Impact of Ethical Business Conduct on Corporate Reputation

Building
 Table of Contents
Impact of Ethical Business Conduct on Corporate Reputation Building...................................1

Introduction............................................................................................................................3

Review of Concepts................................................................................................................3

Relationship between Corporate Reputation and Business Ethics.........................................5

Corporate Social Responsibility and Business Reputation....................................................5

Impact of Unethical Behaviour on Corporate Reputation Damage........................................6

Practical Importance and Application of Business Ethics......................................................6

Conclusion..............................................................................................................................7

References..................................................................................................................................8
Introduction
Ethical conduct of business is widely being acknowledged by stakeholders in the modern,
turbulent business world. It is obvious that most of the business organizations are profit
driven. Yet, the financial returns must be derived in a socially responsible and ethical manner
in order to sustain in the longer term of operations. Business ethics and corporate social
responsibility consistently convey the message to the interest groups that the organization is
being responsive and accountable for the business surrounding within which the company
operates (Cacioppe, et al., 2008). Thereby, it is expected from the administrative authorities
of an organisation to be alert on ‘stakeholder thinking’ and associate business ethics with the
value creation process.

Effective communication of corporate values and systems of ethics enables reputable brand
building and creates a positive public perception on the corporate image. Corporate
management tend to put more and more information on stakeholders to enhance the level of
transparency and thereby imply as they are much more accountable for the betterment of the
corporate social performance (Swift, 2002).

On contrary, institutions that are accused of engaging in unethical behavior, such as fraud,
corruption, concealing or manipulating their real financial situation of the company, and
insider trading, suffer disproportionately from compromised reputations, which harm their
legitimacy with interested parties and have an adverse effect on their monetary results
(Schwartz, 2013).

Appropriately, this essay will explore organizational ethics, give readers a glimpse of the
connection between ethics and corporate identity, describe how CSR functions as a motivator
or indication of company reputation, and then analyse the impacts of deceptive business
actions.

Review of Concepts
Throughout the history, a number of massive corporations such as Enron and WorldCom has
collapsed due to corrupted business policies. The unethical managerial conduct was among
the key issues for such failures and thereafter became subjected to critical examinations.
Ethics are typically fair, trustworthy practices that others can put trust on. Accordingly,
business ethics can be defined as the values and norms that guide appropriate behavior in
corporate settings. Business ethics simply reflects organizational value system and the
mechanisms of distinguishing right and wrong business flows (Sroka & Lőrinczy, 2015).

Leaders should bear the ultimate responsibility of establishing business ethics in an suitable
manner for the operational context. In order to achieve the desired attitude and effectiveness,
it is crucial that corporate leadership participate in and contribute to the procedure for
enforcing ethical ideals inside the firm. Ethical leadership strategically drives the
organization towards ethical procedures. Ethical leadership is defined as righteous
figureheads who uphold the principles of justice, honesty, and reliability within an institution
(Zhu, et al., 2015). This empowers workers to think of them as mentors, which improves
corporate and employee work performance, increases employee recognition with the
company, and fosters interaction between staff members and employers. Also, having moral
leadership reassures workers because it fosters a favourable connection for reporting immoral
behavior in the workplace. Empirical evidences prove that ethical leadership supported by a
positive organizational culture is upgrading the corporate reputation. Such facts outline that
leadership by example is a technique of improving ethical practices in a company (Nuha &
Shehu, 2019).

Corporate reputation has become an essential managerial concept that provides the
organization with a competitive edge in the industrial platform that it operates. Upgradation
of corporate image is one of the core elements of the corporate strategy as well. Reputed
organizations are subjected to uncertainties within the marketplace at a low rate since
customers are embracing the brand and do not want to shift to substitutes. Further, a positive
corporate image is a valid generator of financial returns and become an effective tool which
enforces corporate growth (Leiva, et al., 2016).

Over the years, corporate reputation has groomed as a means of evaluating the weight of
responsiveness of organizations towards their stakeholders. Some of the cases suggest that
small scale companies hold high level of reputation in comparison to well established
organizations due to low level of deficiencies. Hence, concurrently, managers are
experiencing pressures on finding mechanisms to effectively address the lapses and get their
reputation level upgraded. Reputation is non tangible and based on assurance and quality. it is
a collaborative assessment of how interest groups view a company based on that
organizational capacity to meet and exceed stakeholder requirements and clearly articulate its
characteristics. Establishing a superior reputation assures close and mutually beneficial
relationships with stakeholders, whilst reasoning for long term financial gains and reduced
operational costs (Fombrun, 2007).

Relationship between Corporate Reputation and Business Ethics

Going in line, organizations looking to boost their credentials should create ethical guidelines
and regulations as a part of their strategy and mission. Moreover, companies should tailor
their hiring procedures to accommodate candidates who have ethical principles because these
candidates frequently choose to join corporations with high moral principles. Genuine
approach to stakeholders would upgrade the confidence level and understanding about the
business standing so that the company can stand high amidst intensified market competition
(Šontaitė-Petkevičienė, 2015).

Whilst reputation refers to how various stakeholders see or approve an organization, it is

crucial for companies to develop, establish, and apply values that will help stakeholders see
them as morally upright businesses that embrace moral principles like justice and
truthfulness. Robust and consistent communications strengthen the said facts (Nuha & Shehu,
2019).

Corporate Social Responsibility and Business Reputation

Corporate social responsibility (CSR) is a key driver of positive brand image. Social
accountability is the moral responsibility of an organisation towards the community that it
serves for by means of optimizing the positive effects and reducing the adverse effects
through the continuation of business operations. Legal, economic, ethical and philanthropic
concepts are getting highlighted with the term CSR (Nuha & Shehu, 2019). Accordingly,
corporate entities can have a high brand reputation simply by contributing for the societal
wellbeing and designing schemes that persuade employees to voluntarily contribute for
community services (Brammer & Millington, 2005).

In previous studies on this broad dimension, some academician have examined that some
highly lucrative companies received low reputation ratings while other companies with
significantly lower profit rates received higher ratings, indicating that perceptions or views
about a business brand is not solely based on profitability or finance terms but also include
other variables such as its societal responsiveness. Hence, investing in an accurate CSR mix
would definitely increase corporate reputation (Nuha & Shehu, 2019).

Consequently, it is advocated that managerial bodies are needed to spend more time and
money getting to know their stakeholders and pursuing the proper balance of CSR initiatives,
since doing so will not only boost profitability over the long run but also increase
acceptability and cut costs, enhancing the firm recognition (Nuha & Shehu, 2019).

Impact of Unethical Behaviour on Corporate Reputation Damage

Unethical behaviours caused reputational damages are typically accelerated by the corporate
management of a certain organization. When purpose, resources, and opportunities come
together to generate ethical risks, which eventually raise the likelihood of unethical activity
occurring, unethical behavior occurs. Additionally, misconduct can be linked to the pursuit of
the management on overly ambitious business goals, which results in information
misinterpretations due to lack of personal qualities of the leaders. Stakeholders are persuaded
to accept decisions with the hope of gaining something in the long term by using this
information. The manipulations and misconducts would eventually create an unpleasant
feeling about the business organization on interested parties (Zona, et al., 2013).

Consequently, it is crucial to design an ethical set of values that will become the code of
ethical standards of the organization, while the leadership of the firm offers the moral
motivation to enable the avoidance or elimination of unethical activities. This will help to
establish an effective corporate culture. Employee acceptance and readiness to follow leaders
who are characterized as extremely socially interactive rather than trying to optimize their
personal gains results in higher ethical behavior and improved individual and organizational
reputation, without which unethical practices will persist. In order to create a friendly,
relational, yet goal-based organization that will lessen unethical activities, leaders should
work to construct checks inside their organizations and get educated to be moral managers
(Schwartz, 2013).

Practical Importance and Application of Business Ethics

Business ethics have to be linked with actual business practices. Business disciplines have to
carry ethical values in each and every business aspect. For example, in marketing the brands
need to deliver the promising product characteristics. In finance, the managers should
comprehend the ethical basis of transactions. In operations, the humanity of people
management have to be kept in mind. Shortly said, in order to make theorizing in business
ethics more practically applicable, ethicists must engage with the fundamental operations of
business and get a deeper understanding of how these operations influence sensemaking
about both business and ethics. Appropriately, corporate ethicists will have to re-examine the
subject (Parmar, et al., 2010).

Conclusion
In summary, ethics significantly affects an organizational reputation and its ability to fulfill
its corporate social obligation. In order to achieve the desired impact, compliance, and
reputation, a robust ethical culture driven by intentional and moral management is crucial.
Also, selecting the appropriate CSR strategy in line with organizational ethical ideals to
achieve a diverse stakeholder mix is essential for maintaining a healthy stakeholder
perspective, which results in building a solid reputation. Last but not least, businesses
established on the virtues of trust and goodwill typically enjoy a solid reputation (Ferrell, et
al., 2013).
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