The Role of Ethics in Business
Public Health vs. Free Speech Over the past years, corporate governance and business ethics have gained a great amount of public interest due to its implication in the economic health of organisation. Such cases as Enron, WorldCom, and Oracle just to name a few in recent years have made world headlines outlining the governance of unethical behaviour comprising of corporate fraud, dubious accounting, and abuse of power that shocked the world and rattled the realm of business ethics.
As a result, the role of ethics in the pursuit of business has come to the forefront of many of today’s current issues. Business ethics is the applied study of understanding the application of ethical behaviour and concentrates on the moral standards as they apply to business policies, institutions, social systems, and behavior (Velasquez, 2012). According to Ronald Sims (2003), an organisation’s moral ethics is demonstrated by how it abstains from behaving in a manner contrary to the well-being of society.
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Moral standards are the kinds of actions and beliefs that are believed to be morally right or wrong or otherwise good or bad. The application of the concept of business ethics is administered by the corporate governance of an organisation (Urlacher, 2008). As business ethics represent an organisation’s principles and values when conducting business; corporate governance is the organisation’s structure on how it implements to govern and protect those associated with the organisation with the actions of those decisions determining the direction of an organisation’s performance (Fernando, 2012).
Corporate governance embodies leadership that governs an organisation’s core values, beliefs, and polices that influence its strategies and decisions. It is the system by which organisations are authoritatively directed and controlled (Colley, Doyle, Logan, Stettinius, 2004). All corporate entities comprising of profit and non-profit orientated companies, public and private, partnerships, joint ventures, community organisations, academic institutions as well as governmental corporate entities have to be governed (Tricker, 2012).
It is through the conduct of the basic principles of integrity, responsibility, accountability, honesty, and trust (Tirole, 2001) that leaders and managers are guided by to fulfill their goals and objectives into which is beneficial for the organisation and its stakeholders. For instance, leaders, managers, and executives face many kinds of ethical issues on a daily basis, however, unless these issues are initially sorted out and distinguished from each other it can prove to be extremely complicated and confusing.
According to Bhal and Sharma (2004), three of the main business ethic issues are systemic, corporate, and individual. Systemic issues are ethical questions raised about the political, legal, economic and institutional sector within which a business operates. It also includes the morality of the laws, regulations, industrial structures and social practices. Corporate issues are ethical questions raised about a specific organisation including questions about the morality of the activities, policies, practices or organisational structure of an individual organisation.
Lastly, individual issues are ethical questions raised about the moral decisions, actions, and character of an individual or group of individuals within an organisation. By identifying these types of ethical issues it helps those involved in the governance of the organisation in developing a better understanding of ethics in a more informed manner when analyzing ethical issues that deal with uncertainties Now as opposed to using an example of a financial organisation’s unethical pathway to embezzlement or fraud I have chosen a slightly different issue illustrating systematic and corporate ethics in the world of business.
The assertive anti-tobacco movement implemented throughout governments across the globe to debrand cigarette packaging is now currently been disputed in New Zealand. It is the ethical dilemma of the government’s public health administration versus Big Tobacco’s validation of ‘intellectual property’ and ‘free speech. ’ Big Tobacco is the term applied to the tobacco industry in general and it is well known that Big Tobacco companies spend a considerable amount of its resources marketing their brands and image to maintain and increase its levels of performance.
However, the New Zealand government has put it in their best interest to debrand all cigarette packaging leaving only images of health scares and concerns, cutting out all forms of branding and marketing to effectively reduce the amount of smokers of its nation. New Zealand researchers have found that plain packaging affects a smoker’s perceptions and behaviour in making an attempt to quit (New Zealand Herald, 2012). This ruling could consequently effect Big Tobacco’s organisational performance to take a possible downturn and potentially draw a decline on tobacco sales.
However, Big Tobacco are not claiming their issues are in pursuit of financial benefit, but instead are disputing the ruling because of the breach of its ‘intellectual property rights’ and governance of ‘free speech’ (The National Business Review, 2012). Even knowing how harmful their products are and that it is only the government’s plea to improve the health and welfare of its nation, the question remains – is Big Tobacco’s fight against the ruling of debranding cigarette packaging socially ethical?
Or is it just a tactical diversion by the domination of Big Tobacco to protect investor’s shares in maintaining tobacco sales. On the contrary, there is no argument tobacco causes heart disease, mouth diseases, cancer and many other respiratory diseases; and although it has become compulsory for cigarette manufactures to produce graphic health warnings on each packet of cigarette, another issue is, is it ethical for the government to go as far as debranding cigarette packaging and prey on toes of Big Tobacco?
Where does it end? Why not go as far as debranding fast food companies and fill their menus with grotesque images on the effects of high cholesterol and obesity, as it is well known that fast food is also the cause of many of today’s health concerns. Beyond the arguments for and against the role of ethics in business, there is no denying that money is the quintessential measure of an organisation’s performance and that making a profit is the motivation behind any organisational activity.
However, as many organisations are now been faced with numerous challenges of illegal and unethical business practices and transactions, the question is – are unethical companies more successful than ethical ones? Milton Friedman (1970) asserts that the only responsibility that business should have is to maximize its profits. Velasquez, 2006 also concurs and states that one should not involve ethics in the conduct of business, and that businesses should single mindedly be in the pursuit of the financial interests of the firm and not be side tracked in emphasizing energies or resources into doing good works.
Nevertheless, according to Mandal (2010), no business can survive without ethics; it requires at least a minimal means of compliance by those involved; even in acts of crisis as businesses have an ethical duty to obey the laws of society. Ethical behaviour is known to be the best strategy for businesses; many ethical matters are difficult to deal with and at times can be unclear even after much consideration. Over the long run it can give organisations significant competitive advantages over others that choose to ignore ethics in their business.
Furthermore, organisations must ensure that everyone associated with their organisation knows how to deal with ethical issues as this will give all associated with the organisation the confidence to be aware of any acts of unethical behaviour and the understanding of doing what is morally right, in turn entrusting that it will also be supported by the governance of the organisation. Equally all businesses have an ethical duty to each of its associates, whether it to be owners, employees, or customers, as each has an effect on the organisation and each is also affected by the organisation.
In conclusion, business ethics and corporate governance are two significant factors that impact an organisation and how it operates resulting in the direction of its performance. After analyzing the concept of organisational governance and ethics it is my understanding that in today’s competitive times ethical choices confront all businesses and when inevitably an ethical dilemma occurs that the challenge of ethical behaviour must be met by those involved in the organisation to step forward and operate with a clear, positive and ethical culture.
Essentially, an effective organisational culture should emphasize and promote ethical behaviour and discourage unethical behaviour. Admittedly, ethical behaviour may cost, just like the example of Big Tobacco that could prospectively lose out on sales if their ethical actions were to be that to accept their fate by being restricted on how they market such a terminal product. In contrast, as there are many different ways of defining ethics and many different ways of measuring success, it does not mean ethical behaviour is always rewarded or to say that unethical behavior is always punished.
It can actually be quite the opposite, and as most businesses measure success in terms of financial performance it is safe to say that being morally ethical and being successful does not always go hand in hand, in fact unethical behavior every so often does pays off, and being morally conscious sometimes fails. However, any of those returns are often short-lived as an organisation cannot operate if its predominant cultures are not compatible with those of society. Word Count – 1530
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