Ethics is the study of what is right and wrong, as well as moral duties and responsibilities. Personal ethics are a person’s code of conduct. Business ethics encompasses truth and justice, as well as societal expectations, fair competition, social responsibility, corporate behavior, and public relations, among others. Fairness and integrity are the common values that an organization may have.
Importance of ethical considerations in business
- Corresponds to Basic Human Needs: A basic human need is to be a part of an organization that they respect and are proud of, because they believe it is ethical. Everyone wants to be associated with a trustworthy and socially responsible organization. HR managers must meet both the employees’ and their own basic needs if they want to lead an ethical organization. The basic needs of employees and managers force organizations to be ethical.
- Public Credibility: An organization’s ethical values build public trust. People will buy a company’s product if they believe it is trustworthy and reasonably priced. Such companies’ public issues are sure to be a hit. As a result, only cola companies are spending huge sums on advertising to convince the public that their products are safe and free of pesticides.
- Credibility with Employees: When employees believe in the organization’s ethical values, they respect it. A common set of values and goals. The HR manager has credibility with employees because the organization has public credibility. Social uprightness and moral values can win employees more than money.
- Better Decision Making: Respecting ethics forces management to consider economic, social, and ethical factors when making decisions. Making decisions that benefit the public, employees, and the company will improve decision making.
- Profitability: ethical business does not mean any profit. Every organization has a self-responsibility to make money. Long term, ethical businesses will be more successful and profitable, even if they lose money initially.
- Society’s Protection: Ethics can protect society better than the country’s legal system. Ethics always triumphs over law. The state cannot regulate all harmful activities. A good HR manager can reach out to agitated employees better than the cops.
Social Responsibilities of Management
The social implications of business decisions are called social responsibility. It means seriously considering the social impact of a company’s actions. Social responsiveness is the ability of a corporation to relate its operations and policies to the social environment in ways that benefit both the company and society.
Areas of social involvement
Today many businesses are involved in social activities, various and kinds of organized enterprises have different missions entrusted to them by the society. This mission of the business is the production and distribution of goods and services to the society. The mission of the university for example is teaching and research thus in one way or the other any business enterprise or organization has some social responsibility to the society. The areas of involvement include: –
- Aid/gifts to organizations in form of bursaries
- Providing job opportunities to minorities and women i.e. non-discrimination
- Training the disadvantaged
- Environmental protection through clean-up of existing pollution and noise control.
- Financial support to charitable organization for example, non-governmental organizations.
- Control of harmful products e.g. cosmetic containing mercury
- Aid with healthcare facilities
- Assisting disadvantaged members of the study.
- Full and truthful disclosure about a company’s product.
- Contributing towards the development of internal sector.
Arguments for social involvement
- Business receives its charter from the society and consequently has to respond to the needs of the society
- The creation of better social environment benefits both the society and business society gains through better neighborhoods and employment opportunities. Business benefits from a better community since the community are the source of its workforce and consumer of its products and services.
- Social involvement discourages additional government regulation and intervention. The result is greater freedom and flexibility in decision making for business.
- Social involvement creates a favorable public image. Thus the firm may attract customers, employees and investors.
- Modern society is an interdependent system and the internal activities of the enterprise have an impact on the external environment for example environmental damage.
- Problems can become profits. Items that once have been considered waste, for example, empty soft drink can be profitably used again through recycling and this will create additional jobs to the society.
- It is better to prevent social problems through business involvement than to cure them. It may be easier to help the unemployed than to cope with the social evils created by unemployment e.g. crime.
Arguments against Social Involvements
- It requires higher costs.
- In the final analysis the society must pay for the social involvement of business through higher prices.
- Deviation from Profit-Making Goal.
- Business people might lack the social skills to deal with the problems of the society.
- Disagreements and conflict between managers and shareholders regarding spending money.
- It may be difficult to determine which groups to give priority in the society.
- The society ends up paying the cost of social responsibility in the form of increased prices.
Types of CSR based on its beneficiaries
- Environment-Based Corporate Social Responsibility (CSR): An organization’s focus is on reducing the negative environmental impacts of its operations. The company develops such processes at the production level to reduce the production of harmful by-products. It also encourages the use of non-renewable energy to prevent damage to the environment caused by burning fossil fuels.
- Community-based Corporate Social Responsibility (CSR): To protect the society’s well-being, the company develops programs with the help of non-profit organizations. A company either provides funds or arranges funds from other companies to carry out planned programs to improve people’s lives.
- Human Resource-Based Corporate Social Responsibility (HR-CSR): An organization’s human resource is critical to its success. Thus, companies pay close attention to their employees’ needs to improve their lives. Some companies provide extra leave to male employees so they can better care for their newborn child. Companies provide better medical insurance to employees in case of on-the-job accidents.
- Charity-based Corporate Social Responsibility (CSR): Companies frequently partner with charities. Companies donate money to help individuals and organizations meet their basic needs. Companies prefer this type of CSR.
Factors influencing individual Ethics
- Family influence– determines an individual’s belief as to what is right or wrong. A person who grows up in a setting where parents are extremely ethical is likely to develop higher ethical standards than one who is not taught the importance of such behavior.
- Peer influences: Classmates and other persons in a person’s social network can shape her ethics peer pressure for instance can determine how a person will engage in activities such as smoking, taking drugs, copying assignments etc.
- Past experiences: As a person grows up her past experiences can also play a role in determining the evolution of her standards. If she behaves unethically in a given situation and suffers negative consequences (feeling of guilt) her behavior will probably be more ethical next time conversely if her behavior do not lead to feelings of reward she may choose to behave in the same way when next confronted by a similar situation.
- Values and morals: At a more general level, basic values and morals influence ethics. A person who is profoundly religious will almost certainly have feelings about the right and wrong. Such beliefs will help shape his personal ethics as well.
- Situational factors: These are things that occur in an almost random way and have the potential to determine behavior that may or may not be consistent with a person’s ethics. For example, a manager who is heavily indebted may be tempted to take a bribe offered by a client for some favor.
Functions of Ethics Committee
- Holding regular meetings to discuss ethics
- Communicating the code to all team members.
- Looking for code violations.
- Enforcing the code
- Rewarding compliance and punishing noncompliance
- Reviewing and updating the code
- Reporting to the board of directors.
Factors that Raises Ethical Standards
- Public disclosure and publicity
- Increased concern of a well informed public
- Government regulations, for example laws regulating business activity.
- Teaching Ethics in educational institutions, for example, schools, training institutions and universities. This raises professionalism and ethical behavior of business managers.
Measures for Making Ethical codes Effective/Possible Solutions to Unethical Behavior
- The management should set provisions for enforcing ethical codes.
- Unethical managers should be held responsible for their actions.
- Privileges and benefits should be withdrawn and sanctions applied to unethical managers.
- The management should teach ethical guidelines and their importance to all employees.
- Management should set up controls, for example, reporting systems that check on illegal or unethical deeds.
- Conduct frequent and unpredictable audits.
- Punish trespassers in a meaningful way and make it public so that it may deter others.
- Emphasize regularly that loyalty to the company does not excuse improper behaviour or actions.
Unethical Issues in Management
- Dishonesty in business dealings
- False accusations/malicious acts
- Irregular promotion/demotions.
- Iniquity in administration of wages and salaries/favoritism and biasness.
- Deceptive advertising messages
- Overcharging products/services of low quality
- Irregular procurement etc
- Sexual harassment at the work place
Causes of Unethical Behavior
- Personal gains
- Pressure for performance
- Job insecurity
- Poor remuneration
- Increased completion in the industry
- Lack of proper policies
- The culture of the organization which might encourage unethical behavior
Limitations of ethical behaviors
- Ethics may conflict with the organization’s main goal, maximizing profit.
- It may interfere with decision making because managers must determine whether a decision is ethical.
- Paying employees fair wages and salaries may be costly to the organization, and the business may be unable to maintain such wages and salaries.
Managers should behave ethically in order to
- Be good role models to the other employees
- To maintain a good corporate image
- Ensure the organization does not collapse
- To improve the value of the firm
- To maintain justice and fairness.