Business Ethics

            Business ethics is the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel. There are three different ethical thoughts about the extent to which ethical standards travel across cultures as follows:

• Ethical Universalism: Holds that the most fundamental conceptions of right and wrong are universal and transcend culture, society, and religion
• Ethical Relativism: Holds that the differing religious beliefs, customs, and behavioral norms across countries and cultures give rise to multiple sets of standards concerning what is ethically right or wrong
• Integrative Social Contracts Theory: Universal ethical principles based on the collective views of multiple societies form a social contract that all individuals and organizations have a duty to observe in all situations

Importance of Business Ethics:

•  Employees’ perceptions that their firm has an ethical culture lead to performance enhancing outcomes within the organization
• A corporate culture that integrates strong ethical values and positive business practices has been found to increase group creativity and job satisfaction and decrease turnover
• Ethical conduct results in shareholder loyalty and contributes to success that supports even broader causes and concerns
• Employees working in an ethical environment support and contribute to the process of understanding customers’ demands and concerns
• Ethical conduct towards customers builds a strong competitive position shown to positively affect business performance and product innovation

 

The 3C’s of Business Ethics:

• Compliance: The need for compliance of rules including laws, principles of morality and policy of the company
• Contribution: That business can make to the society including core values, quality of products/services, employment, usefulness of activities to surrounding activities and quality work life
• Consequences: That business can cause to the society toward environment inside and outside the organization; Social responsibility toward shareholders, bankers, customers and employees of organization; Good public image

Important factors of building an ethical infrastructure:

• Commitment from top management: As the top executives are the leaders, so if an ethical initiation is taken by them, it would be easy to spread it downside.
• Code of ethics: Formal code of ethics for organization members must be framed to establish and to encourage ethical conduct.
• Communicating ethics: A proper well designed network of communication is needed to institutionalizing ethics.
• Ethics training: Effective ethical training program must be designed to make employees aware of the ethical conduct and this would help them to design, implement and evaluate their ethical decision making.
• Response and Enforcement: A consistent response to ethical issues involves many criteria like – reward system, built in incentives, this can be further supported by checklist method
• Audits, Revisions and Refinements: The effectiveness of the program should be done through surveys, focus groups and detailed exit interviews often conducted by outside consultants for unbiased feedback. Audits should be established to reveal about the effectiveness of the communication of codes of ethics. A review for value program must be allowed.

Ethical values involve the behavioral norms and rules that are operand within an enterprise taking the form of an ethical code, covering areas such as conflicts of interests, general violating business laws.

Ethical Issues and Dilemma

Ethical dilemma is a complex situation a person (business) faces in which a decision must be made about the adequate action to be taken. A dilemma may derive from the conflict between the rightness and wrongness of the actions and the goodness or badness of the consequences of the actions. In other words, it is a conflict between at least two ethical principles both of which could lead to equally good or equally bad outcome.

Resolving ethical dilemmas:

Several frameworks have been developed as aid for resolving ethical dilemmas. One of them is the potter box model developed by Jay black for ethical decision making. The Potter box model consists of six steps as follows:

·        Define the dilemma

·        Identify values

·        Develop an accountability system

·        Compare the alternatives

·        Implement the decisions

·        Monitor the consequences and develop a policy

The use of this framework is particularly useful in clarifying ambiguous situations or contradictory loyalties.