After reading this essay you will learn about:- 1. Definition of Business Ethics 2. Factors Influencing 3. Objectives.
Essay on the Definition of Business Ethics:
Business Ethics is the application of ethical principles and methods of analysis to business. Business ethics deals with the topic of study that has been given its due importance in business, commerce and industry since last three decades.
Most of ethical questions are divided in two types:
1. Overt and
These two types, their meanings and examples are detailed in Fig. 8.6 below:
The overt ones are generally deplored. The business avoids overt unethical practices. In business most activities are covert. The covert activities are bad and harm business.
The characteristics that make a business decision ethical are:
The decision be just and equal.
Morally correct and due.
That which is appropriate to the situation and generally acceptable.
Which highest good for highest number of concerned people.
Which is honest and due.
Justice is done to all and it should appear that justice is given to due.
Ethics means different meaning to different people. It is abstract and does not have universal standards or acceptance due to the fact that ethics depend on morals and morals on value system of people.
(1) Moral standards change depending on value system.
(2) Ethical standards depend on moral standards.
(3) Value system is built by in family, upbringing, background and experience.
(4) Ethical practices differ in different organisations. Experiences in turn alter ethical practices.
Many business men do not agree that ethics is necessary in his business dealings. They also say that business and ethics are opposite terms and hence, combining them is not proper. In the keep competition in the market place earning money is most important and how it is done is of secondary or no importance.
The golden rule is that a person should have gold to rule. There is lot of misconceptions or myths about business ethics and business should be done with ethics in mind. Myths are popular unexplained beliefs but not truths.
There are 5 myths:
Business and ethics do not go together:
Business runs on scientific management principles whereas ethics is religious.
Myth No. 2:
Ethics in business is relative:
Ethics is in the thinking and eyes of the man who sees business. One customer see business ethically excellent other customer see it is poor. The experiences are contradictory and cannot be measured as so many kilos.
Good business makes good ethics:
Ethical means may be or may not be always in the interest of business or better profits. Whatever the profit or business of a company, CEO of the company has to act ethically. The company should be prepared to pay costs for instituting and maintaining ethical values in the company.
MIS is amoral:
Management information systems (MIS) is neither immoral nor moral. While MIS is good management productive tool and positive dimensions, there are dark usage areas. MIS may be misused. Information and computing can be put to bad use. There are violations of privacy and questionable use of data or putting the MIS in wrong perspective.
Ethics is an individual matter:
The right or wrong thinking is based on religious belief of individuals. Business ethics is not for individuals. Individuals make ethical choices for their individual or own family life as well as for business. The choices in organisational decision making are based on data, discussions, purpose and directions in the organisation.
Organisations that do not act in a socially responsible ways often pay penalties. In all the 5 myths it may be seen that business ethics is seen in simplistic and unrealistic light. Box 8.2 below gives dilemmas of Director Finance. The 5 myths can be discussed for the case-let.
Essay on the Factors Influencing Business Ethics:
Business Ethics is quality of being useful or desirable. It is commonly used to all things which people regard as good, desirable and just. We generally make value judgments on many matters like good, skilled, unskilled, bad etc. The statements are comparative. We have few terms generally used with different meaning at times not correctly.
These words and their means are:
Norms of expectations of a proper behaviour in a society. These are not requirements or must. Example: We in India treat elder with respect. When we address our teacher we say ‘Sir’.
Ethical codes of thought. Belief is an abstract thinking process. Here there is no action as in norms. Beliefs support norms. Example: Thinking saving money, or energy.
Characteristics of a community or of a culture. Code of values by which a group or a society lives. Example: Generosity of a group.
Concerns regarding principles of right and wrong. Example: It is always right to tell truth.
It is the standard that an individual or a group that knows that is good, what is right and which is proper. Example: Since last decade political morality is decreasing in India.
(vi) Moral norms:
Are expectations of society a level of morals in the society. Example: Do not harm innocent man.
(vii) Moral values:
Are desired level of morals. Usually these are statements, regarding describing moral features. Example: Honesty is best policy.
(viii) Moral behaviour:
Moral behaviour is a study of right and wrong in human behaviours.
Values of managers:
Business is driven by values. Values guide what a business manager should do and how the stakeholder reaction to these action. Following a set of good values a value system can be built in the organisation business thus can create good, services, employment of larger value.
A manager while accepting the values the considerations are:
(a) The values should be universal.
(b) Maximum good to greatest number of people.
The manager should be pragmatic in his approach. This comes by his experience and skill in knowing as to how a decision works in a given situation. Manager should have a feel of what is good for highest number. Manager should also evaluate the value built up in his control.
The manager has to choose values in his day to day business decisions. Basic values cut across culture time and type of industry. Some values appear overlapping. Selection of values by a manager is given in Fig. 8.7. The selection values show a person’s judgment, prejudices and a view of the world of the person.
Essay on the Objectives of Business Ethics:
The Objectives of Ethics are to evaluate the human behaviours and calling up on the moral standards. The ethical standards also prescribe how to act morally in specified situations.
The objectives of business ethics are:
(i) Personal level:
At personal level the policy should be set that not to misuse the properties of the others or of the organisation keeping the promises and extending the mutual help, not to seek quick gains and not to indulge in politics to gain power.
(ii) Internal policy level:
The business organisation should follow fair practices in dealing with employees and other stakeholders. The organisation should have open and better communication at all levels. The organisation leadership should motivate employees for better productivity and for common good.
(iii) Societal level:
The social concerns like no discrimination concerned for the down trodden be the prime concerns of the business organisations. Optimal use of scarce resources, clean environment and ensuring better quality of life to all the stakeholders should be stressed in the internal policies.
(iv) Stakeholder’s level:
The organisation should take care of the maximum number of stakeholders and follow ethical means with shareholders, customers, suppliers, employees, banks and financial institutions, government and all others that are connected with the organisation.
This essay aims to analyze the essential of ethical business behaviour. This essay will focus on the business ethics on employees. After the introduction part, the definition of business ethic and corporate social responsibility will be given in Chapter 2. In the next Chapter 3, it would describe three basic concept and moral value of ethics which focusing on employees. Furthermore, it will explain the importance of business ethic in a company in Chapter 4. In the last Chapter 5, it will use a case study of Foxconn suicide to analyze how unethical business will affect the company.
Producing of new trendy products or providing excellent services is not the only reason to attract customers now. Business ethics is taking a significant position on it. Business people are the experts to maximize the profit of a company. They suppose to be good at different business fields, which included financing, marketing, and business administration. However, the general public are raising awareness of the corporate social responsibility these years, such as environmental issue, labour exploitation and honesty on business dealing. Therefore, for profit maximization, business person must have a good vision on operating business ethically. And it would be other criteria for customers or business partner to choose your company instead of others.
This essay will divide to three main parts: the first part will provide basic idea of business ethic and corporate social responsibility. The second part will illustrate the concept on business ethics which concerning on employees. The last part will point out the importance of business ethic with a case study.
2. What is Business ethic
2.1 Definition of business ethic
Business ethic has various meanings and it can be differ in different countries and from industry to industry. It is a set of moral value, standard, code of conduct in a business organization, for example honesty, fairness and responsibility, which stipulate as a guideline to a law, regulation in a business organization.
According to O.C Ferrell (2011), ‘Business ethics comprises the principles and standards that guide behaviour in the world of business. Investors, employees, customers, interest groups, the legal system, and the community often determine whether a specific action is right or wrong, ethical or unethical. Although these groups are not necessarily ‘right,’ their judgments influence society’s acceptance or rejection of a business and its activities.’ (Ferrell,2011). And Kirk O. Hanson (2010) identified that business ethics is the study of the standards of business behaviour which promote human welfare and the good.” (Kirk O. Hanson2010).Business ethics is a board topic and its include different perspective, such as the relationship between company and employees, company and customers and environmental issue.
Business ethics on relationship between business organization and employees
Will be focus on this essay.
2.2 What is Corporate Social Responsibility (CSR)
Corporate social responsibility is a common term which has a close relationship and links with the concept of business ethic. According to Lord Holme and Richard Watts (2000) , corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. ‘(Lord Holme and Richard Watts 2000)
‘CSR is not a function of business like accounting or marketing, it is a representation of the soul of a business, like values or principles. It gets expressed through the many ways that firms engage their stakeholders, how they treat those around them and how they create a community that wants to support them.’ , said Joe Lawless(2012). CSR also are reflected in a corporate policies and behaviours, for example how the company treats the stakeholders including employees, customer, supplier, community and environment ethically or in a responsible manner.
3. Business ethic on employees
3.1 Justice and Fairness
Every company must have encounter of problem that how to motivate their employees. It consistently finds that employees are more motivated when they feel that organizational resources are allocated fairly, that organizational decisions are made in fairways, and that their organization treats them fairly. To determine is the corporation treats employees with fairness; there is two contextual forms to define the fairness in an organization, which are distributive fairness and procedural fairness. Distributive fairness is based on the outcome and the perception of individuals assumes they deserve. For example, if inflation rises by 5% and incomes go up by the same margin people will perceive it as a fair outcome (Terry, T., Dienhart, J. & Thomas, T. ,2008). Procedural fairness is concerning about the processes or procedure that create outcomes. Take hiring employees as an example. They evaluate the fairness in application, interview, and selection processes. Are those processes consistent over time and the same among individuals and groups? Is it in neutral and transparent situation? Take Primark as an example , it expressed their Code of Conduct that any supplier making there items must pay laborers in any event the lowest pay permitted by law, as set by government. They deliberately vet each and every processing plant, checking wage and working hours records in point of interest and address specialists themselves, in certainty, to confirm the information. (2015)
3.2 Human rights & Labour rights
The United Nations, Office of the High Commissioner of Human Rights claimed that Human rights are rights inherent to all human beings, whatever our nationality, place of residence, sex, national or ethnic origin, colour, religion, language, or any other status. We are all equally entitled to our human rights without discrimination. These rights are all interrelated, interdependent and indivisible. Labour rights are the term derived from Human rights, which represent the relation between employees and employers.
It can be refer to the employers should respect the rights of all person to life, security of the person and privacy, respect the right of their employees to join trade unions and to bargain collectively and develop non discriminatory employees polices , and respect each person freedom of thought, religion, opinion and communication.( Joseph W.Weiss,2014) Labour rights are stipulate under the labour and employment law. Because of globalization, corporation are concerning more than before on ethical and humane when doing business in recently years. So the issues of Labour rights such as child labour, setting the minimum wages and labour abuse are raising public awareness on business ethics factors of employees.
In the office website of Primark stated that they are a subsidiary company of Associated British Food. They advocate that child labour should not be used and they sanction its supplier to deliver their item when the checking of the manufacturing plant to guarantee all the labourers are in a lawful working age. Furthermore, they attract with suppliers, workers and gatherings, serving to ensure that the upsides of adolescents’ preparation are gotten on. Besides, they advance program that on
raising public awareness of children rights. (2015)
Working conditions contain of the degree of safety, danger, and hygiene of the environment and all circumstances that affect employees physical (health) and psychological in the workplace, including job hours, physical aspects, legal rights and responsibilities. It also involved the implementation of safety training for employees and insurance schemes and safety guideline and policies to reduce the risk of employee might suffer. Working hours is the important factor of the productivity. However, in order to reach the highest productivity and efficiency, some companies abuse their workers with extremely long working hours. ‘[Companies should] provide a framework for regulated hours of work , daily and weekly rest periods, and annual holidays. These instruments ensure high productivity while safeguarding workers’ physical and mental health. Standards on part-time work have become increasingly important instruments for addressing such issues as job creation and promoting equality between men and women.’ claimed International labour organization (2014). Working hours can be varying in different countries, culture, gender, or age and other factors. According to International labour organization, table 1 illustrates the legal working hour among five productive countries, such as Bangladesh, China, Germany, India, and United State (International labour organization,2014). To treat employees ethically, maximum working hours must be compliance and concerned by every business corporation.
Primark has a strict Code of Conduct that meets universal guidelines. Suppliers must take after this Code to guarantee items are made in great working conditions, and the individuals making them are dealt with well and paid a reasonable pay. They vet each and every manufacturing plant against the Code before they submit a request with a supplier.(2015)
Table 1: Legal working hour in Bangladesh, China, Germany, India, United State (based on International Labour Organization, 2013)
Bangladesh China Germany India United State
Daily hours limit(hour) 11 8 8 9 No federal statutory limit on daily working hours identified
Weekly hours limit(hour) 48 40 48 48 40
Last update 4 March 2011 1 April 2011 2012 14 May 2011 July 2012
4. Importance of business ethic for a company
4.1 Save money for lawsuit, settlement, theft
‘Study from Joseph W.Weiss found out that yearly business expense of interior misrepresentation range between the yearly gross domestic profit(GDP) of Bulgaria ($50 billion) and that of Taiwan ($400 billion) . It has likewise been assessed that fraud costs organizations $600 billion USD every year, and that 79% of labourers concede or to consider taking from their employers.() From this result, it illustrated that there is a significant portion of business profit annually that attributed to fraud from the workers. Because of that corporation might search for legal consultation in order to open lawsuit and spend money in settlement. Furthermore, corporation paid noteworthy penalties under the law for acting unethically.
” A loss of public confident can be detrimental to the firm’s and to its investor.’, said Joseph W.Weiss (Operating with business ethics is essential when cooperating with crucial players with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behaviour is discovered. When a corporation was discovered that they do business unethically, usually they will do lot more advertising and promotion on their business than before in order to hide the problem and divert the public’s attention, instead of stand in front to apologize and to correct the problem. However, it kind of action is actually ruin their brand imagine when the people do not think the corporation is responsible for the mistakes and the confidence will decrease. Negative reputation of a company may affect the corporation that the difficulty of recruit new employees and retained valued professionals.
4.3 Investor loyalty
‘Business relationship based on mutual trust and ethical principle combined with regulation result in long term economic gains for organizations, shareholder, and stakeholders.’ , said Joseph W.Weiss (2014). Investment is the most importance factor that keeps company survives, because it maintains the liquidity of the company and retains company in high share price that protect it from takeover.
However, at the point when speculator certainty is lost, it can be a hard time for an organization to recover the trust of general society, its financial specialists and its important shareholders. Profitability may take years to develop once more.
4.4 Customer satisfaction
The business can remain on long-term benefits when it has good client connections. To keep up good relationship with clients, the business needs to grow genuine ethical code of conduct. The conduct of the representative towards the clients will have an effect on them. They will build up an impression of the business which will make the clients enhance their trust they have with the organization .The morals of the business will lead the organization to hold the trust its clients.
Joseph W.Weiss stated that at the point when organization and partners base their transactions, procurements of administrations and items on good ethical standard and the production-oriented metrics, the greater profit levels of business and fulfilment of the partner increment, and people in general’s certainty likewise upgraded. (Joseph W.Weiss ,2014) .It is clear that the profit of the company will definitely increase if all the stakeholders are supporting the business . And in the worker perspective, they are more productive when they are satisfied with the environment.
5. Case Study: Foxconn Suicide
Foxonn suicide was a tragedy of unethical business practise that happened in China. ‘Sweat factory ‘ Foxconn Technology Group is a Taiwanese multinational company with its main plant operating in Shenzhen, China. Foxconn is hands down the largest manufacturing of electronic, computer and computer components in the world. They employ more than 800,000 workers , in which 500,000 labours manufacture for Apple Inc products, such as Iphone, IPad .Between 2010 and 2013, there is a string of suicide at Foxconn. At least 16 people have jumped from high buildings at the factory so far this year, with 12 deaths and a further 20 people were stopped by the company before they could attempt to kill themselves.
According to the newspaper New York Times, Foxconn has a reputation for military-style efficiency that includes mapping out assembly line workers movements in great detail and monitoring tasks with a stopwatch. A typical worker shares a dormitory room with nine other workers, eats in the campus cafeteria and works 11 to 13 hour shifts. Often they do little more than work and sleep. Some have no friends on campus and do not even know the names of their roommates. Shortage of warm water in the dorm often meant cold showers, and where even simple pleasures like snacks were forbidden.(2010) . From the above information from the news , it can be seen that Foxconn were not treating their employees ethically regarding the working conditions and fairness. Many worker were working long hours for low pay under heavy pressure. Most of them work 40 extra hours of overtime each week and the monthly wage they got is only 950 RMB ($US140) that employees must work hours of overtime each day to make about 2,000 RMB to meet basic needs.
5.3 Effect on Apple Inc.
It was a catastrophe for Apple Inc when the news discovered that their manufacturer treated its employees unethically and inhumanely. Apple Inc share of stock dropped by 1.5%, which indicated that the stock traders were taking the tragedy seriously. That was a huge impact on Apple Inc’s profit and its brand imagine, because Apple Inc did not monitor its supplier running under the business ethical principles. Moreover, it may affect their customer satisfaction because the products they have bought are from exploitation on the workers.
This issue has raised the public awareness on ethical business. After that, Apple Inc. and Foxconn putted a lot of effort for the improvement to enhance their reputation and the trust from their stakeholders, including customers, shareholders and employees. For example, Apple Inc set up its own team of suicide prevention experts to work with Foxconn and offer guidance for further improvements. And Apple Inc worked with the Fair Labor Association to ensure its suppliers’ workers are trained in their rights and obligations. Furthermore, Foxconn has raised their pay to the workers. Foxconn suicide case is an example of unethical business to reveals that the importance of ethical practise on employees and its effect on the whole business operation.
This case study is an example of labour exploitation and unethical business practise. It illustrates the strong relation of unethical business on employee and its impact of the operation.
This paper has showed that the business ethic in perspective of employee, such as justice and fairness, human rights and working condition. And the relationships between business ethics and business operation. For example, save money for lawsuit and settlement, reputation, investor loyalty, customer satisfaction and profit. Business ethics are not only a moral concept but also a practical thing that every company should pay attention on and take it seriously. Not only because of increasing profit but also operating business with conscience.