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IMPACT OF ETHICS UPON BUSINESS SUCCESS

Conference Paper · November 2017

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Vision 2020: Sustainable Economic development, Innovation Management, and Global Growth

Impact of Ethics upon Business Success

Ruxandra-Gabriela Albu, Department of Management and Economic Informatics, Faculty of

Economic Sciences and Business Administration, Transilvania University of Brasov, Romania
ruxandra.albu@unitbv.ro

Lidia Mandru, Department of Management and Economic Informatics, Faculty of Economic Sciences
and Business Administration, Transilvania University of Brasov, Romania
lidia.mandru@unitbv.ro

Titus Suciu, Department of Finance, Accounting and Economic Theory, Faculty of Economic
Sciences and Business Administration, Transilvania University of Brasov, Romania
titus.suciu@unitbv.ro

Abstract
This paper aims to study the way ethics influences business success. It is well known that many
companies may go bankrupt because of lack of a well established overall strategy, poor quality of
products, lack of innovation, focus on gaining immediate profit etc but is seems that nowadays ethics
is strongly influencing business success. The study conducted reveals that implications of ethics in
business are reaching a high level and they are more complex than presumed, ethical behaviour
bringing significant benefits to a business.

Keywords: ethics, business success, qualitative research.

Introduction
Since ancient times, companies are searching for business success but it seems that, nowadays, more
than ever, having success is not easy. Business success does not come unexpectedly in a company, it
presumes efforts, wise strategies, risk assuming and sometimes failure provides the lesson for
success. Many factors are implied in gaining business success (such as employees, processes,
management, strategies, etc) and it seems that there is a strong connection between ethics and
business success. Furthermore, code of ethics is seen as a pillar for business success, companies
without ethics being not able to exactly determine what is right and fair within their business,
therefore, ethical practices may lead a company to failure or success. We shall see in the following
comments what ethics is, and what does business success means; we will explore the importance of
ethics and closely study the way it influences business success.

Literature Review

What is Ethics?
Longman Business Dictionary (2017) defines ethics as “moral rules or principles of behaviour that
should guide members of a profession or organization and make them deal honestly and fairly with
each other and with their customers”. Likewise, a company should apply ethics also when dealing
with its stakeholders, in addition to its customers or employees (Cleveland, 2002). Moreover, some
authors, Ferrel et al (2011) and Pauna et al (2014) have shown in their paperworks that fairness and
honesty represent the heart of a moral business and there should be no discrimination when it comes
about applying the rules within an organization. A code of ethics may help companies to improve
their business activities, reducing ambiguities and communicating the ethical vision of the company
to all interested parties. But what is a code of ethics? After reviewing several definitions of code of
ethics, Schwartz (2004) issued that “a code of ethics is a written, distinct and formal document which
consists of moral standards used to guide employee and/or corporate behaviour”. Firms who operate
at international level are more likely to have a written code of ethics; a study upon this was conducted

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by McKinney & Moore in 2007. In the specialty literature, Kaptein (2004) and Kaptein & Schwartz
(2008) clarified that for code of ethics there have been used other various names such as code of
conduct, integrity code, business code, corporate credo, code of practice, business principles,
corporate philosophy, corporate ethics statement.

What is Business Success?

There are many points of view about business success which shall be discussed below but what we
know for sure is that success always brings an award for those who hold it. In fact this award is the
one who triggers people for gaining success. But an exact recipe that would lead a company to
success can not be set as success does not mean same thing to everyone: for some people, being
successful means to reach a top position and have enough money to leave happy, without worries and
fears regarding the future.

For others, having success may consists of being a top seller on the market. But business success is
not only about selling products that suites the market. This is the result of having success and it starts
with the leadership of the company. In his book, Baggett (2000) has shown that within a company,
leaders should be the firsts who strive for companie’s success and the best leader is the one who
serves the others, thinks that finding a solution represents a higher priority than placing blame,
understands the power of synergy, is flexible, open minded, fully accepts responsibility, shares
knowledge, knows that employees want to be heard and understood, learns from failure, listens with
his ears as well as with his heart, place effectiveness ahead of efficiency.

For other authors like Gagliardi (2006), business success means to be better than the competitors on
the market and in its opinion the key of success is to develope dominating competitive positions that
can not be attacked by competitors. In his book, Gagliardi presented nine formulas that describe how
to build dominant positions and have business success.

Techniques for eliminating barriers to profitable growth, change management, business process
improvement represents the basis of business success says Peter Cleveland (2002), senior vice-
president at Ernst&Young. Case studies and methods that lead businesses to success can be found in
Carstea (2016), Carstea et al (2014), David (2011).

As we can see, there are many points of view of approaching business success but one thing is clear:
any company is searching for success and the way it reaches it, may differ from one to another.

Link between Ethics and Business Success

According to Ethisphere Institute, the global leader in defining and advancing the standards of ethical
business practices, among 2016 world’s most ethical companies list there are: Dell, Ford Motor
Company, Intel Corporation, Levi Strauss & Company, L’Oreal, ManPower Group, Marriott
International, Marks&Spencer, Royal Carribean Cruises, Starbucks, Xerox (the list includes 131
companies spanning 21 countries and 45 industries). All these companies are business successful thus
showing us an implicit connection between ethics and business success.

In his article published by Forbes, Strauss (2016) mentioned that the goal of Ethisphere’s ranking is
to offer a model on how corporate entitities should manage themselves, improving their own
activities and have business success. He said that this list “represents some of the best the
international business world has to offer”. Ethisphere (2017) evaluates firms upon 5 criteria
considered as core for ethics, namely: ethics and compliance program; corporate citizenship and
responsibility; culture of ethics; governance; leadership, innovation and reputation.

For this survey, there were also taken into account companies’ size, geographic location, activity
domain (industry), history of litigation, reputation, ethical track record, and other factors like risks
exposure, sustainability, etc. Ethisphere does not take into account firms that deal in alcohol, tobacco
or firearms (Strauss, 2016).

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Another study conducted by Ethics&Compliance Initiative (2016) is Global Business Ethics Survey,
a research project performed through online panels from 13 countries. This survey provides reliable
insights about organizational ethics in global economies that are critical to business success on the
basis of four key metrics: pressure to compromise organizational standards, observed misconduct,
reporting of misconduct when observed and retaliation against reporters. Thus, ECI identified some
principles common to High-Quality Ethics and Compliance Programs that may help company to
reach business success, among which we mention: ethics and compliance are central to business
strategy and leaders at all levels across the organization have to build and sustain a culture of
integrity that prizes ethical decision-making.

Methodological Aspects of the Qualitative Research

In his book, Malhotra (2007) shows that qualitative research provides insights and understanding the
problem setting, while quantitative research seeks to quantify the data.

Qualitative research aims to provide a deep understanding of people’s contextualized behaviour. It

aims to explain how and why people behave as they do, therefore there are examined beliefs,
perceptions, motives, attitudes and opinions as mentionned by Bowie and Buttle (2004).

Survey Method. A survey consists of gathering data by interviewing people. The advantage of a
survey is that information comes directly from the people you are interested in. The main limitation
of a survey is that are opportunities for error in the construction of the survey questionnaire.

As stated by Etzel et al (1997), personal interviews are more flexible than phone or mails because
more information can be obtained by personal interview and interviewers can probe more deeply if an
answer is incomplete.

The purpose of this study was to determine the connection between ethical behaviour and business
success, the general objective of the research being to learn about the concept of ethics in business.
In order to reach the above-stated aim, the following specific objectives were established:

1. To identify individuals representing ethical models for the interviewed subjects;

2. To identify the factors influencing the unethical behaviour;
3. To identify the way in which breaking the principles of ethics affects the quality of work
and products/services provided.

In order to achieve the objectives listed above, a qualitative research was conducted, using the in-
depth, semi-structured interview method. The sample was made of 20 subjects and the structure of
the interviewed people is presented in Table 1.

Table 1: The Structure of Research Sample

Demographics
Participant Seniority Type of
Field of Work Age Gender Studies
[years] Company
S1 28 State public service National 54 Female Higher education
Management, supply
S2 27 chain, import, National 47 Male Post-graduate
distribution
S3 8 Furniture design National 27 Male Student
Automotive,
S4 20 National 42 Female Higher education
financial field
S5 20 Economics National 40 Female Higher education

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Non-profit, social,
S6 10 humanitarian and National 38 Male Higher education
educational activities
Post-secondary
S7 20 Services National 44 Male
education
S8 20 Sales National 42 Male Higher education
S9 20 Culture National 47 Male Higher education
S10 5 Trade National 25 Male Student
S11 15 Technical Multinational 33 Male Higher education
S12 21 Industry National 39 Female Higher education
S13 21 Economics Multinational 47 Male Higher education
S14 5 months Nutrition Multinational 22 Male Higher education
S15 1.5 years Trade Multinational 21 Female Student
S16 6 months Services Multinational 22 Male Higher education
S17 19 Automotive Multinational 40 Female High School
S18 2.5 years Services Multinational 28 Female Higher education
S19 20 Services Multinational 49 Female Higher education
S20 1.5 years SPA National 20 Male Student

The subjects interviewed were chosen taken into account their education and training but also their
work experience (either students or graduates of economics faculties who studied subjects that dealt
with concepts related to business ethics, or practitioners who were able to express an opinion from
their own experience). The structure of the interviewed subjects by gender, type of organization they
work for and their seniority is presented in figures no. 1, 2 and 3.

Q16. Gender

40%
Female
Male
60%

Fig. 1: Subjects Gender

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Q3. Do you work for a national or a multinational

company?

40%
National
Multinational
60%

Fig. 2: Subjects Division by the Type of Organization They Work for

Q1. Seniority

25%

Less than 3 years

3-10 years

10% Over 10 years

65%

Fig. 3: Seniority of Interviewed Subjects

The interview guide, which included 18 questions, had both questions covering the general aspects
under research, such as the awareness of the concept of business ethics and business success definition,
and questions aimed to identify level of importance subjects give when it comes to complying with
ethics and the potential correlation between business success, ethical behaviour and quality of provided
work.

The qualitative research method used was the exploratory one, respectively exploratory investigation
and as Constantin and Tecău (2013) mentionned, this kind of method is often used in order to
investigate new and complex fields, collect information where secondary data is hard to get and when
provision of a theory is intended.

In his book, Lefter (2004) stated that marketing qualitative research may rely on several investigation
techniques such as direct communication techniques – which may be individual (structured, semi-
structured or unstructured) or in group (debate group, focus group etc.) - or indirect communication
techniques (projective techniques). In this case, we went for a direct individual communication
technique namely semi-directive (semi-structured) in-depth interview.

The interviews were conducted between March 2017 and May 2017 and were afterwards transcribed in
order to conduct a content analysis.

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Content Analysis

In the content analysis, the questions of the semi-structured interview were correlated with the
previously mentioned objectives.

For the first specific objective of the research correlated with the general objective ("To learn about the
concept of ethics in business" and "To identify individuals representing ethical models"), all
interviewed subjects asserted they knew what this concept meant and 45% of them considered they
could identify individuals representing business ethical models (see figure 4). For instance, S10
mentioned Warren Buffet as model of ethical behaviour, while S13 went for Mehran Tavakoli Keshe.

Q6. Is there an individual who represents a business

ethical model for you?

45% Yes
No
55%

Fig 4: Share of Subjects Who Have an Individual as a Business Ethical Model

When it comes about defining the concept of ethics in business, we mention some opinions: S1
considers that business ethics is " …a set of moral principles, methods and tools without which a
business cannot develop ...", S4 asserts that business ethics is correlated with "adherence to moral
norms", and S19 defines the concept as "promoting and implementing the moral principles within the
company, in the relations from the internal and external environment (shareholders, employees,
customers, suppliers, partners, authorities)".

We also found interesting the subjects' answers to the question related to success definition (What does
success means to you?): S1 "the effort and abnegation towards achieving a goal”, S15 "the capacity to
succeed regardless of the situation" and S16 "to succeed in achieving all intended goals".

Among the factors ensuring business success mentioned by our subjects, there are: perseverance,
profit, respect for competition, integrity, courage, seriousness, talent, profit reinvestment, quality,
staying true to commitments, competent and moral people, professional training, correctness, honest
partners, consistency, permanent adaptation to market needs, instinct, political stability, luck,
notoriety, providing high quality products/services for competitive prices, money, work expertise,
strategy, entrepreneurial spirit, trust in yourself and in what you do etc.

In respect to the second specific objective "To identify the factors influencing the unethical behaviour",
51% out of respondents mentioned desire for gain, 16% the strong competition, 14% personality and
19% other reasons.

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Q9. Considering the following factors, which one influences the

unethical behaviour in your opinion:

19%
Desire for gain
Strong competition
14%
Personality
51%
Others

16%

Fig. 5: Share of Factors that Influences Unethical Behaviour

The most interesting answers the subjects gave to question no. 10 (“Which are in your opinion the
consequences of an unethical behaviour?”) were: maximum material profit for short period of time,
achieved by breaking the ethical principles; corporate divergences; bankruptcy; corrupted company;
personal benefits; legal and financial repercussions from authorities; perpetuation of negative values
affecting the behaviour as well; customer dissatisfaction; image impairment, etc.

Among the companies that subjects consider having an ethical behaviour we mention: ICCO Clinics,
Private Healthcare Network Queen Mary, Saint Constantin Hospital, Ina Schaeffler, Ikea, Apple,
Emag, Vodafone, Orange, OMV, Telekom, Maurer Imob, Dacia Plant, Transilvania University of
Brasov, Interbrands, Marketing&Distribution - P&G, Keshe Foundation, Albalact, Sergiana, Bit
Software Brasov, Hutchinson, Gelu Bagel Shop etc.

The elements that distinguish ethical companies from others were indicated by the answers to
question no. 12 (“Which elements distinguish in your opinion ethical companies from the unethical
ones?”). The elements mentioned by respondents were: professionalism, correctness, management,
care for customers, care for people/humanity, investment in employees, respect for partners, profit,
compliance with law, social responsibility activities etc.

The third specific objective - "To identify the way in which breaking the principles of ethics affected
the quality of work and products/services provided" - got two of the 18 questions of the interview
guide, namely questions 13 and 14.

Q13. Have you ever been asked to break the code of

ethics at work?

40%
No
Yes

60%

Fig 6: Share of People Who Were Asked to Brake Ethics at Work

As a result of our survey, 40% of the interviewed people answered that they were asked to brake
ethics at workplace and among them 75% accepted it thus showing us that some employees do not

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betrade companies own values. People at work were asked to offer bribery, sexual favors, imposing
some people on certain job positions, omission of some items in the financial statements so that
company may get included in a lower risk class by the bank, violation of government laws, delivery
of a component made of material other than that requested by the customer, without informing him.
Those who broke the rules said that this affected the quality of their work generating additional work
effort (preparation of extra statements), stress affecting the personal well-being so as employees were
tempted to look for another job.

Conclusions
The most important conclusions of the qualitative research are:

- all subjects interviewed stated that they knew what the concept of business ethics dealt with;
- 45% of the respondents stated that they could identify individuals representing models of
ethics in business and they gave several examples in this respect;
- in respect to determining the factors influencing the unethical behaviour, 51% of
respondents mentioned desire for gain, 16% the strong competition, 14% personality and
19% other reasons.
- in subjects ’opinion, there is a multitude of elements that distinguish the ethical companies
from the unethical ones (professionalism, correctness, care for customers, legal compliance,
management, respect for partners, social responsibility activities etc.).
- 40% of the subjects stated they had faced situations of breaking the ethics within the
organizations they work/worked for. Those who broke the rules said that this affected the
quality of their work generating additional work effort, and stress.

Therefore, culture of ethics should be embedded within a company from top down and all employees
should be aware of it and apply it. Lack of ethics may cause serious problems in a business affecting
employee performance, employee work relations, company’s image and credibility.

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