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Fareast International University

Assignment
on
How can good business Ethics enhance profitability
Course Code: (BUS- 3312)

Submitted To
Farhanaz Luna
Assistant Professor
Fareast International University

Submitted By
Md. Mamun Hossain : 16201026

Date of Submission:
18-12-2019
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S.L Table of Content page

1. Introduction 3
2. Definition of Business Ethics 3
3. Main Characteristics of Business Ethics 3
4. Relationship Between Business & Ethics 4
5 Advantages of Managing Ethics in Workplaces 4
6. 3 Reasons an Ethical Business Leads to Profits 4
6.1 Ethical Leaders Have Productive Workers 4
6.2 Ethical Business Practices Can Reduce Costs 5
6.3 Consumers Want to Spend Money With Ethical Organizations 5
7. Business Ethics Connected to Profitability 5
8. Importance of Business Ethics for Profitable Business 6
9. Businesses Pursue both Ethics and Profits 7
10. Ethical Issues in Maximizing Profit 7
10.1 Employees 7
10.2 Marketing 8
10.3 Environmental 8
10.4. Quality 8
10.5 Impact of Ethics in Business profits 8
11. Conclusions 9
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1. Introduction

Many factors play an important role in making a business profitable which includes dedicated and
productive employees, expert management teams, and consistent consumer demand By following
ethics in business, organizations can make correct judgments and decide what is right and wrong for
them. Ethical behavior and corporate social responsibility can bring significant benefits to a business.
They may attract customers to the firm's products, which means boosting sales and profits. Make
employees want to stay with the business, reduce labor turnover and therefore increase productivity

2. Definition of Business Ethics

The erstwhile-regulated economies necessitated their governments to regulate and control business
organizations and economic institutions through law and government mechanisms to enable them to
play their role in contributing to the growth and wellbeing of their stakeholders in a balanced way
such that the interest of the almost all the people was protected.

Various business management concepts, principles, theories, practices, goals and strategies have been
under evaluation, revalidation and constant change consequent upon massive liberalization,
privatization and globalization of business initiated towards the end of the 20th Century and geared up
in the beginning of the present century.

3. Main Characteristics of Business Ethics

There are several characteristics or features of business ethics.

Some of them are discussed here:

 Business ethics are based on social values, as the generally accepted norms of good or bad
and ‘right’ and ‘wrong’ practices.

 It is based on the social customs, traditions, standards, and attributes.

 Business ethics may determine the ways and means for better and optimum business
performance.

 Business ethics provide basic guidelines and parameters towards most appropriate perfections
in business scenario.

 Business ethics is concerned basically the study of human behaviour and conducts.

 Business ethics is a philosophy to determine the standards and norms to make mutual
interactions and behaviour between individual and group in organisation.

 Business ethics offers to establish the norms and directional approaches for making an
appropriate code of conducts in business.

 Business ethics may be an ‘Art’ as well as ‘Science’ also.

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 Business ethics basically inspire the values, standards and norms of professionalism in
business for the well-being of customers.

 Business ethics is to motivate and is consistently related with the concept of service motives
for the customers’ view point.

 Business ethics shows the better and perspective ways and means for most excellences in
customisation.

 Business ethics aims to emphasise more on social responsibility of business towards society.

4. Relationship Between Business & Ethics

The relationship between business and Ethics has long been debated. If Classical economists like
Adam Smith and Milton Friedman were of the opinion that the only objective of business was profit
maximisation and business had no right to ‘meddle’ with ethics, the Church, in pre-medieval times,
was the spokesman and judge for all spheres of the society, including business.

In medieval and pre-medieval period, the Church took upon itself to regulate the moral functioning of
business, making moral declarations like-all businesses must remain closed on Sunday, the ‘holy-
day’, when Jesus Christ was supposed to have taken a rest and it was morally ‘correct’ to stop
working on Sundays.

5. Advantages of Managing Ethics in Workplaces

 Significant improvement to society- By applying business ethics, many social evils can be
eliminated like child labour, harassment to employees etc.

 Cultivate strong team work and productivity- Business ethics helps in building openness,
integrity and a sense of oneness amongst all employees. Employees become motivated as they
feel strong alignment between their values and those of organisation.

 Support employee growth- It supports the employees in facing the entire situation whether
good or bad.

 Insurance policy – It ensures the employees that all the policies are legal and all the
employees are treated equally in the organisation.

 Avoid penal action- Ethical problems if detected at earlier stage helps in avoiding penal
action and lower fines for the organisation.

 Helps in quality management- strategic planning and diversity management practices of the
society wherein it exists and operators. This view sought to integrate the two previous views
presenting a more realistic picture.
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6. 3 Reasons an Ethical Business Leads to Profits

Ethical Business Practices Can Reduce Costs More businesses are discovering that these pursuits can
help them reduce costs, thus effectively increasing their profits. Sustainable Brands, an alliance of
organizations committed to sustainability, recently reported significant savings for many leading
businesses.

i. 6.1 Ethical Leaders Have Productive Workers

In their report “Linking Ethical Leadership to Employee Well-Being: The Role of Trust in
Supervisor,” published in the Journal of Business Ethics, Aamir Chughtai, Marann Byrne, and
Barbara Flood found that employees trust superiors who demonstrate ethical leadership.
The study of two hundred and sixteen trainee accountants also found workers who trusted
their supervisors are more engaged at work and less emotionally exhausted.

“Engaged workers … have bought into what the organization is about and are trying to make a
difference,” explains Dr. Jim Harter, Gallup’s chief scientist of employee engagement and well-being,
in a Gallup report “How Employee Engagement Drives Growth.” “This is why they’re usually the most
productive workers.”

ii. 6.2 Ethical Business Practices Can Reduce Costs

The World watch Institute notes the modern business landscape is characterized by an increasing
number of “triple-bottom-line companies” that aim to have a positive social and environmental
impact in addition to earning a profit. World watch further observes that caring for both the planet
and its people are the cornerstones of ethical business practices. More businesses are discovering
that these pursuits can help them reduce costs, thus effectively increasing their profits.

Sustainable Brands, an alliance of organizations committed to sustainability, recently reported

significant savings for many leading businesses. In 2015, for example, PepsiCo Inc. announced it
saved more than $375 million since establishing water, energy, waste-reduction, and green
packaging initiatives in 2010. In early 2016, Hilton Worldwide reported its energy, waste, and water-
reduction strategies helped it save an estimated $550 million since 2009, according to coverage of
PepsiCo’s 2014 Corporate Social Responsibility Report by Sustainable Brand

iii. 6.3 Consumers Want to Spend Money With Ethical Organizations

Businesses rely on consumer support for profits. Strong evidence suggests that a company’s ethical
practices help generate this consumer support. Nielsen research found that fifty-five percent of
global online shoppers in sixty nations are particularly passionate about companies that make a
positive social and environmental impact; in fact, these consumers will pay more for related
products and services.
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In addition, research from market intelligence agency Mintel found more than half of U.S. consumers
stop buying from companies perceived as unethical. More than one-third will stop buying an
unethical company’s products even if no substitute is available. This behavior illustrates that if a
business does not perform ethically, consumers can penalize that business in the marketplace.
Today, more businesses are discovering that this ethical approach can be the key to profits and
success.

7. Business Ethics Connected to Profitability

High standards of organizational ethics can contribute to profitability by reducing the cost of
business transactions, building a foundation of trust with stakeholders, contributing to an internal
environment of successful teamwork, and maintaining social capital that is part of an organization's
market-place image.

8. Importance of Business Ethics for Profitable Business

Many factors play an important role in making a business profitable which includes dedicated and
productive employees, expert management teams, and consistent consumer demand. In addition to
these factors, organization that executes a management philosophy that relies completely on
business ethics. Business ethics are proven to be much more beneficial than those which operate in
an unethical manner towards the success of a company.
Conducting a business the right way is imperative for organizations to build a public image and stay
in the competition. By following ethics in business, organizations can make correct judgements and
decide what is right and wrong for them. By following the code of ethics in business, they can plan,
track, implement, and evaluate management acts. Being responsible towards clients, their course of
action, and the society can do a lot of benefits for businesses. Any deviation from these basics of
running a business will can prove a spoiler for the company’s image, and it will also result in losing
clients, stakeholders, and profit.

Further, giving second thought before implementing any decision is paramount. This act will help in
staying in the competition and in the following ways:

 When ethics are implemented in business, it helps in boosting customers’ confidence in the
company. As customers are relieved that they are buying products of a company that
execute high social responsibility, sales and revenue of the company eventually increases.

 By displaying ethics in business, companies can infuse interest in people who are dreaming
of getting associated with an organization that is reputed for ethical behavior. This will help
the company in building a pool of talent that can work collectively for achieving a common
goal, which is profit.

 Another advantage of implementing business ethics is the ease in retaining employees.

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When staff and workers are treated ethically, the thought of leaving the company will never
touch their mind. There will be no need to get engaged in hiring process. The time thus
saved can be used for other important matters. Besides time, the company can also save
money they would be investing in hiring and training new employees.

 Business ethics help in attracting the investors who hold the company’s share price high. As
the share price remains high, the company has no fear of being take over.
One can follow the listed business ethics which is much essential as they play an important
role towards profitable business.

 You realize that the organization is following the ethics when they allow you with a good
working environment. Financial supporters of the organization feel safe and secure about
their cash being used ethically.

 Clients and customers are calm while purchasing certain products from the organization, as
they are aware that the products manufactured are morally.

 When you are working with an organization which is following the firm business ethics, the
proud feeling you get also encourages you to work more ethically.

 We can consider the example, a coffee powder manufacturing company which strictly
follows business ethics, use the beans which are picked without causing deforestation.

 Certain organizations which strictly follows their own business ethics are at a lower risk of
being fined for having poor conduct and disobeying laws.

9. Businesses Pursue both Ethics and Profits

In one sense, the answer is clearly "yes." There are plenty of examples of businesses and their
employees who make good decisions that also turn out to be profitable. Yet we know that doing
what's ethically right does not always contribute to short-term profits. For example, refusing a bribe
and consequently losing a contract will negatively affect the profits a company could have received if
the employee had decided to take the bribe. However, you could argue that refusing the bribe
actually contributes to long-term profits because a company that refuses bribes won't have to deal
with the inevitable consequences that would come when the company is found in violation of the
Foreign Corrupt Practices Act (FCPA). So, while ethics may not be compatible with short-term profits,
in the long-run a company can pursue both ethics and profits.

But such an answer is too easy. Despite the many proponents of a Corporate Social Responsibility
(CSR) or a Creating Shared Value (CSV) approach to business who seem to suggest that doing well by
the communities where businesses operate is not only compatible with long-term profits but can
enhance the long-term sustainability of a company, there are surely times and situations where
doing what is ethically correct will not increase the long-term profitability of a company. Maybe a
company refuses to do business in an emerging market despite its profit potential because it cannot
do so ethically. Such a case is surely one where long-term profits are incompatible with the ethical
commitments of a company. So what should a company do when there is a conflict between ethics
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and profits?

10. Ethical Issues in Maximizing Profit

A company's ultimate goal is to increase profits. While many companies grow profits ethically, others
maximize profits unethically via marketing, slashing employee expenses, lowering product quality or
impacting the environment negatively. Unethical business practices can lead to smeared public
relations and a loss of trust and respect on the part of the consumer.

A. 10.1 Employees
One of the fastest ways to maximize profit and reduce costs is to slash employee expenses.
In many industries, payroll makes up a large percentage of overall costs for a company.
Employee pay for restaurants, for example, routinely hovers around 20 to 25 percent of
total costs, according to Forbes. Slashing employee expenses and removing benefits is an
ethical issue that can cause poor morale in the workplace. Poor morale in a small-business
workplace can lead to devastating results, particularly if the business only employs a
handful of people. It's unethical in many people's eyes to cut employee pay and benefits in
an attempt to pad the profit numbers, but many companies opt for such a strategy because
it's quick, proven and effective.

B. 10.2 Marketing

Marketing has a strong relationship with a company's profits. A solid marketing strategy can grow a
brand, attract consumers and ultimately build profits. However, in attempt to maximize profits,
companies often straddle the line of what's ethically right and wrong when it comes to marketing.
Examples of questionable ethics in regards to marketing include the placement of sexual ads in an
attempt to attract people to a product or service, targeting children in advertisements and using
violence as a means to draw attention to a product or service.

C. 10.3 Environmental
The production of most items has some type of environmental impact. Companies that
want to grow profits may use unethical environmental practices by increasing pollution,
contaminating water supplies and destroying forests. It's often less costly to negatively
impact the environment than it is to positively impact it. For example, a small business
that's still growing may not have a lot of extra funds. It's less costly for the business to
continue operating with a plant that produces a lot of pollution than to remodel or build a
safer plant. These companies often have to adhere to certain environmental laws in the
United States and other developed countries, but the laws often just prevent excessive
environmental damage, not mild or moderate damage.

D. 10.4 Quality
The cost of goods is usually one of the highest expenses a company deals with. Companies
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can reduce the quality of the goods and still sell the goods at the same price to maximize
profit. By doing so, however, they cross the line into an unethical business practice. The
danger of reducing quality to maximize profit is damage to the company's brand name and
a loss of both consumer respect and trust. As small businesses rely on consumer respect
and trust, the loss of both can have significant repercussions that slow growth and lead to
reduced revenue.

10.5 Impact of Ethics in Business profits

High standards of organizational ethics can contribute to profitability by reducing the cost of
business transactions, building a foundation of trust with stakeholders, contributing to an internal
environment of successful teamwork, and maintaining social capital that is part of an organization's
market-place image.

11. Conclusions

Ethical Companies and Employees Are More Successful. Companies with a strong ethical foundation
tend to do better financially, have higher rates of employee retention, and benefit from more
customer referrals and higher customer service satisfaction numbers. To make profit and for the
survival of the business, implementing ethics in their course of action is essential for the
management. There is direct relationship of ethics with profits. If you are ethical, no one prevents
you to earn more and more profits. But if you are unethical, no one saves you from getting loses.