Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

BUSINESS ETHICS; THE FUNDAMENTAL PILLAR FOR AN ORGANIZATIONS LONG TERM SURVIVAL
AIM AND OBJECTIVE OF THE STUDY: The objective of this research is to examine the most important attribute for any organizations success which is the distinguishing quality of practicing admirable business ethics. This study aims to establish a solid link between the awareness and adoption of appropriate business ethics and the long term survival of an organization or firm. The endeavor is to introduce and describe a conceptual framework of business ethics as the core for a firms growth. SIGNIFICANCE OF THE STUDY: Managers are always looking for ways to stabilize their business and subsequently achieve long term survival. This research provides the most fundamental means of doing so. Business ethics is taken an unimportant segment of business and most of the time managers and employees both dont take its destructive results into consideration. This study would help explain the importance of following ethics, not just for the personal satisfaction of an individual but at the same time for the survival of the whole organization. Good ethics can have positive effects on organizations and their results. Productivity increases, group dynamics and communication increase and risk in the organization, decreases. The relatively recent increase in empirical research conducted in business ethics has been accompanied by a growing literature which addresses its present shortcomings and continuing challenges. Particular attention has been focused on the difficulties of obtaining valid and reliable secondary data. However, little attention has been paid to the use of primary data. The endeavor is to try to stimulate the interest of business ethics using both the primary and secondary data. HYPOTHESIS: Two hypotheses have been constructed to be tested through this study. These hypotheses are given as under: Hypothesis # 1: An ethical behavior by the individuals of a firm and in turn the organization is the fundamental pillar of a strong reputation and long term survival of an organization.

1|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

Hypothesis # 2: An unethical behavior can generate a very high reputational risk, which can, consequently, be fatal for a firms survival. RESEARCH QUESTIONS: The following questions are intended to be answered by this study: 1. 2. 3. 4. 5. 6. What are Business Ethics? Why are business ethics important? Are the business personnel aware of business ethics? Do teaching business ethics help in their practice? Does the adoption of proper business ethics pay off? Is the appropriate knowledge and adoption of business ethics vital for a firms long term survival and growth?

LITERATURE REVIEW: The term ethics has many nuances. Webster's World Dictionary, 3 rd College Edition, defines "ethics" as relating to what is good or bad, and having to do with moral duty and obligation. Taylor defined ethics as "inquiry into the nature and grounds of morality where the term morality is taken to mean moral judgments, standards and rules of conduct. (Taylor, 1975) According to Hartmann ethics is a matter of ethos, participation in a community, a practice, a way of life. (Hartman, 2005) Definitions of ethics, including the study of the general nature of morals and of the specific moral choices to be made by an individual in his or her relationship with others, and the rules or stands governing the conduct of the members of a profession (Alderson, 1965). However, ethics indicates an obligation to consider not only our own personal well-being, but also that of others and of human society as a whole (Muddux & Muddux, 1989). Ethics in general is concerned with actions and practices that are directed to improving the welfare of people. Ethicists explore the concepts and language that are used to direct such actions and practices to improve human welfare (Powers &Vogel, 1980). Thus, ethics deals with questions that relate to making a life worth living and helping people to achieve such a life. Ethics is largely a matter of perspective, putting every activity and goal in its place, knowing what is worth doing and not worth wanting and having (Solomon & Hanson, 1983). Ethics is primarily a communal, collective enterprise, not a solitary one. It is the study of our web of relationships with others. When Robinson Crusoe found himself marooned and alone on 2|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

a tiny pacific atoll, all things were possible. But when Friday appeared and they discovered pirates burying treasure on the beach, Crusoe was then involved in the universe of others, an ethical universe (Gini, 1996). Applying ethics in business makes good sense. A business that behaves ethically induces other business associates to behave ethically as well. If a company (or a manager) exercises particular care in meeting all responsibilities to employees, customers and suppliers it usually is awarded with a high degree of loyalty, honesty, quality and productivity. For examples, employees who are treated ethically will more likely behave ethically themselves in dealing with customers and business associates. A supplier who refuses to exploit its advantage during a seller's market retains the loyalty and continued business of its customers when conditions change to those of a buyer's market. A company that refuses to discriminate against older or handicapped employees often discovers that they are fiercely loyal, hard working and productive. (www.asqsandiego.org/articles/ethics1.htm) (Accessed on June21, 2009) Companies do not operate in a vacuum but rather are plunged in a universe of relationships with multiple stakeholders. In this new era of limitless globalization, the scenario in which companies operate has become even more complex, given the emergence of global groups of stakeholders. Furthermore, globalization has also increased the levels of competition among firms, which look for new a creative ways to create a competitive edge. This competitive edge often turns out to be good morals and business ethics because this is the only edge that can bee sustained for long. Once a company has these ethics in it, it can compete with any big organization around the globe. (Friedman, 2000) The study of business ethics and its implications for different stakeholders i.e. customers, suppliers, governments, local communities and employees, have seen tremendous growth in the past few decades. There has also been a rise in the use and development of codes of ethics and announcements for ethical practices by many firms; however companies are still criticized for their unethical practices at different levels. Ethics has been defined as the activity of examining the moral standards of a society, and asking how these standards apply to ones life and whether these standards are reasonable. (Velasquez, 1998; pp. 11) Business ethics is a subset of the study of ethics in general. However, some special aspects must be considered when applying ethics to business. First, businesses must make a profit. Second, businesses must balance their desires for profit against the needs and desires of society. Maintaining this balance often requires compromise or tradeoffs. To address these unique aspects of the business world, society has developed rules-both legal and implicit-to guide businesses in their efforts to earn profits in ways that do not harm individuals or society as whole (Hoffman & Moore, 1982)

3|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

In this context, Business Ethics becomes a prerequisite for conducting any type of business, particularly in the global marketplace. Traditionally, there have been two views on the role of ethics in business. The first perspective is that the corporate executives sole responsibility is to maximize the shareholders value. The second view is that ethics pays, which implies that acting in a socially responsible way towards shareholder will automatically enhance shareholder wealth. (Verhezen, 2005) The literature on business ethics is divided on its views about the motivation and reason for businesses to have an ethical dimension. Drawing upon Harrison, there are two major schools of thoughts, firstly those who suggest that firms are profit generating institutions and therefore business ethics is yet another way to attract customers, secondly those who support corporate conscience and intrinsic motivation for the adoption of business ethics. (Harrison, 2001) According to the Shareholder Model, the entire spectrum for corporate governance lies with the shareholders. All questions in management are to be decided on the sole basis that whatever is best for the shareholders is to be adopted. All the decisions the company makes should solely be for profit maximization in turn benefiting its owners or shareholders. This came to be recognized as the shareholder model when societal concerns were sought to be matched with the increasingly rising profits of the corporations. Issues such as 'Corporate Social Responsibility' i.e. a corporation owes a responsibility to the society in which it operates and therefore has to act upon it, etc. came to be raised and were being argued vigorously in the early days of the 21st century. (Jain, 2008, February 12) Norton Juster, as cited by Hartman, stated that, From here that looks like a bucket of water, but from an ants point of view, its a vast ocean; from an elephants point of view, its just a cool drink; and to a fish, of course, its home. Justers statement is to imply, if we are to conduct an analogy, the different views of stakeholders around the company about its importance for them, but after all the company itself is the most interested one in its prosperity. Business ethics to one company could be one of the valuable intangible assets for competing in todays business world. In essence, business ethics could be viewed similarly by a company and its stakeholders if business ethics are to be competitive advantage. (Hartman, 2005) The potential for individuals and organizations to behave unethically is limitless. Unfortunately, this potential is too frequently realized. Consider, for example, how greed overtook concerns about human welfare when the Manville Corporation suppressed evidence that asbestos inhalation was killing its employees, or when Ford failed to correct a known defect that made its Pinto vulnerable to gas tank explosions following low speed rear-end collisions (Bucholz, I 989). Companies that dump dangerous medical waste materials into our rivers and oceans also appear to favor their own interests over public safety and welfare. Although these examples are better 4|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

known than many others, they do not appear to be unusual. In fact, the story they tell may be far more typical than we would like, as one expert estimates that about two-thirds of the 500 largest American corporations have been involved in one form of illegal behavior or another (Gellerman, 1986). Unfortunately, unethical organizational practices are embarrassingly commonplace. It is easy to define such practices as dumping polluted chemical wastes into rivers, insider trading on Wall Street, overcharging the government for Medicaid services, and institutions like Stanford University inappropriately using taxpayer money to buy a yacht or to enlarge their President's bed in his home as morally wrong. Yet these and many other unethical practices go on almost routinely in many organizations. Why is this so? In other words, what accounts for the unethical actions of people in organizations, more specifically, why do people commit those unethical actions in which individuals knew or should have known that the organization was committing an unethical act? According to Baccus and Near, they do so because they look for short term motives and hence feel that doing so would be profitable for them not caring for its consequences in the long run (Baucus and Near, 1991). It is not too difficult to recognize how individuals can knowingly engage in unethical practices with such mentalities. The overemphasis on short-term monetary gain and getting votes in the next election may lead to decisions and rationalizations that not only hurt individuals in the long run, but threaten the very existence of organizations themselves. (Gellerman, 1986) Ethics, according to Bottorff is defined as: "a body of principles or standards of human conduct that govern the behavior of individuals and groups. Ethics arise not simply from man's creation but from human nature itself making it a natural body of laws from which man's laws follow."(Bottorff, 2006, p. 3) Ethics plays important roles in the organization. Bottorff gives both good and bad examples of what happens when organizations have positive or negative ethics. Poor quality ethics are described here as "damaging organizational performance" productivity is lowered, group dynamics suffer, communication becomes more elusive and complex and a declining organizational environment is the result. (Bottorff, 2006) According to the model developed from Baucus and Near's, illegal behavior occurs under certain conditions. For example, results from their research showed that (1) large firms are more likely to commit illegal acts than small firms; (2) although the probability of such wrongdoing increases when resources are scarce, it is greatest when resources are plentiful; (3) illegal behavior is prevalent in fairly stable environments but is more probable in dynamic

5|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

environments; (4) membership in certain industries and a history of repeated wrongdoing are also associated with illegal acts; and, (5) the type of illegal activity chosen may vary according to the particular combination of environmental and internal conditions under which a firm is operating. (Baucus and Near, 1991) Another concept that arises further is that of the Ethical Climate of an Organization. The ethical climate of an organization is the shared set of understandings about what correct behavior is and how ethical issues will be handled. This climate sets the tone for decision making at all levels and in all circumstances. Some of the factors that may be emphasized in different ethical climates of organizations are Personal self-interest, Company profit, Operating efficiency, Individual friendships, Team interests, Social responsibility, Personal morality, Rules and standard procedures and Laws and professional codes. (Hunt, 1991; Schneider and Rentsch, 1991) Vinten has divided the business ethical issues at different levels i.e. international business, domestic business and professional ethics. At the international level ethical issues include freemasonry and socialism versus capitalism; at domestic level these include religious dimensions, social marketing and ethical education; and lastly at the individual level these include bribery, corruption and data protection. (Vinten, 1991) The focus on ethics has led to new management and leadership approaches. There has been increasing emphasis on the vision of the corporation or organization. As Badaracco and Ellsworth note, there has been a trend towards viewing leadership as moral leadership, as well as financial leadership, with the leader holding the vision for the organization and seeking to maintain both the leader's and the organization's integrity while also seeking profit and continuation. This has led to the development of new kinds of strategic thinking, including a modern concept of the Socially Responsible Corporation. There is an ongoing effort within business to develop strategies that are compatible with ethics. The attempt is to link the old requirements for profit and continuation to the new demands for equity, justice, sustainability, and community responsibility. (Badaracco & Ellsworth 1989) Hans Bool likes to think that Business Ethics and Staff Morale are link to each other. According to him, though there is a difference between morale and ethics and the best way to show this, is to add: "staff" and "business" to these words. Business ethics is, in general, more specific and focused on good-practices in business; like that of a company's practices in market behavior, in sales practices (intimidating clients) or accounting practices, etc. While, Staff morale is a different topic. It is more about how people (management, employees) work together in the organization. Yet both affect each other. A company that is involved in bad business practices will influence the morale of the internal staff. (Bool, 2009, April 1).

6|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

A difficult challenge for international managers arises when differences in local and homecountry norms lead to a tension about which ethical standards should be applied in a particular situation. It is suggested that the organization should first study culture of the foreign country in detail and then go on making their respective transactions. (Donaldson, 1996) In conclusion, even though ethical problems in organizations continue to greatly concern society, organizations, and individuals, the potential impact that ethical behavior can have on the long term survival of an organization has not really been explored The challenge of ethical behavior must be met by organizations if they are truly concerned about survival and competitiveness. What is needed in today's complicated times is for more organizations to step forward and operate with strong, positive, and ethical cultures. Organizations have to ensure that their employees know how to deal with ethical issues in their everyday work lives. (Hellreigel, Slocum & Woodman, 1989). METHODOLOGY: The researcher will be employing a variety of methodologies and approaches. Both the Primary and the Secondary sources will be utilized. A quantitative analysis of the Primary Sources and a qualitative analysis of the Secondary sources is planned to be conducted. The public perception of the importance of ethics will be studied by sociological survey through questionnaires. The questionnaire has been made by keeping in view all the symptoms. It is consisted of 22closeended questions. The subject needs to respond in the degree of extent to which he/ she agrees with each statement. The language used in the questionnaires is easy for a layman to understand and for the researcher to interpret. LIMITATIONS: The following limitations, while conducting research, might be observed: 1. The literature review may not be sufficient due to the lack of ample time and access to resources such as far off libraries. 2. The inability to form a control group of the primary sources could be a hurdle in getting accurate results. 3. The selection of the sample for a quantitative analysis of the Primary sources or subjects would be non-random due to the unavailability of the population fame. 4. The sample size may be inadequate and hence lead to biases in the assessment.

7|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

REFERENCES : Alderson, Wroe. (1965) Dynamic Marketing Behavior, Homewood III: Irwi. Badaracco, Joseph and Ellsworth, Richard. (1989), Leadership and the Quest for Integrity, Boston: HBS Press. Baucus, S. Melissa and Near, P. Janet. (1991) Can Illegal Corporate Behaviour be Predicted?, An Event History Analysis. Academy of Management Journal, 34(1), Pg 9-36 Bool, H. (2009, April 1) Corporate Values, Business Ethics versus Staff Morale. Retrieved June 21, 2009 from http://ezinearticles.com/Corporate-Values---Business-Ethics-Versus-StaffMorale&id=2170510 Bottorff, L. Dean. (2006) Best practices, which control failure of business ethics, Advancing from compliance to performance, Quality Progress, American Society for Quality Control, Inc. Buchholz, A. Rogene. (1989) (ed.) Ethics Theory and Business, Englewood Cliffs, N. J.: Prentice-Hall Bucholz, A. Rogene. (1989) Fundamental Concepts and Problems in Business Ethics, Englewood Cliffs, N. J.: Prentice-Hall Donaldson, Thomas. (1996) Values in tension: Ethics away from home. Harvard Business Review, Boston, Sept/Oct 1996, Retrieved on June 20, 2001from http://www3.gvsu.edu/wcb/schools/GV/mgt/sanchezc/3/files/donaldson.html, Friedman, Douglas. (2000). Ethics needed to be Part of the Cutting Edge, Erlanger, Vol. 104, pp. 2-14. Gellerman, Saul. (1986) Why good managers make bad ethical choices?, Harvard Business Review. pp. 85-90. Gini, Al. (1996). Moral Leadership and Business Ethics, Loyola University, Chicago in Ethics and Leadership working papers, Academy of Leadership. Harrison, John. (2001) Ethics for Australian Business, Sydney: Prentice Hall. Hartman, Laura. (2005) (ed.) Perspectives in Business Ethics, Vol. XVI, pp. 43-68, McGraw-hill International Edition. 8|Page

Research Proposal

Business Ethics; The Fundamental Pillar for an Organizations Long Term Survival

Hellriegel, Don, Slocum W. John & Woodman W. Richard. (1989) (ed.) Organizational Behavior, St Paul: West. Hoffman, W. Michael. & Mills M. Jennifer. (1982) Result of a Business Ethics Curriculum Survey Conducted by the Center for Business Ethics, Journal of Business Ethics, Vol I, Issue no 2. pp. 81-83 Hunt, G. James. (1991) Toward A Leadership Paradigm Change, California: Sage, Newbury Park. Jain, Tarun. (Jain, 2008, February 12) Shareholders v. Stakeholders: The changing paradigm in corproate governance, Origins of Corporate Law. Retrieved on June 21, 2009 from http://legalperspectives.blogspot.com/2008/02/shareholders-v-stakeholders-changing.html Maddux, J. Roberthy. & Dorothy, Muddux. (1989) Publishs, Inc. Menlo Park Ethics in business, California: Crisp

Powers, W. Charles & Vogel, David. (1980) Ethics in the Education of Business Managers, Hastingson- Hudson, New York: Hastings Center. Schneider, J. B. and Reitsch, J. (1991) (ed.) Managing Climates and Cultures: A Futures Perspective, in J. Hage, Future of Organizations, MA: Lexington Books, Lexington. Solomon, C. Robert & Hanson, R. Kristine. (1983) An Introduction to Business Ethics, New York: Harcourt Brace Jovanovich. Taylor, W. Paul. (1975) (ed.) Principles of Ethics, An Introduction to Ethics, Encino, California: Dickenson. Velasquez, M. G. (1998) Business Ethics: Concepts and Cases, 4th ed., Prentice-Hall, Englewood Cliffs, NJ .Manuel G. Velasquez Verhezen, Peter. (2005) Integrity as Good Reputation, International Conference on Ethics and Integrity of Governance: A Transatlantic Dialogue, Belgium. Vinten, Gerald. (1991) Business Ethics: Busybody or Corporate Conscience?. Managerial Auditing Journal, Volume V, Issue No. 2, pp. 123-144.

9|Page