If there is a value which is being considered as totally critical to the proper running of the corporate and the business sector, then it is business ethics. Simply put, business ethics refers to the code of behavior which a business organization or an enterprise must adhere to as it continues with its transactions with the business environment. That business ethics is totally pervasive is a fact which is underscored by the fact that business ethics surpasses the mere interaction with the world, to encompass the one-to-one interaction which may take place between the business enterprise and an individual. Similarly, the reality of business ethics is also underscored by the fact that the wellbeing of a state is directly dependent on the application of business ethics. Similarly, the rise or fall of a business organization or an enterprise may depend on adherence to business ethics.
This research paper will go the painstaking lengths of discussing the full essence of business ethics and its merits by looking at the real life events and businesses which exemplify the business or entrepreneurial world. A broad approach will be used to discuss various angles of business ethics from a broad area of moral principles. The benefits of articulating proper business behaviors will also be addressed with respect to corporate code of ethics. Moreover, multinational corporations will be evaluated to realize their obligations of restricting business ethics to the requirements of the law.
According to Boatright, business ethics does not just entail the paying of regards to peripheral laws or policies which may affect business performance and output, but also incorporates the tenets of applied or professional ethics. It is these ethics which examine the ethical principles and the ethical problems or questions which may arise out of a business environment. Thus, the conduct of the individuals of a given business organization together with the operations of the entire business are all essential parts of the business ethics.
At the same time, scholars such as Goltz point out at the fact that business ethics can be divided into two: the normative and the descriptive, as a testament of the wideness of the topic. The corporate aspect of business ethics together with is career specialization gives business ethics its normative streak.
On the other hand, Velasquez maintains that it is the reality of business ethics which ensure that business operations remain legitimate even in the face of stiff market competition and the need to ensure profit maximization. This is due to the fact that in the need to realize profit maximization, most business enterprises seek to evade operational costs. Most of the time, the running away from high operational costs is usually done in a manner that is unlawful, with most companies or organizations resorting to tax evasion, underpaying of employees and the neglecting of corporate social responsibility.
To Boatright, it is business ethics which legitimizes the existence of an organization or an enterprise in a given locality. He divulges that this is the case, given that business ethics and corporate social responsibility (CSR) are inextricably integral to each other. As part of CSR, any business is mandated to ensure that the business environment around it is not shortchanged. He maintains that the same starts with the business ensuring that the business enterprise adheres to all government policies on employment. This is to the effect that in the first place, the organization in point is to ensure that a certain percentage from its local environment is reflected in the organization’s personnel. Different states (in the US and the world over)are specific on the percentage that is to be absorbed into the business organization’s workforce. The importance of this move is that directly, the government is able to alleviate poverty. Herein, poverty is alleviated when the business organization, an enterprise or a company accords the locals, employment opportunities. In this manner, the locals are able to improve the quality of their lives and those of their dependents (nutritionally, educationally, medically and also by being able to access other socio-economic values).
It is important to note that such adoption of CSR standard only remains as meaningful as it should, only if such an act is followed by the accordance of fair remunerations. It is against this backdrop that Josephson Institute was categorical that being in possession of the right knowledge imbues upon the actor, the need to act fairly. It is at this juncture that Theodore Roosevelt’s maxim that to educate minds while neglecting morals is to educate menaces to the society is referred to. An organization which is serious about observing business ethics ought to ensure that the locals who are in the organization’s rank and file have their emoluments given fair appraisals and that these emoluments are paid pronto, as scheduled by the organization’s human resource management (HRM) departments.
The observation and recommendation above is mostly critical when the fact that most businesses and organizations are going global is brought into consideration. Since the need to realize profit maximization and to have an edge in the competitive market may modify business or organizational decision to venture into newer global markets, most governments craft policies to ensure that their populace is not exploited as an artifice to ensuring the realization of surplus capital.
Boatright waxes poignant that one of the main reasons as to why many business empires such as Coca-Cola, SONY, Samsung, Nokia, Tatung, Kenwood, Pioneer, Tatung and Technics have remained very successful globally and throughout the years is because of the culture of the punctilious observation of business ethics. Besides these organizations being reputed for excellent quality products and services they produce, these organizations are multinationals which pay their local recruits very hefty or fair remunerations for their portfolios. Likewise, these organizations ensure that the recruitment exercise is as open, competitive and widely conducted as possible. This has always ensured that the organizations bag the most competent team for their personnel. While at it, these multinational organizations have always been sure about seizing and consolidating the locals’ confidence.
Another important facet of business ethics which still falls within the category of government policy towards multinationals is seen in the area of taxation. Most governments from around the globe specify the levies and amount of tax that multinationals ought to pay at the end of each fiscal year. Because of the adoption of policies of economic liberalization which were mainly propounded by the World Bank (IMF) and the International Monetary Fund (IMF) under the title of the Structural Adjustment Programs (SAPs), at the turn of the 1990s, most of the governments, especially those in the Least Developed Countries (LDCs) ceased from exacting discriminative tariffs on multinationals as a way of leveling the ground for interstate competition in trade. The issue of taxation and according discriminative tax rates nevertheless remains within the prerogatives of different governments. Thus, many governments prefer to exact on multinationals, tax rates which are neither too high to strain the multinationals nor too low to fail to ensure the protection of the local industry.
Nonetheless, in respect to the above development, responsible business organizations ensure that all their tax obligations are fully met. This obligation remains one of the most critical responsibilities to any business organization, given that the government always has the highest stake in matters bordering alongside taxation. This is because; all the governments that exist tax seriously, given that tax is the primary source of revenue for any government.
Business ethics therefore entails not just being amenable to negative and dishonest practices such as tax evasion, but going the extra mile to set an example in ensuring tax compliance. As has been the trend for many multinationals has been to publish their fiscal financial transactions in the dailies. These publications show the profit made before and after taxation. The gravity behind this observation is that this ensures the highest extent of honesty and goodwill possible from all players (both the government and the business entity or company). Should an organization publish in the dailies, untrue reports on the profit margin made and the tax exacted on the profit, the government will have the right to subject such an organization to a lawsuit. On the other hand, such a move ensures that the government ensures the highest level of accuracy when exacting taxes on such profits lest it be cast in a negative light as incompetent, dishonest or uncommitted to fair trade.
On the other hand, the place of business ethics remain as a critical aspect of some organizations as the backbone is to the vertebrate. This is especially the case in organizations which are more interested in providing critical services to the public, in lieu of making profit. Such organizations normally are hospitals and other healthcare institutions, government institutions, religious or faith-based institutions and even learning institutions. These organizations have to take business ethics more important, given that they thrive on public confidence, than in the extent of profit made.
In the case of a healthcare institution, it is needful for the organization to ensure that the greatest ethical standards possible form the basic guideline of its operations. Right from the point of a client’s inception, to his admission, treatment and discharging, the client and his acquaintances are to be treated with the greatest extent of care, respect and concern. The need to take business or operational ethics herein remains of critical importance, given that ethics may serve as the turning of the institution either towards success or failure. For instance, the failure to draw out a comprehensive plan on how to tamper business ethics and business operations may leave the healthcare organization incurring heavy losses. This may happen in the event of an organization admitting and treating patients who have not paid treatment fees. This is especially the case in emergencies.
Conversely, being too punctilious with operations on first-pay-first-served basis may also undercut the aspect of business ethics for such a healthcare institution discussed above. This is the case, given that the healthcare institution is likely to be mistaken for a money making firm. Such an organization is only likely to suffer negative corporate image which may ultimately affect its productivity. The case may not be any different for learning institutions, given that learning institutions are always expected to hold the greatest extent of integrity. The veracity behind this standpoint is epitomized by the fact that there are learning organizations such as Harvard University, Oxford University, Cambridge University and Yale University whose certificates and transcripts are held in much esteem compared to others.
The method that has been used to collect and analyze the data that has been used in this research paper is qualitative investigation. This procedure has involved, considering an array of materials which have been compiled by relevant authorities who have written about business ethics. The relevant materials on business ethics on the other hand have needed be up-to-date, touching on a dynamic matter which is relatable to business ethics or any topic related top business ethics such as corporate social responsibility. The ideas that these authorities have divulged upon have then been read, reflected upon and elaborately divulged upon in the literature review section.
Legal and ethical obligations for businesses
Organizations do not inherently reserve the right to exist but rather are granted this by the societies within which they exist. Various countries have different corporations’ charters that govern the operations of business enterprises. A legal contract between the between the society and the enterprise must exist to regulate the power endowed on an organization over the people. Consequently, the society holds the legal right to revoke the corporations’ charter whenever need be. It means that the prevailing law reserves the right to “kill” and enterprise if justified by the rationale behind the corporations’ charter. Essentially, the society can impose sanctions on a corporation for a number of reasons. For instance, if an enterprise fails to keep to the interests of the society or rather harms the society in an unethical manner, applicable law can be used to impose sanctions on the operations of such an enterprise.
A corporation must not harm the society and should be focused on creating something useful for the people. Each country has its own written legal requirements that comprise of explicit prerequisites for corporate behavior. In fact, national laws are the main embodiment ethical corporate standards for the society. Though national governments may act on unethical laws, a corporation must not knowingly violate ethical laws under any circumstances (Jennings, 2008). This is a recurrent issue in international business for corporations that have operations in more than one country. National laws differ in standards but do not allow the violation of human rights or ethical standards of corporate operations. Therefore, the course of action for any enterprise should be guided by moral norms and not just legal obligations. This is especially useful where two or more mutually exclusive standards are conflicting. The society has its expectations regarding pleasant corporate behavior. This presents the idea of social contract between the enterprise and the society offering the charter. Such a contract includes legal requirements even though social expectations may vary over time.
Fundamentally, businesses with national and international operations must abide by social and legal obligations as well. They have to conform to constantly evolving societal expectations as well as national regulations. The main challenge for such businesses is the potential legal conflict between different nations and cultures. Operations in the global economy must essentially be governed by national laws. The contemporary global environment however is faced by insufficient consensus between national governments especially on societal objectives and expectations on business conduct. International laws and standards governing international enterprises has been a major debate in the past century. Nations have been unable to agree on legal standards that are internationally recognized and can be abided by.
Employees and vendors in business operations are bound by a set of principles and standards that govern their conduct and integrity. The society expects conduct of the highest possible standard from all players in the corporate environment. Ethical code of conduct is the set of principles that guide the behavior of employees. These define the procedures that employees are expected to take in certain situations of ethical concern including conflicts of interest and acceptance of gifts. The principles also define various procedures used to determine the possible occurrence of violation of the code of ethics. In case a violation is identified, the code of conduct is used to determine the remedies that can be applied (Ferrell et al p.214).
Employees and business dealers must therefore maintain high moral standards and integrity. By doing this, should avoid conflicts of interest as well as avoiding improper influence. They are expected to act in ways that enhance public trusts and confidence in the services they offer the society. Moreover, positions held by employees in office should not be used for personal gain at the expense of the resources of the employer or public resources. Appropriate behavior at work is also expected of employees as per the code of conduct. As a result, they should serve their clients with consciousness, honesty and impartiality. Duties allocated to them should be accomplished with diligence and efficiency and should be aligned with the interests of the organizations as well as those of the local community. Employees are also required to treat colleagues at work with respect and courtesy besides dealing with the public courteously and fairly. By so doing, they should also promote equality among members of the public by avoiding unnecessary prejudice in their business dealings. These principles of ethical conduct ensure that conflict of public and personal interests do not arise which might be detrimental to the organizations in question.
The ethical code of conduct defines what is right or wrong for every employee in an enterprise, whether national or international. A company is proud of its values when they are observed in conduction of business. Therefore, companies have to continue upholding high levels of business ethics as well as personal integrity in every transaction and interaction that occur between employees and clients. Any violation of code of ethics is subject to appropriate penalty as deemed necessary by the governing boards. Every employee is held accountable for ethical violations and should face the penalty inflicted by the necessary committee. The code of conduct may be violated directly or indirectly depending on the situation at hand. Moreover, withholding information related to an ethical violation is a violation in itself and the offending party should face necessary penalty as well. Such penalties are usually carried out through notices to the offending individuals. Offenders may be penalized for non-compliance or violation of ethical conduct up to and including termination from office or complete dismissal from the enterprise.
Unethical business practices and their consequences
The constantly changing society influences business activities a great deal. Economic policies and values also change with this dynamism. Illegal business, economically referred to as shadow economics, is destructive and contradicts societal interests of general human welfare. Avoiding state taxes, harming the environment and the community through such business practices is subject to legal actions that vary from one nation to another. The main economical damage done by any illegal business is the reduction f income for governments besides worsening of economic wellbeing of local public. While unethical or illegal business may increase earnings for some individuals, it adversely affects the income of other people as well as that of the state. Additionally, potential market destabilization could also result from such business dealings that are opposed to legal and ethical standards. International corporations are bound to lose trust in such market places that are laden with unethical businesses. They therefore cannot expand their business operations to places where IP rights are not observed and legal obligations deferred. As a result, there would be a decline in investment from external enterprises in such nations.
All employees are expected to apply professionalism at the workplace guided by the ethical code of conduct. Violations occur often and should be reported accordingly to maintain professionalism in the workplace. Public awareness has also been boosted by globalization and scrutiny of business activities has become a vital requisite for business operations. A global social contract framework could assist in upholding ethical standards that would go beyond the applicable norms within nations. Moreover, international legal agreements would boost international trade a great deal but this possibility faces many challenges. Nevertheless, contemporary situations in ethical aspects would still apply in all business operations.