BUSINESS ETHICS C.I.

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Submitted By Shreyas Patharkar M.B.A-G 1020826

HOW DOES CORPORATE CULTURE HELP IMPROVE BUSINESS ETHICS?

Business ethics (also known as Corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non -economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

Is business ethics required?

Discussion on ethics in business is necessary because business can become unethical, and there are plenty of evidences as in today on unethical corporate practices. Even Adam Smith opined that People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.Business does not operate in a vacuum. Firms and corporations operate in the social and natural environment. By virtue of existing in the social and natural environment, business is duty bound to be accountable to the natural and social environment in which it sur vives. Irrespective of the demands and pressures upon it, business by virtue of its existence is bound to be ethical, for at least two reasons: one, because whatever the business does affects its stakeholders and two, because every

juncture of action has trajectories of ethical as well as unethical paths wherein the existence of the business is justified by ethical alternatives it responsibly chooses. [ One of the conditions that brought business ethics to the forefront is the demise of small scale, high trust and face-to-face enterprises and emergence of huge multinational corporate structures capable of drastically affecting everyday lives of the masses.

History of ethics in business

Business ethics being part of the larger social ethics, always been affec ted by the ethics of the epoch. At different epochs of the world, people, especially the elites of the world, were blind to ethics and morality which were obviously unethical to the succeeding epoch. History of business, thus, is tainted by and through the history of slavery[8][9][10] history of colonialism
[11][12]

and later by the history of cold war. [13][14] The current discourse of

business ethics is the ethical discourse of the post-colonialism and post-world wars.[15] The need for business ethics in the current epoch had begun gaining attention since 1970s [16][17]. Historically, firms started highlighting their ethical stature since the late 1980s and early 1990s, as the world witnessed serious economic and natural disasters because of unethical business practices. The Bhopal disaster and the fall of Enron are instances of the major

disasters triggered by bad corporate ethics. It should be noted that the idea of business ethics caught the attention of academics, media and business firms by the end of the overt[18] Cold War
[16][19][20]

. Cold Wars, seen through pages of history were fought through

and fought for American business firms abroad. [21][22] Ideologically, promotion of firms owned by American nationals were presented as if it were freedom and the local resistance against the excess of American firms were labeled communist upraising sponsored by the Soviet Block. [23][24][25][26][27][28] .Further, even legitimate criticism against unethical practice of the firms was presented as if it were infringement into the 'freedom' of the entrepreneurs by activists backed by communist totalitarians
[29] [30][31][32]

This scuttled the discourse of

business ethics both at media and academics.[33]. Overt violence by business firms has decreased to a great extent in the democratic and media affluent world of t he day, though it has not ceased to exist. The war in Iraq is one of the recent examples of overt violence by the liberal western states on the behalf of oil business interests

Ethics officers
Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of this new role was a series of fraud, corruption and abuse scandals that afflicted the U.S. defense industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-industry initiative to promote and ensure ethical business practices. The DII set an early benchmark for ethics management in corporations. In 1991, the Ethics & Compliance Officer Association (ECOA) originally the Ethics Officer Association (EOA)-- was

founded at the Center for Business Ethics(at Bentley College, Waltham, MA) as a professional association for those responsible for managing organizations' efforts to achieve ethical best practices. The membership grew rapidly (the ECOA now has over 1,100 members) and was soon established as an independent organization.

Business ethics in corporate culture

The Institute of Business Ethics recently conducted a study that showed a proven correlation between ethical practices and business performance. The study shows that business ethics values corporate culture in the sense that with ethics comes an environment where pe ople want to be there and want to work as a team striving for the same goal. They are less likely to behave in an unethical manner. They aren t looking out merely for their own interests, as they were when working conditions led to low morale. Due to the h igh worker morale, there is increased employee retention, not to mention better productivity and services that come with keeping happy experienced employees. Business ethics values corporate culture only if there is an effective and consistent ethics program in place. Some companies may just skim over business ethics during new hire orientation and the words are never brought up again. BIG MISTAKE! When there is more than business ethics education, such as the company leading by example in their practice of ethical business, the success is amazing. Management, from the CEO on down, should view themselves as the model of ethical behavior in the eyes of their employees. If they demonstrate practices like favoring certain employees, compensation that is based on office relationships/politics rather than merit, and failing to take disciplinary action when unethical behavior of another employee is reported, employee morale and ethics will undoubtedly suffer. The concept of the corporation being a team is disre garded and employees are just bitter of the corporate environment. Most employees will gauge their actions by watching that of their supervisor or higher ups in the business. Ethics tend to be learned more than taught. We learn ethical behavior from the time we are young and it s mostly by observing the conduct of others, especially people we respect and admire. Our personal ethics may differ from person to person but business ethics is all about finding a uniform code of conduct that everyone c an follow to cultivate a positive work environment and corporate structure. The business ethics values corporate culture is very important to the structure of the business and employees that make the business run smooth.

The corporate world is beginning to understand that ethics are important, said Rush Kidder, president of the Institute for Global Ethics in Camden, Maine. By every measure we look at, this is a growth industry. With companies like Enron, WorldCom, Martha Stewart Omnicom and Barron s Ban k, executives are becoming increasingly worried whether their corporations are ethical. Scandalous and unethical behavior has become so prevalent in the media that executives have realized the impact of ethical behavior on both themselves and their corporations. Corporate corruption, government investigations and excessive pay packages have been well chronicled lately and executives are calling upon people like Rush Kidder to address ethical issues within their companies. Kidder emphasizes how a good ethical approach creates a positive corporate culture that makes customers happy and ultimately makes the company more profitable. Ethical companies are more efficient, Kidder said. That drops directly to the bottom line. Kidder s approach on ethics is something that parallels the course reading on creating a corporate culture. Clarifying expectations is an important component of management and ethics is no exception. Spending time with their subordinates to verbalize what the company s ethical expectations are, managers can instill ethical behavior from with the culture itself. In addition to creating an ethical forum, managers should also maintain the ethical quality, in addition to confronting any wrongdoers.

Business Ethics In Accounting

Those keeping the books of any business should be well versed in business ethics in accounting to avoid any breaches of confidentiality or financial stability. Depending on the type of business, white color crime with fraudulent accountin g practices can be easy. Manipulating or cooking the books has been a long time concern of many business owners worldwide. It is a concern because it is fairly easy to do and can be years down the road before the owner even realizes money is missing. The employee may be long gone with the cash in hand before the owner has a clue that he/she is missing money or

other products. Business ethics in accounting has been a long standing fight and is nothing new. In the past several years there has been a turn and more of a focus on overall ethics of a company. Most of the time the training is geared toward employees and their daily handling of the cash drawer, petty cash or merchandise that they handle. The bookkeeper that handles the minor accounting practices are generally held to some type of background check to ensure that they have not been caught with their hands in the cookie jar in the past. What about if the bookkeeper decides that under financial hardships, he/she needs a few hundred in cash that no w ill ever know about. That is when training for business ethics in accounting becomes important. Not only is a training program imperative to keep everyone honest and above board when dealing with financial reporting, but also a system of monitoring. Every company, small or large, needs to have a policy of checks and balances in place. It may be a monthly audit or a member of management doing a spot audit, but something should be in place. This makes the employees, whether they deal with finances or not, re alize that there is a strict business ethics in accounting policy and they will likely get by with nothing. It is also important to verbalize and put in written policy about the implications of stealing or falsifying records. Making sure that there are not large sums of cash or holding deposits will also help with deterring any type of fraud. Having policies of checks or money orders will help tremendously. Putting large sums of cash in front of most people is a chance, even if they are good people. There are situations in which people come up in life and you never know who might skim just a little bit off the top. There is another employee practice that is jeopardizing the business ethics in accounting. Employees that are privy to confidential information may be bribed to sell that information. Credit card numbers, checking account numbers and social security numbers are a very hot item for identity thieves right now. This costs businesses thousands and the customers as well.

Can Social Responsibility and Profitability Coexist

The social responsibility of a company also has its basis in ethics. The extent to which companies channel their resources toward improving society is a direct function of their ethical awareness. History shows that if left unimpeded, companies will practice the moral minimum which allows them to pursue profits, as long as no one is harmed. Kidder suggests that a pro-active ethical stance can improve profits as well as the corporate culture by attracting high level employees as well as prestige that can enhance marketability. As ethical behavior is being more closely examined in today s political environment, it is no surprise that investors and high level employees are flocking to companies like Google, General Electric and Alcoa, who are known to have high ethical standards. This can be demonstrated in sports world where most professional leagues will use charitable causes to help marketability and elevate the prestige of their respective league and its employees.