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Business Ethics and Relevance in Modern Times
Business Ethics and Relevance in Modern Times
Business Ethics and Relevance in Modern Times
Business ethics (also 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 entire organizations. Business ethics has both normative and descriptive dimensions. As a corporate practice and a career specialization, the field is primarily normative. Academics attempting to understand business behaviour employ descriptive methods. The range and quantity of business ethical issues reflects the interaction of profit-maximizing behaviour with non-economic concerns. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporations promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters. Adam Smith said, "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." Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behaviour that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes.
business has no ethical obligations, other institutions could make the same claim which would be counterproductive to the corporation. Ethical issues include the rights and duties between a company and its neighbours, its fiduciary responsibility to its shareholders. Issues concerning relations between different companies include hostile take-overs and industrial espionage. Related issues include corporate governance; corporate social entrepreneurship; political contributions; legal issues such as the ethical debate over introducing a crime of corporate manslaughter; and the marketing of corporations' ethics police.
The search for universal values as a basis for international commercial behaviour. Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP and [Corruption rankings]. Comparison of business ethical traditions from various religious perspectives. Ethical issues arising out of international business transactions; e.g., bio prospecting and bio piracy in the pharmaceutical industry; the fair trade movement; transfer pricing.
Issues such as globalization and cultural imperialism. Varying global standardse.g., the use of child labour The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries. The permissibility of international commerce with pariah states. The success of any business depends on its financial performance. Financial accounting helps the management to report and also control the business performance.
The information regarding the financial performance of the company plays an important role in enabling people to take right decision about the company. Therefore, it becomes necessary to understand how to record based on accounting conventions and concepts ensure an ambling and accurate records. Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other.
ECONOMIC SYSTEMS
Political economy and political philosophy have ethical implications, particularly regarding the distribution of economic benefits. John Rawls and Robert Nozick are both notable contributors. For example, Rawls has been interpreted as offering a critique of offshore outsourcing on social contract grounds, whereas Nozick libertarian
Very often it is held that business is not bound by any ethics other than abiding by the law. Milton Friedman is the pioneer of the view. He held that corporations have the obligation to make a profit within the framework of the legal system, nothing more. Friedman made it explicit that the duty of the business leaders is, "to make as much money as possible while conforming to the basic rules of the society, both those embodied in the law and those embodied in ethical custom". Ethics for Friedman is nothing more than abiding by 'customs' and 'laws'. The reduction of ethics to abidance to laws and customs however have drawn serious criticisms. Counter to Friedman's logic it is observed that legal procedures are technocratic, bureaucratic, rigid and obligatory where as ethical act is conscientious, voluntary choice beyond normal . Law is retroactive. Crime precedes law. Law against a crime, to be passed, the crime must have happened. Laws are blind to the crimes undefined in it. Further, as per law, "conduct is not criminal unless forbidden by law which gives advance warning that such conduct is criminal. Also, law presumes the accused is innocent until proven guilty and that the state must establish the guilt of the accused beyond reasonable doubt. As per liberal laws followed in most of the democracies, until the government prosecutor proves the firm guilty with the limited resources available to her, the accused is considered to be innocent. Though the liberal premises of law is necessary to protect individuals from being persecuted by Government, it is not a sufficient mechanism to make firms morally accountable.
3. Survival of business : Business ethics are mandatory for the survival of business. The businessmen who do not follow it will have short-term success, but they will fail in the long run. This is because they can cheat a consumer only once. After that, the consumer will not buy goods from that businessman. He will also tell others not to buy from that businessman. So this will defame his image and provoke a negative publicity. This will result in failure of the business. Therefore, if the businessmen do not follow ethical rules, he will fail in the market. So, it is always better to follow appropriate code of conduct to survive in the market. 4. Safeguarding consumers' rights : The consumer has many rights such as right to health and safety, right to be informed, right to choose, right
to be heard, right to redress, etc. But many businessmen do not respect and protect these rights. Business ethics are must to safeguard these rights of the consumers. 5. Protecting employees and shareholders : Business ethics are required to protect the interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects them from exploitation through unfair trade practices. 6. Develops good relations : Business ethics are important to develop good and friendly relations between business and society. This will result in a regular supply of good quality goods and services at low prices to the society. It will also result in profits for the businesses thereby resulting in growth of economy. 7. Creates good image : Business ethics create a good image for the business and businessmen. If the businessmen follow all ethical rules, then they will be fully accepted and not support those businessmen who follow this necessary code of conduct. 8. Smooth functioning : Criticised by the society. The society will always If the business follows all the business ethics, then the employees, shareholders, consumers, dealers and suppliers will all be happy. So they will give full cooperation to the business. This will result in smooth functioning of the business. So, the business will grow, expand and diversify easily and quickly. It will have more sales and more profits.
9. Consumer movement : Business ethics are gaining importance because of the growth of the consumer movement. Today, the consumers are aware of their rights. Now they are more organised and hence cannot be cheated easily. They take actions against those businessmen who indulge in bad business practices. They boycott poor quality, harmful, high-priced and counterfeit (duplicate) goods. Therefore, the only way to survive in business is to be honest and fair. 10. Consumer satisfaction : Today, the consumer is the king of the market. Any business simply cannot survive without the consumers. Therefore, the main aim or objective of business is consumer satisfaction. If the consumer is not satisfied, then there will be no sales and thus no profits too. Consumer will be satisfied only if the business follows all the business ethics, and hence are highly needed. 11. Importance of labour : Labour employees or workers play a very crucial role in the success of a business. Therefore, business must use business ethics while dealing with the employees. The business must give them proper wages and salaries and provide them with better working conditions. There must be good relations between employer and employees. The employees must also be given proper welfare facilities.
12.
Healthy competition :
The business must use business ethics while dealing with the competitors. They must have healthy competition with the competitors. They must not do cut-throat
competition. Similarly, they must give equal opportunities to small-scale business. They must avoid monopoly. This is because a monopoly is harmful to the consumers.
The biggest victim of ethical lapse is trust. A small breach of ethics is often known only between a few people. But this knowledge can destroy trust between fellow employees, and from there make its way up the ladder, destroying trust between employee and supervisor, and between divisions of companies. When ethical lapses become rampant, employee productivity declines, loyalty follows, soon major breaches such as employee theft begin to appear. Eventually, and worst of all, the most important advantage a firm has, the trust between a firm and its clients, erodes. Why has such an important topic as business ethics gone unnoticed, even actively ignored? The biggest reason is that ethics is largely misunderstood. Ethical behaviourbehaviour conducted with honesty and integrity, has recently become muddled up with moral or political questions. In the past generation, the business community for the first time was asked to consider political and moral consequences when making business decisions-whether to do business with South Africa during apartheid, for instance. The public's new interest has changed the way many companies do business. However, as political and moral concerns have taken center stage, ethical concerns have been forgotten. Ethics has very little to do with political beliefs, or public opinion. Ethical behaviour is a very personal matter, which requires that a person be honest and truthful in all business dealings. Because ethical behaviour is so personal, it is unlikely to be given any recognition. While there are many awards for corporate social responsibility, awards that recognize ethical behaviour are rare. Ethics is viewed as something that is expected from employees-only when ethics codes are breached is the topic even discussed. However, this Monday Morning Quarter backing approach to ethics gives employees who are being ethical day in and day out, without encouragement from above, the impression that ethics are not important.
A movement has begun to combat this impression. Business leaders know the importance of ethics--an international survey found that 78% of boards of directors are setting ethical codes of conduct, up from only 41% in 1991. Ethical behaviour starts at the top. Before a company can expect to be viewed as ethical in the business community, ethical behaviour within its own walls-to and by employees-is a must, and top management dictates the mood. Ethical behaviour by the leaders of an organization will inevitably set the tone for the rest of the company-values will remain consistent. Further, a well-communicated commitment to ethics sends a powerful message that ethical behaviour is considered to be a business imperative. Companies, led by top management, are increasingly adopting ethical codes of conduct. Modern ethics codes aren't just some simple platitudes set in a break-room plaque. Companies now commit considerable time and money to illustrate their reliance on ethical behaviour. Companies now bring in consulting firms (including KPMG's own Business Ethics Services Practice), to craft a document with concrete rules and real meaning. A modern ethics code will consider the main ethical dilemmas of a company's employees, and determine the most vulnerable ethical areas for the company. The execution of a company's ethics program depends on identifying these vulnerabilities. All future messages, from the code, to materials, to training, will focus on these major ethical dilemmas. Companies are also interested in determining whether ethical behaviour can be measured, just as efficiency and productivity are. KPMG's Business Ethics Institute is taking the lead on research in this area. Often companies must innovate ways to measure ethical behaviour, which in turn motivates ethical behaviour. Once training, measurement and a new ethical code have been developed, companies are also hiring full-time ethical compliance officers, and starting ethics hotlines to report possible policy
violations. Hiring a full-time ethics officer is another signal to employees that ethical violations will be taken very seriously. However, this person isn't just a watchdog-they will take a proactive approach to identifying possible violations before they develop. An ethics violation hotline is another essential step to ensure ethical compliance. Employees can call the hotline 24 hours per day, 7 days per week, to report violations or even to discuss potentially dangerous ethical situations. As ethical behaviour comes to the forefront, more and more companies will be taking these steps to ensure that the ethics of their company and its employees are unassailable. For those of you about to enter the workforce, ethical questions are fairly faint on your radar screen. However, because companies, and especially accounting firms, are so concerned with maintaining proper ethical standards, it is important to reiterate the major principles of professional ethics:
Avoiding even the appearance of conflict of interest-This is most important in the accounting field. Especially when confidential financial material is involved, as in an audit, there can be no interest conflict. For instance, it is improper to hold stock in a company that you are auditing. Keeping sensitive information confidential-Most, if not all, information you get from a client is confidential. As an accountant or consultant, you are usually dealing with some of the most sensitive material a client has. Therefore, that material, even its existence, should not be discussed with anyone outside the firm. Full disclosure-Any information with any impact whatsoever on your duties or professional life should be shared openly and honestly with supervisors. At KPMG we encourage such honesty with a "time-bank" leave policy. There is no such thing as sick leave or personal days, it is all lumped togetheremployees can use the time for whatever they choose, making for a much more open workplace.
Devotion to responsibility-As a paid employee, you are expected to perform your duties to the best of your possible abilities, and to retain loyalty and respect to your firm.
You may have taken a business ethics class, where you learned theories of ethics and analyzed case studies of famous ethical dilemmas. This is important preparation-but in the business world, there won't be time to fulminate and analyze. Split-second ethical decisions are made every day-and if you follow the main professional ethics principles, making the correct decision shouldn't be difficult.
The most persistent metaphor, which seems to endure no matter how much evidence is amassed against it, is atomistic individualism. The idea that business life consists wholly of mutually agreed-upon transactions between individual citizens (avoiding government interference) can be traced back to Adam Smith and the philosophy which dominated eighteenth-century Britain. But most of business life today consists of roles and responsibilities in co-operative enterprises, whether they be small family businesses or gigantic multi-national corporations. Government and business are as often partners as opponents (however frustrating the labyrinth of 'regulation' may sometimes seem), whether by way of subsidies, tariffs and tax breaks or as an intimate cooperative enterprise. But atomistic individualism is not only inaccurate in the face of the corporate complexity of today's business world; it is naive in its supposition that no institutional rules and practices underlie even the simplest promise, contract or exchange. Business is a social practice, not an activity of isolated individuals. It is possible only because it takes place in a culture with an established set of procedures and expectations and these are not (except in the details) open to individual tinkering. Accordingly, it is a sign of considerable progress that one of the dominant models of today's corporate thinking is the idea of a 'corporate culture'. As with any analogy, there are, of course, disanalogies, but it is important to appreciate the virtue of this metaphor. It is social, and rejects atomistic individualism. It recognises the place of people in the organisation as the fundamental structure of business life. It openly embraces the idea of ethics. It recognises that shared values hold a culture together.
There is still room for that individualistic maverick, the 'entrepreneur', but he or she too is possible only insofar as there is a role (an important one) for eccentricity and innovation. But the problem with the 'culture' metaphor, too, is that it tends to be too self-enclosed. A corporation does not exist in isolation. A corporate culture is an inseparable part of a larger culture, at most a sub-culture (or a sub-sub-culture), a specialised organelle in an organ in an organism. Indeed, it is the tendency to see business as an isolated and insulated endeavour, with values different from the values of the surrounding society, that characterises all of these myths and metaphors. Breaking down this sense of isolation is one of the main tasks of business ethics.
CONCLUSION :
Ethics are the building block of our society and thus should be the building block of our corporations. Henry Kravis states, If you build that foundation, both the moral and the ethical foundation, as well as the business foundationthen the building won't crumble. It is essential not to let greed cloud judgment. The colossal missteps taken by Enron and Arthur Andersen shall serve as a lesson for those that consider straying from the path of morality.