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A business ethics is an evolutionary process that runs demanding honesty in the process of production, in terms of sustainability and environmental friendliness. The new society is demanding that the behaviour of companies and organizations integrate intelligence, sensitivity, developed knowledge, belief and respect.
This essay will identify the concepts and the bases of an ethical business, and the importance of an ethical environment in a company.
Ethical business dated from the post-colonialism and the post-world war, the necessity of it begun in 1970s. Business started to realize the world's serious economic and natural disasters, due to the unethical business practice. Criticism against the unethical practices of the companies was presented as if they were violations of the freedom by the Communists in the United States. That's why media education, introduce to the students ethical behaviour. These create a reduction in overt violence of the companies in the media and the affluent world, but have not ceased yet. The war in Iraq is one of the recent examples of overt violence by the Western government on behalf of commercial interests of oil, as their country's oil reserves have fallen considerably due to the unethical business practices.
Ethical businesses have many different definitions. Can be defined as the critical and structured examination of how people and institutions should behave, this include the examining on the pursuit of self-interest, profits, or when the actions of the individuals affects others (customers or suppliers)
According to Crane & Matten (2007) business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed.
Can be as well the analysis of the behaviour of employees, management and corporations in how they deal with problems such as corporate, social and fiduciary responsibilities; and how shareholders relations, corporate governance, bribery and discrimination are examined in the company.
The ethics has two important areas, the critical and the structural. Is critical because has to do with the examination and criticisms of moral beliefs and practices; as well as involves the judgement of norms and values behaviour, asking them which one matter more and in what sort of situation. Now, it's structured, because is not just having the opinion of how people should behave, it involves the attempting to rationalize and unify the diverse moral beliefs.
The acts of the companies and individuals that are part of them, affect positively or negatively on other businesses, other individuals or other processes. The ethical issue is of great relevance to every individual and extends to the business. In every decision taken will be mixed up some ethics. Whether negotiating with suppliers or with the union, hiring and dismissal of employees, allocation of responsibilities or launching a promotion, ethics is always present.
Currently, when there are more organizations that are striving for transparency and the internet as a tool for democratization and social mobilization, companies have as one of the foundations of corporate ethics. According to Rinnova Kan Quirilio, director of one of the most important financial groups in Netherlands, "Without strong values we are flirting with disaster. With strong values, we can face the international markets". But surely there are some who over the ethics and values financial performance, but do not realize that corporate ethics can be a source of competitive advantage and that through it you can attract customers and staff first level.
Through ethics, business may end up with corruption practices that destroy value and damage the economy and society. If the organization rely on human capital as one of the greatest business assets, and it realize that these people have value in themselves, that they should be respected, the management of the company will have made the first step to justify ethically the company, an organization that lives by the five core values: equality, freedom, dialogue, respect and solidarity will be better prepared for the future
Business can provide a good contribution to the society. They can produce goods and services that people want, generating employment, contributing with taxes, and helping to build an economic development. (1)
There are many benefits of an ethical culture. Many companies are making emphasis on it, to protect the business and the employees from situations like scandals or bad management, that can send them to morale's downward, and probably to look for another job
At the moment studies show that the mayor people looking for jobs are interested to do it in ethical companies, even suggesting they would accept lower salaries, if the business acts by the ethical rules.
According to a study from the University of DePaul, companies that are working under the ethics code, are returning the shareholder value twice the rate of normal companies, and for companies with ethics crises, the share price lost four times the Dow Jones Averages rate.
When the company focuses on ethical behaviour, they won't have any problem falling out in compliance, because they culture will report the violations of the ethics code, which means that the issues are managed and identified on time. As well, the company is able to deter fraud, if there is an appropriate code, training and enforcement, stopping major scandals that can deteriorate the companies' name.
(3. Less Litigation - We are in the most litigious era ever in the history of this country, and litigation is expensive. According to a survey by law firm Fulbright Jaworski, LLP, "Companies worldwide spend an average of $15.8 million annually on all their legal work. More than two-thirds goes to litigation." Forty percent of those surveyed by Fulbright Jaworksi had one or more lawsuits filed against them in which $20 million or more was at stake. By creating an ethical culture, there will be fewer situations where issues or problems will lead to litigation.)
(4. Happier Employees = Improved Bottom Line- Finally, research tells us that happier employees add to the bottom line. Happy employees are more productive, more loyal to the organization and are more invested personally in helping the company be successful. In fact, companies listed on Fortune magazine's annual list of the "100 Best Companies to Work for in America" between 1998 and 2005 showed an annual return of 14% per year, while the overall market showed a return of only 6% per year. Employees' feelings toward the organization are reflected in how they treat customers. And if customers are happy, they will continue to do business with the company. In addition, loyal employees are more likely to stay longer and will also settle internal problems peacefully. The majority of employees want to work for an organization they know is ethical. Failing to create an ethical environment is likely to impact how employees feel about the organization. Their disappointment, frustration or angst toward the company will come across in their productivity and service to customers. And unhappy customers are not likely to continue to do business with a company that has unhappy employees.)
Employees that are treated with respect and dignity is an employee that shows respect for the organization, reflected in their conduct on the works place. They will avoid expensive charges to the company, their working and resting areas will be clean and tidy, won't take office supplies home and they will reduce their "sick days"
There are three fundamental principles of business ethics. Maximize owner's value, based in a long term period of sales of goods and services. Distributive justice which is essentially concerned to aspirations, dispositions and achievements, relevant to the business just if they affect the long-term owner value. And the Ordinary Decency, better explained by "treating equals equally" (Sternberg 1990) within the confines of the law
According to Sternberg (1999) in his ethical decision model, the identification of which problems, managers need to address on the business are, the clarification of the issue; classifying it in media, interest groups, stakeholders, etc. Second, determine its relevance for the business, and if it's related to the maximization of the long-term owner value, if it's relevant to the business or can represent a problem for it; if not, there is no ethical problem to be resolved. Then identify constrains that may limitate the solutions based not only in law and regulations, also in cultural, physical, economic and technical considerations. And the last procedure is to see how alternative solutions measure up against maximizing long-term owner values, respecting distributive justice and decency.
The management of every company should be covered by the foundation of all ethical code, which is respect for fundamental rights, as the company is personified by men in each management area
In contemporary society, business ethics is the workplace of the future for reasons of human dignity, business logic in the process of globalization and socialization of knowledge.
In social life becomes more important as the ties and social relations become more complex. The person is the sole subject. Ethics must be developed from and for the person. The company as a community of people who bring together their managerial work, its operational and investment. Thus the strength is not what the man brings, but people who carry. There is a difference between what is and what it brings slide. The ethical importance is when it carries.
The personification of managerial work, the close relation to the subject that carries out this work.
2. The embodiment of operational work, also by the close relationship that keeps working with the operator, although not a total relation, since the operational work is closely linked to the object on which it operates.
The personification of the act of purchase in relation not only to those who purchase (which corresponds to the first or second degree), but in relation to whom we buy, that is, the person of the supplier, and the personification of the act of selling in relation to whom sells (which corresponds to the first or second grade, but in relation to whom they are sold, that is, the person of the client.
From the ethical theory of transparency to the business community questioned how much the corporate social responsibility, the moral authority to all members of the community and social relations that developed the business community within your community and as relations with its social and natural environment.
The European Union Commission proposed the famous Green Book. Promoting a European framework for corporate social responsibility in order to make the European economy the most competitive and dynamic world capable of sustainable economic growth with more and better jobs and greater social cohesion.
To achieve inviting businesses to invest in your future, pursuing a triple bottom line economic, social and environmental progress in parallel allowing for economic growth, social cohesion and environmental protection. Three keys to an economy that does not want to do anything extraordinary, but simply their duties.
Companies that are committed to a code of ethics will enjoy the following four key benefits:
An ethical culture should be a top priority of every business, large or small. Companies that follow the six steps outlined above, from establishing enforceable code of conductto rewarding employees for helping to implement and enforce the code will find that their efforts also will be rewarded. Research has consistently proven that developing
an ethical culture; one where employees are respected, corporate values are emphasized and management guides by example, leads to growth, innovation and higher profitability.
Allegiance Ethics Training and Reporting Solutions can serve as critical components to developing and maintaining an ethical culture. Based upon 25 years of experience, the Allegiance ethics program is the only end-to-end ethics training and reporting solution on the market. Allegiance provides an extensive library of online and seminar training
solutions and services; customizable ethics solutions and strategies based upon client need; and a suite of ethics reporting solutions featuring SilentWhistle, an anonymous web-based reporting system.
Article Number 16: Ethical standards play important role in protection of company assets
A good indicator of high levels of corporate, and hence, employee ethics is how well employees protect their company's assets. TIers who take pride in this company's ethical standards reflect that pride in a respect for TI assets.
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Article Number 83: Sometimes the most damaging acts are not the most obvious
Much time and effort are spent discussing those obvious ethical problems and situations. Sometimes, however, our work relationships, our productivity, job satisfaction, and trust in our fellow TIers are damaged by the subtle and subversive games that people play.
Ethical scandals in today's businesses quickly make it to the national spotlight. Almost every newspaper highlights some situation or issue reeking of unethical behavior, questionable business practices, or outright law violations. However, Frank Navran writes in a recent issue of Training and Development magazine that those spectacular scandals account for only about 10% of the business losses attributable to poor ethical behavior.
That other 90% accounts for billions of dollars annually across the U.S. and appear in the way we treat each other when we try to protect our own turf, or get ahead at the expense of others, or do the wrong thing because we believe that is what our company wants us to do. Mr. Navran lists these examples of the "silent saboteurs"
Scapegoating -- blaming others for missed commitments, bad decisions or poor results.
Allowing the boss to fail by withholding information and not pointing out risks.
Budget games -- padding the budget in anticipation of cuts, end-of-year spending sprees to match estimates to actuals.
Overpromising to win a customer, gain support for a pet project or avoid a confrontation.
Turf-guarding -- protecting yourself from losing control or power.
Endless meetings and memos to make sure that you are covered or that you can distance yourself from a bad decision.
Under delivering on commitments because the other person's priorities are not important to you or because you look good by looking better than someone else.
Risk aversion -- not doing what is needed to succeed because you fear the consequences of failure more than you value the reward of success.
Sharp penciling -- fudging on reported results because everyone else does it so you have to do it to stay competitive for pay and promotions.
The cost of these activities is high...in the areas of motivation and morale, stress, quality, turnover, productivity, pride, and customer satisfaction, all of those areas that we want to emphasize in a highly ethical company.
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Article Number 84: Combating the subtle subversion
Much time and effort are spent discussing those obvious ethical problems and situations. There is, however, great damage potential in the subtle and subversive games that people play. Know how to combat the subtle is often as important as dealing with the obvious.
In last article we identified nine examples of what Frank Navran of Training and Development magazine called the "silent saboteurs", those self-serving subtle and subversive games that people play that tend to destroy an organization from within. His research reports that 90% of the business losses attributable to ethical behavior fall within these kinds of practices, and that accounts for billions of dollars annually across the U.S. To bring those numbers closer to home, he estimates that for a company the size of TI, losses resulting in unrealized productivity and profitability due to these behavioral types of problem could range from $5000 to $7000 per employee per year. You simply cannot ignore them. So how do you combat them?
Generally, there are two governing principles in effect here. First is that we tend to do what we think the company, our management, and supervisors want us to do. We tend to live up to their expectations as we perceive them. Secondly, we identify through our work environment and culture what we perceive it takes to be successful and move toward it. Both of these drives are so strong that even good employees are sometimes tempted to follow them even if their choices mean that they violate their basic understandings of what is right and what is wrong.
The key issues here are perceptions and expectations. Problems arise when perceptions are either incorrect or are not in alignment with the TI culture. And the solution centers on proactive communications and candor. The supervisor/manager must take an active personal role in making employees aware of the organization's values and ethics so that they will understand how the organization defines right and wrong along with its goals and expectations. Employees must have a clear knowledge of their organization's ethical standards and equally important, a feeling of management support when they act within those standards. Management must demonstrate through consistent examples their personal alignment with documented TI ethical principles and values, their expectations that employees will do what is right and fair, their support for a work environment that recognizes and respects individual ethical behavior, and their encouragement and support of open communications and candor within the organization.
On the other hand, organizations that squelch the "bad news", that discourage the sincere open discussion and resolution of problems, and make employees fearful of bringing concerns to the attention of their supervisors and managers are very costly. Self-serving people who allow this type of environment to exist, and those who use short-cuts, compromises and half-truths to achieve near-term gains are destructive over the long run. They divide people and organizations into winners and losers, ruining relationships and destroying trust.
Whatever your position is here in the TI organization, I encourage you to continually pursue integrity, openness, fairness and credibility, for they are the vital elements in a high quality, productive organization and the most effective weapons in combating the subtle subversion.