There are probably many meanings when it comes to business ethics; as many as business

companies are. Different companies have different view and governance on their actions

depending on the perspectives of their directors and stakeholders. Thus, that factors could define

their business ethics measure. However, in this relativism era, it is important to define business

ethics to address arising issues such as corporate social responsibility, customer and shareholder

relations, insider trading and fiduciary accountability. “Obedience to the unforceable” is an

example of the meaning quoted by Lord Moulton. There are also several other examples such as

“The market has no morality” by Michael Heseltine, a British conservative politician and also “It

is a commonplace executive observation that businesses exist to make money, and the

observation is usually allowed to go unchallenged. It is, however, a very limited statement about

the purposes of business” by Daniel Katz and Robert L. Kahn in The Social Psychology of

Organizations (1966). Those quotes may be short and not enough but it may make all confusing

and doubts close to crystal clear.

So the question is how do you define the business ethics? Business ethics could be define

as a written or unwritten principle, policies, practices or governance of actions taken to examine

and address the arising issues given above. It is not the same with the objective choice of right or

wrong because it involves recompilation and reconciliation of actions considering legal,

customer concerns, and company’s interests while maintaining competitive advantage. It is not

surprising to discover that some company even may had to putting regards to its competitive

advantage than fully address their customer concerns.

Business ethics is importance in many level including from individual up to macro level.

From top executives and head of departments, leadership ethics is important for individual

(employee) to follow the footsteps. Keeping ethics in leadership can retain smooth and effective
management thus would also ensure employees high cooperation and energy. This overall would

bring productivity and positive images not only to shareholders but also the public. Following

business ethics, a company would also govern legal and customer demands and also its profits

and finding firm stability in that. Business ethics practice would ensure that their business

practices would not cause illegal trades, false claims, deceptive marketing and product that can

rupture the company’s reputation and trust. Thus its importance are to not only avoiding issues

but maintaining a company’s reputation and stability while also retaining their stakeholders’

interests.

There are examples of study case showing the importance of business ethics such as the

case of huge corporate collapses like Lehman Brothers (2008) and such huge risks and balance

sheet holes like Morgan Stanley (as late as 2012). Business ethics is important to make sure a

long term growth. These case studies are painful example of when business ethics were

disregarded. Ceaseless hunger for big and bigger profit without considering long term plan has

caused these huge companies and economy generally busted. When considering self-interest is

more important than the business and long term plan, huge amount of bonus allocation were

allocated to individuals, long term investment were disregard, and real change needed were goes

unnoticed. This caused the companies bust after only a brief time of boom. Taking lessons from

this, more and more companies at that time were reconsidering their bonus allocations, profits

management and long term plan. Thus, business ethics is important to check and balance its

profits and plan so that it could survive for the long term.

Next, business ethics is also important to boost profits. Not to mean hypocrisy of gaining

more profits, but business ethics practices could become a selling point for a company’s product.

Many companies have achieved recognitions, benefits and boosted profits from such example.
For an example, Cadbury Schweppes' gained those benefits when it was voted as ‘Most Admired

Companies for Community and Environmental Responsibility' by Management Today magazine

in 2003. Cadbury’s attentive and comprehensive practice and standard was recognized from

dealing with suppliers, manufacturing, retailing and production and up until to the mouth of

customers. Their ethics including concerning environmental impact good manufacturing

practices, employees’ remuneration and appreciation, and many more has overall gave them not

only selling point but also international interests. Their ethics practices has been expressed

thoroughly and has been set as a benchmark by many. This example is not too big some people

that have small businesses and company. People have to understand that business ethics began

from individual and its intention to create both wins situation for all and this has been displayed

by the Cadbury Schweppes.

Other than that, business ethics could manage a company’s cost and risk reduction. In the

early 1980s, products were began to be inspected through quality assessment (QA) before pass

through the final packaging in the factory. This practice were made to reduce the risk of costly

customer complaints. Since then, QA practice has been evolving and products came with

warranties. In the case of some electronics manufacturers, the warranty is up to 3 years. This

shown that ethics practices in business has greatly reduce risk of costs and complaints. The more

the ethics practiced, the more the reduction in costs. In addition, it also protect the company from

any potential fraud, false claims and ensure good governance that will also increase the

customer’s loyalty and trust.

However, implementing business ethics is no easy feat especially for big companies. There

are challenges and obstacles that can come from both within and outside of a company’s

business. One of the challenges in implementing it is to set and present it. In a company, top
level executives is accountable to directors and also accountable to provide leadership to

employees. They are the model for ethics behavior and practices. To ensure consistency and good

presentation of business ethics, company leaders are challenged to follow their own strict

practices. If the executives, managers and also trainers are not fully understand the degrees

involved in implementing it, misinterpretation may be occur. For an example, if an executive or a

trainer make an in-depth presentation on a particular religious or culture holidays while glossing

over others, some employees might get offended. If an executive also were to involve in

unethical practices, they might set a bad example or losing the trust of their employees and

customers.

In addition, another challenge is satisfying all shareholders interests especially if there are a

large number of stakeholders involved. It is difficult to cater all the needs of stakeholders

especially when the interests goes again social and ethical responsibility. This resulted in

companies violates ethics and went through illegal solution. An example of this dilemma is the

case with Wal-Mart. Wal-Mart is big company that has a huge number of stakeholders and has

been involving with long lasting relationship with some supplier factories. The dilemma rose

when some of this supplier used child labor. It is understandable where it was hard to

immediately break up the relation with the factory because of the stakeholder’s interest in

keeping the relationship. What Wal-Mart did was, they listed 200 factories that violated labor and

safety standards and barred from doing business with those factories. However, two years later,

the US customs records detected that, there were at least 2 among the 200 barred factories were

still selling merchandise to Wal-Mart. It was confusing and shady that the barred supplier in

question was producing garments under the label of another company. This is just an example of

how challenging it is to address interests of stakeholders while keeping ethics in check.

Challenges came when a company didn’t have clear steps to estimate and foresee this kind of

situation.

Limitation can also challenge the implementation of business ethics. This limitation is the

cost induced by corporate social responsibility (CSR). Whilst it is necessary for a company to do

their part of social and community responsibility and it can give long term benefits, the cost

involved can be high. According to Hopkins (2012), in the implementation of CSR, a company

may lose its focus on the main objective; making a profit. Note in mind that a company profits

depends on their customers, so they are obliged to make sure that they can attract the customers

by all means in which including providing high cost just to make a good reputation through CSR

initiatives. Thus, a company is challenged to find equilibrium in making profits and in

examination of benefits of CSR when implementing the business ethics to ensure the interests of

its stakeholders including customers and shareholders.

Hence, despite those challenges involved, business ethics are important to be implemented

comprehensively through various business aspects. Company’s management must recognize the

nuances of their ethical practices that in adherence to their business benefits and loss. Important

reminder is that in business, we are dealing with people, in which business ethics can be defined

differently. Thus, in implementing business ethics, one must considered enforcing the righty way

of business ethics; both compliance and business oriented ethics.

Reference:

1. Moriarty, Jeffrey, "Business Ethics", The Stanford Encyclopedia of Philosophy (Winter 2016

Edition), Edward N. Zalta (ed.), <https://plato.stanford.edu/archives/win2016/entries/ethics-

business/>.
2. Melissa Horton, “ Why are business ethics important?” Investopedia (February 29,2016)

<http://www.investopedia.com/ask/answers/040815/why-are-business-ethics-important.asp>