Understand The Principles Of Organizational Ethics Commerce Essay

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Arnold, Cooper and T Robertson believe that work psychologists activities are governed by ethical principles, many of which concern the rights and well-being of people who pay for their services and/or participate in their research" (p47).

Ethical principles are very essential to be considered by work psychologists for not to put the participant under a "subject of risk". Ethical principles are a kind of regulators which define characteristics of professional status and they are an integral part of all aspects of professional life. Every work psychologist should make a careful evaluation of the ethical acceptability of the research. 

Business ethics has been claim as an Oxymoron. By an oxymoron, it mean that bringing together of two apparently contradictory concepts, such as in 'a cheerful pessimist' to say that business ethics is an oxymoron suggests that there are not or cannot be ethics in business which state that business is some way unethical such as business that is inherently bad, or that it is at best amoral which are such as outside of our normal moral considerations. Examples are such as in the latter case, Albert Carr (1968) notoriously argued in the article 'is business bluffing ethical' that the game of business was not subject to the same moral standards as the rest of society, but should be regarded as analogous to a game of poker where deception and lying were perfectly permissible. 

Business ethics is currently a very prominent business topic, and the debates and dilemmas surrounding business ethics have tended to attract an enormous amount of attention from various quarters. For a start, consumers and pressure groups appear to be increasingly demanding firms to seek out more ethical and ecologically sounder ways of doing business. Besides, the media also constantly seems to be keeping the spotlight on corporate abuses and malpractices. And even firms themselves appear to be increasing recognizing that being ethical may actually be good for business. 

There are main reasons that show why we think that a good understanding of business ethics is important:

The power and influence of business in society is greater than ever before. Evidence suggests that many members of the public are uneasy with such developments. Business ethics helps us to understand why this is happening, what its implications might be, and how we might address this situation. 

Business have the potential to provide a major contribution to our societies, in term of producing the products and services that we want, providing employment, paying taxes, and acting as an engine for economic development, to name just a few examples that how or indeed whether, this contribution is made raises significant ethical issues that go to the heart of the social role in business in contemporary society.

Business ethics can provide us with the ability to assess the benefit and problems associated with different ways of managing ethics in organizations.

Business malpractices have the potential to inflict enormous harm on individuals, on communities and on the environment. Through helping us to understand more about the causes and consequences these malpractices, business ethics seeks, as the founding editor of the journal of business ethics has suggested (Michalos 1988), to improve the human condition.

The demands being placed on business to be ethical by its various stakeholders are constantly becoming more complex and more challenging. Business ethics provides the means to appreciate and understand these challenges more clearly, in order that firms can meet these ethical expectations more effectively.

Finally, business ethics is also extremely interesting in that provides us with knowledge that transcends the traditional framework of business studies and confronts us with some of the most important questions faced by society. The subject can therefore be richly rewarding to study because it provided us with knowledge and skills which are not simply helpful for doing business, but rather, by helping us to understand modern societies in a more systematic way, can advance our ability to address life situation far beyond the classroom or the office desk. (Business ethics, Andrew Crane and Dirk Matten, 2007, Oxford, pg 9-11)

The study of ethics has become increasingly important with global business expansion, because of an increase in ethical and social responsibility - concerns that businesses face in different country environments. There exists, however, a wide divergence in the level of importance attached to these two issues in different countries (Czinkota and Ronkainen, 1998). Moreover, vast differences exist from country to country in the economic development, cultural standards, legal/political systems, and expectations regarding business conduct (Wotruba, 1997). In addition, there is great divergence in the enforcement of policies (Mittelstaedt and Mittelstaedt, 1997).

In the business ethics literature, ethical variations among marketers/managers from different nations are documented in many empirical studies on various types of ethical issues (e.g. Armstrong et al., 1990; Graham, 1985; Becker and Fritzsche, 1987). Variation in ethics across cultures was evidenced in a cross-national study of industrial salespeople by Dubinsky et al. (1991) where some significant differences in ethical perceptions were found among marketing managers from Japan, Korea, and the USA. A study by Singhapakdi et al. (1994) also revealed that American and Thai marketers differ on various components of their ethical decision-making process.

Ones of the case study show in business ethics is McDonalds. McDonald's fast food chain was very close to winning the Business Ethics award for environmental excellence in 1999. Ironically, shortly before they received the award they became the example of animal mistreatment. This occurred when the Business Ethics group heard about a campaign being done by, People for the Ethical Treatment of Animals (PETA). PETA is known for their negative publications on businesses for animal mistreatment in the United States. The People for the Ethical Treatment of Animals campaign showed the slaughterhouse cruelty to animals. The co-founder of the Business Ethics group stated that this seemed unfair to McDonald's. Apparently animal cruelty is industry wide. However, others feel that McDonald's is the perfect company to stand up and lead the industry in changing this horrific truth. This is not directly McDonald's fault because they are not directly harming the animals. The suppliers are unintentionally being cruel to the animals. Now that McDonald's knows this they ethically have to make their suppliers provide humane living conditions for the animals. This is a prime example of agency theory; McDonald's is most of America's agent for lunch, dinner or the afternoon snack.

2.0 Understand ethical codes and related legislation:

Public auditors, work study and personnel practitioners, those involved in health services, public prosecutors and others all have a code of conduct. These codes do not usually have legal authority. They are merely guidelines formulated over a long period. They reflect the honest desire of public officials to serve their respective communities with dignity and integrity. According to Hanekom and Thorn hill (1987:163), an ethical code has at least four main objectives:

The encouragement and maintenance of responsible behaviour by public servant

The promotion of public confidence in the integrity of public officials

The provision of guidelines to officials regarding their relationship with other officials, elected public representatives and members of the public

The provision of guidelines to public servants regarding the exercise of the discretionary powers which they may possess.

The codes of ethics are issue for these reasons. However, rather than becoming a rule of law where offenders can be made to face legal action, the codes are meant to be a self-restraining or self-governing mechanisms.

Provisions in the codes are meant to be guidelines that have to be strictly followed by accountants and the behavioral traits all accountants should have while carrying outs their roles as accountants. The basic underlying principle is that it is not enough for them to just follow the rules. Over and above that - i.e. rule following, their tasks must be done in a professional manner and accompanied by proper conduct befitting their roles as custodians of financial records and managers of public trusts.

The need for such a mechanism is crucial for a profession to command respect and develop. Chua and Mathews (1995) (Prof. Dr. Mohammad Adam Bakar, Maisarah Mohamed Saat, Ainun Hj. Abd. Majid, 2002) noted that public confidence in the work of accountants will enhance their trusts of them and is the single most crucial element in the future development of the profession. The public expects and needs to be assured that accountants do their jobs diligently and with conscience that what they (the accountants) do is to serve them (the public). In short, what accountants need to understand is that doing their job well will not only benefits the organization they served, but also the economy as a whole.

Ethics in accountancy profession are invaluable to accounting professionals and to those who rely on their services. Stakeholders including clients, credit grantors, governments, taxation authorities, employees, investors, the business and financial community etc perceive them as highly competent, reliable, objective and neutral people. Professional accountants therefore, must not only be well qualified but also possess a high degree of professional integrity. Because of these high expectations, professionals have adopted codes of ethics; also known as codes of professional conduct. These ethical codes call for their members to maintain a level of self-discipline that goes beyond the requirements of laws and regulations. Each of the major professional association for accountants has a code of ethics.

As we enter into the marketing aspect of the business, it can be seen that business marketing had been developed rapidly in the 1980's until today, the development of business marketing had brought prosperity and consumer satisfaction through understanding the consumer market, buying behavior, needs and demands. Throughout these years, organizations had successfully gain the market share and consumer loyalty by sophisticated marketing strategy that strikes the heart of consumers. To stand out from the rivals, some of the marketers offended the social responsibilities and business ethics just to obtain their marketing goals. The marketing ethical issue is under control by a set of law, while the purpose of law is not to make marketers or stakeholders in organization to behave ethical but to compel people not to behave in a way which are legally unethical. There are numbers of issues that are not enforced by the law occurred in the market and practiced by some marketers.

Advertising also has an indirect but powerful impact on society through its influence on media. Many publications and broadcasting operations depend on advertising revenue for survival.

Some unethical advertising misrepresent without relevant facts, promote harmful or useless goods, and mislead consumers based on irrational buying decisions. For instance, some consider it unethical for marketing companies to aggressively promote unhealthy foods to children although such promotional practices are generally not viewed as illegal in law.

In United Kingdom, a company called The Body Shop is very successful in particular of ultra awareness of marketing ethics within the organization. The Body Shop produced skin care products and cosmetics that are animal testing free and the bathing soap that contains natural ingredients without harmful chemicals. This company is against animal testing, defends human rights and protects the planet and supports community trade. Today's consumers are aware of environmental friendly issues and are unwilling to buy a bubble bath if they believe someone or something had to suffer so that they could relax in a tub full of foams.

Several cases of misconduct have somehow highlighted the need for self-governance and hence the codes of ethics. Anderson (1985) (Prof. Dr. Mohammad Adam Bakar, Maisarah Mohamed Saat, Ainun Hj. Abd. Majid, 2002) noted that comment made by the past President of the American Institute of Certified Public Accountant who lamented that the professionalism of accountants is on a decline. The Ohio Society of Certified Public Accountants raised a similar concern and warned that unless something is done to arrest the situation, a crisis of confidence will soon emerged (Cenker and Madison (1996). 

In Japan, Chou Audit Corporation was charged in court for failing to detect "window dressing" practice of Yamaichi Securities - a stock-broking firm that went bust in 1997. The charge claimed that if the auditor had done their work professionally, they would have detected the fraudulent dividend payment illegally made to fictitious shareholders. 

Similar cases were reported in Italy and Malaysia. In the former, two auditors from the 'big five" were charged in court for failing to detect "bogus profit" which their client company reported thereby inflating their income statement, rendering the balance sheet useless. In Malaysia, the cases involving Bumiputra Finance and Pan-Electric in the early 1970s demonstrate ethical conflicts faced by accountants. To this Mahfuzah et. al. (1996), reported that Malaysia is experiencing an increase in white-collar crime that accountants have failed to detect. Few accountants have also been sued by their clients - such as Chi Liung Holdings Sdn. Bhd., Bandar Utama City Corporation Sdn. Bhd. and Meton Properties Sdn. Bhd. Accounting firm Johari Abas and Anor and David Low See Keat and Ors were charged by shareholders for their losses because the accountants had failed, as expected, to detect wrongdoings of their client companies in the course of their normal duties.

3.0 Understand integrated approach to business ethics and corporate social responsibility:

International researchers have not investigated differences in the extent to which marketers from different countries believe that ethics and social responsibility are important for organizational effectiveness. An individual's perception about whether ethics and social responsibility contribute to organizational effectiveness is likely to be a critical antecedent of whether he/she even perceives an ethical problem in a given situation (Singhapakdi et al., 1995). This is a pragmatic view based on an argument that managers must first perceive ethics and social responsibility to be vital to organizational effectiveness before their behaviors will become more ethical and reflect greater social responsibility.

This view is consistent with Hunt and Vitell's (1986) depiction of ethical judgment as including a teleological evaluation, when an individual evaluates alternative actions by weighing the perceived probability and desirability of consequences. Essentially, a manager's choice of behavior in a situation that has problematic ethical content will be based on his/her perception of the likelihood that the actions will bring about a desired outcome. This view is also consistent with Jones' (1991) issue-contingent model where it is postulated that the "probability of effect" which is defined as "the probability that the act in question will actually take place and the act in question will actually cause the harm (benefit)" (Jones, 1991, p. 375) will affect an individual's ethical decision making.

Intuitively, ethics and social responsibility should have a positive impact on the success of an organization, because consumers make ethical judgments that are likely to influence their purchases. Consumers over time will normally recognize the organizations that attempt to be responsive to various ethical and social factors in the marketplace. Accordingly, it is vital for marketers to incorporate ethical and social considerations in their work.

In this section it is proposed that the variations in the perceived importance of ethics and social responsibility as determinants of organizational effectiveness is explained by country differences (including cultural differences and differences in the economic environment), organizational ethical climate, and individual characteristics of gender and age.

It is hypothesized that these cultural dimensions contribute to differences in the perceived importance of ethics and social responsibility. For example, marketers in collectivistic countries (such as Malaysia) would be expected to be more loyal to their organizations because of greater dependence (Hofstede, 1983), and therefore, concerned for their organization's well-being when making decisions that enhance organizational effectiveness. Consequently, collectivistic cultures would attach more importance to achieving superior organizational performance than to ethics and socially responsibility.

Masculine societies encourage individuals to be ambitious and competitive, and to strive for material success (Hofstede, 1980), which may tempt marketers from countries ranking high on masculinity to achieve greater efficiency, at all costs.

Therefore, they would attach less importance to ethics and social responsibility than to efficiency, competitiveness, and long-term survival. Individuals from cultures with high power distance (such as Malaysia) usually accept the inequality of power, perceive differences between superiors and subordinates, are reluctant to disagree with superiors and believe that superiors are entitled to privileges (Hofstede, 1983). Consequently, marketers from high power distance countries are likely to perceive a need to minimize disagreement with superiors and satisfy superiors through improved performance. In other words, organizational performance is likely to be relatively more important to them relative to the extent to which a decision is ethical and socially responsible. The risk-taking orientation of marketers from low uncertainty avoiding countries would lead them to believe that it might be worth taking the risk of unethical actions in order to improve efficiency and competitiveness. Therefore, marketers from low uncertainty avoidance countries are likely to attach less importance to ethics and social responsibility in achieving organizational effectiveness. Individuals in countries ranking high on Confucian dynamism tend to adhere to the more future-oriented teachings of Confucius; those from countries ranking low on Confucian dynamism tend to be more present- and past-oriented (Hofstede and Bond, 1988). From the perspective of this study, marketers from cultures ranking high on Confucian dynamism have a strong sense of shame and are likely to be wary of actions that are improper or disgraceful. Marketers from high Confucian dynamism countries (such as Hong Kong, Taiwan, Japan, and Korea) would, therefore, believe that any actions bringing disrepute and shame to the company would be detrimental to organizational performance. This is also consistent with the greater future-orientation of individuals from these countries. Alternatively, it is also possible that marketers from high Confucian dynamism countries might be sensitive to the shame arising out of inferior performance and might therefore believe that greater efficiency and profits are important at the cost of ethics and social responsibility. In other words, the effects of Confucian dynamism might be expected in both directions.