business social responsibilities at the global level is essential to promote ethical principles that would ensure protection of people in the international business operations. It has been proposed that, principles that enhance respect for human beings, vulnerability, autonomy, integrity and dignity, constitute the core requirements for multinational corporations. From this approach, great emphasis on international ethics is put on the respect for human beings, whether as employees, consumers, shareholders, corporate leaders, or any other stakeholder having a direct interest in the company.
According to Thomas (2003:118), several scholars are opposed to corporations putting much of their effort in considering ethical practices in international business. Some studies have shown that, concentrating on the issues of ethics waste a lot of time for the corporate leaders, who are supposed to concentrate on the aim of maximizing profits for the company. Critiques have argued that, it is not the duty of corporate leaders to take care of the societal issues, the work of the corporate leaders is to promote the output of the company, so as to realize maximum profits.
It has also been argued that, issues of moral responsibility at the international level should should be left to the individuals. The reason provided is that, moral judgments differ and that nobody should be forced to follow specific principles, such as the code of business conduct, since a person may not agree with the provisions therein.
(iii) Studies have shown that, many companies at the International level have adopted the management strategy, in order to ensure that the appropriate ethical practices are adopted at the international level, and to ensure that these practices are effectively implemented, and that they produce the desired results.
According to Richard (2005: 248-249), this type of strategy is meant to ensure that a proper consideration is done on the environmental and social factors, the cultural aspect and character of the company, and that the future vision of the company is also put into consideration. In deciding which ethical practices to adopt, the interests of all the stakeholders who have a direct interest in the company is also considered. It has been stated that, failing to put in place proper strategies may lead to detrimental results while considering which ethical practices should be adopted by any corporation at the international level.
Various policies have been put in place to be adopted by corporations, so as to guide them on what principles and standards of ethics they should maintain at the international level. Corporate Social responsibility (CRS) policies are an example of the best principles that a company may decide to adopt. This policy puts into consideration the interests of all stake holders while making corporate decisions. This policies can be applied voluntarily by a company, or be made mandatory if the applicable laws states so.
The CRS policies are applied for instance in form of the business code of conduct, and the corporation is given the authority to decide on how it is going to monitor the implementation of any type of policy that it decides to adopt. Fandray (2000: 222), expressed that a company is required to make a follow up, to check if the stated objectives have been attained. Finally, the results are supposed to be communicated to both the internal and external organs of the corporation.
The role and responsibility of governments perhaps would explain the major machinery for implementing ethical practices at the international level. Governments have put a lot of effort in ensuring that corporations comply with ethical practices while conducting business at the international level. Governments have established permanent ethical offices that are provided with adequate materials, finances, and professionals.
These offices are used to offer ethical education and public campaigns on the importance of ethical practices at the international level (Boroughs, 2003: 342) . Training programs are organized where corporation leaders are educated on how to make proper strategies, to ensure that proper ethical practices are put in place in order to realize the objectives of the company. When a corporation operates in unethical manner, the same offices have the power to compel such a corporation to to apply the global ethical practices.
(iv) The aspect of international business ethics is of great importance while it comes to international business. According to Davis (2000: 118-120), international business presents a scenario where we have a diversity of companies and people from different cultures interacting in the conduct of business. There is therefore need to ensure that, the behavior of the people is regulated, so as to offer protection of all the stakeholders who may have an interest in the business.
Protection of the human rights is the major objective of the principles of global ethics, as provided by the federal code of conduct. This is a very important approach, because it is the protection of people’s rights that will ensure that manufactures put in place health policies in making decisions about the quality of a product they want to manufacture. The end result is that, companies are likely to come up with quality output, and attract more customers. As a result, the company enjoys competitive market advantage.
Rory (2003: 200), stated that it is the requirement of business ethics that the welfare of the workers is considered while making business decisions. This is important in promoting international business productivity. An employee who is treated well feels as part of the company, they feel taken care of, and tend to work with commitment and have an increased sense of responsibility towards the company. The end result is that, the productivity of the company goes up, with quality improving.
International business ethics provide a guideline for the standard of conduct that is expected for the employees, it provides that, such employees should work towards the protection of the companies assets, avoid wrong doing, protect the secrete information of the company and ensures that business is conducted in the right manner. When confronted with a decision making dilemma, an employee is advised to consider a moral judgment, in order to determine whether they are on the right track, because the approach often leads to making of sensible decisions. It is therefore clear form the above analysis that, International ethics are an important aspect to ensure smooth operation of business at the international level.
(i) According to Michael (2002: 243-244), any conduct of a business person that operates in contradiction of the code of business conduct and ethics, amounts to a wrong doing in the operation of the business. It has been stated that, business people have at one point or another been accused of behaving in unethical manner. Any decision made without putting into consideration the moral judgment is likely to result to a wrongdoing. For instance, corporate leaders who make decisions of the company without considering the wellbeing of the employees are likely to end up in corporate wrongdoing.
Wrongdoing may occur where the employees are overworked, under paid, and not given overtime payments. Employees are vulnerable people who often depend on one employer for their pay, and any other social welfare of their life. When the corporate leaders refuse to consider the employees in their decision making, the human rights of the employees are violated, and this presents a clear show of corporate wrong doing.
A company that does not observe the principle of just and fair dealings in the operation of business often end up committing corporate wrongdoing. This occurs for instance, if a company decides to compromise the quality of a product so as to reduce the cost of production and increase profits. According to Joseph & John (2000: 89), such a company will have neglected the ethical duty of protecting the interests of the consumers including endangering their health by production of goods that may not be fit for consumption. This definitely is a corporate wrongdoing. A company may be held legally responsible for such an action, and may be asked to pay damages where a consumer suffers damages from using such products.
Operating business in an illegitimate manner, whether the business is legitimate or not often amount to a corporate wrongdoing. This happens where for instance corruption influences the making of decisions in the organization, so that some people are favored by the decision made while others loose. Employees who do not abide to the principles and guidelines of the code of business conduct most often get involved in corporate wrong doing. Such employees often go out exposing the corporate confidential information, they misuse the company’s assets, and do not give the best of their efforts towards the company, hence leading to low and poor quality output.
(ii) It is appropriate and important that corporate wrongdoing is identified and dealt with, so as to ensure that business conduct is carried out in the right manner (Costa, 2006: 245-246). This ensures that both the internal and external interests of the stakeholders are taken care of. Identifying corporate wrong doing helps to draw a line between what practices are acceptable, and those practices that are not acceptable. This also helps any one who has an interest in the company such as the employees, consumers, investors or any other person to know their rights.
It is after identifying corporate wrongdoing, that a person is able to know what action can be taken when a company engages in corporate wrongdoing and causes damage to individuals. Both in England and in the United States, a company that gets involved in wrong doing and leads to anyone suffering damages, is liable to a civil or criminal action.
Norman (2006: 88) observed that, identifying corporate wrongdoing is important because it helps to guide people in determining what ethical practices would amount to, and what they do not amount to. It has been argued that moral issues are complex because what may seem to be morally right for one person, may not be perceived as so by the other person. Identifying corporate wrongdoing helps in arriving at a uniform decision on the acceptable ethical practices. Norman observed that, dealing with corporate wrongdoing is an effective way of encouraging businesses to avoid the practice, so as to ensure that the conduct of a business meets the expectations of both the organization and the interested stakeholders.
Those who oppose Identifying and dealing with corporate wrong doing argue that, the wrong action should be felt by the person who is affected, because this is a matter of personal feelings. It has been argued that, making such identification of corporate doing and threatening the corporate leaders, would amount to interfering with the freedom of making decisions suitable for the success of the company (McGuire, 2002: 115-117). The reason given here is that corporate leaders should not compromise the objective of attaining maximum profits for the company while making decisions for the sake of ethical interests.
(iii) One of the great mechanisms put in place for identifying and dealing with corporate wrongdoing is the corporate wrongdoing policing. This article was drawn and approved by the US parliament. According to Reder (2004: 204-206), the policy stipulates the accountability and responsibility of legal persons for any criminal offense done. This policy states that unlawful activities conducted by a corporation amount to criminal actions, and are punishable offenses under the criminal offenses as specified by the penal code. The law enforcement officers are charged with the responsibility of investigating and detecting such action, so as to ensure that corporate wrongdoing is dealt with accordingly.
Cohen (2004: 112) explained that corporate policing has also been implemented by most corporations. The management of the company uses this policy to measure the performance of an individual, so as to detect what behavior amounts to corporate wrongdoing, and which one does not. This policy also advocates for educating the employees on the need to observe ethical practices while conducting business. This is an effective way to ensure that such practices are implemented without resistance from persons within the organization.
The new mechanism put in place is the corporate crime policing, this policing helps the police while detecting and investigating corporate wrongdoing. The corporate crime policing clearly states what kind of activities would amount to criminal actions conducted by a corporate body, and how such action should be handled in a legal way. The new crime policing has introduced new and classic mechanisms for detecting crimes, and documentation is done in a clear and self explanatory manner.
(iv) According to Jacob & Peter (2004: 225), identifying and dealing with corporate wrongdoing is the only measure that is effective in solving the problem in various business organizations. Unless the corporate wrong doing is identified, it may be hard to know what hinders a smooth and fair running of a corporation. It is after the wrong doing is identified, that an employee or any other stakeholder can realize what right they have, what they are legally allowed to do without contradicting the provisions of ethics, and what they are not allowed to do.
When a corporation wrongdoing is identified, corporate crimes are set under the corporate crime policy to help the police in detection and investigation of such activities within an organization. A business that conducts its operations in unethical manner is liable for criminal punishment as provided under the penal code. Identifying and dealing with corporate wrongdoing is a major step intended to prevent corporate wrongdoing in the overall business operations (Friedman, 2004: 204).
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