Business Ethics and Its Importance How Is essay

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Business Ethics and Its Importance

How is the notion of business ethics important for management, work and organisations?

Business ethics is a form of professional ethics guiding the moral conducts of business organizations. Business ethics applies to all aspects of business process relevant to the conducts of employee and the entire organization. In a contemporary business environment, a corporate organization is being viewed as a responsible corporate citizen. Building a strong ethical culture is an integral part of strong business reputation and creating an environment of trusts among the stakeholders. (Khatri & Shrama, 2011).

The objective of this essay is to examine how the notion of business ethics is important for management, work and organisations.

Business Ethics and its important to management, and work organisations

In a contemporary business environment, business ethics is a powerful tool for branding and attaining competitive advantages. (Azmi, 2006).

"Corporate ethics programs have the potential to provide an effective method of setting and communicating expectations among employees for their dealings with customers, suppliers, and other employees" (Brickley, Smith, & Zimmerman, 2000 P. 9).

The concept of business ethics provides the ethical framework by which business organizations conduct all aspects of businesses and dealing with the stakeholders. Ethical theories are primarily important in evaluating the ethical reasoning based on the duties, right, and value. Ethical theory reveals that businesses must inculcate the ethical values by promoting the safe working environment, and serve the interests of the stakeholders. (Nyberg,2008).

Focus on business ethics has increased after the occurrence of corporate scandals that rocks the business community in the United States. Before the enactment of the Sarbanes-Oxley Act (SOX) in the United States, notable big corporations such as WorldCom and Euron have involved in the financial scandals that hurt the interest of the stakeholders. The scandal has led some commentators to believe that businesses are moving away from the code of ethics. (Nyberg, 2008). Identification of the importance of business ethics towards business organizations make Donaldson (1994) to point out that business ethics is a part of business ethos, and businesses needs to adopt adequate health and safety hazards to safeguard employee well-being. As part of business ethics, business must also respect the right of person and privacy. Since a business organization cannot operate in vacuum, businesses are required to be socially responsible to the outside world before it could enjoy the patronage of the community it serves. The application of business ethics requires an organization to design an ethical value that will be the guiding path for the employees in order to create value for the organizations. Realization of the importance of business ethics have made some large business organizations to design code of ethics that employees must follow. For example, it is mandatory for all employees to enhance customer relations to uphold the reputation and integrity of the organizations. Moreover, employees are obliged to adhere to the company policies and protect the confidential business information.

Heery, (1996) also relates the importance of business ethics to the pay system applicable within an organization. The author believes that the application of ethics remuneration is contingence to business strategy. In the present business environment, there are continuing changes in the business strategies, and firms are required to implement new strategies in the pay system to improve the employee performances and employee well-being. The new pay model is the responsiveness to the market signals, which is linked to the customer's satisfaction, employee retention, customer retention, and increase in business volume. Typically, ethics remuneration has been seen to enhance skills and competence of the employees and application of ethics remuneration and variable pay system enhance organizational performances. Thus, it is advisable for firms to inculcate new pay system in their business ethics because the new pay system has been viewed to be a determinant of business success. The application of the new pay has also been viewed to increase the value of employee, and increase the skill acquisition and competence of the employees.

On the other hand, Edgar, & Geare, (2005) argue business ethics is largely related to the HRM practice. The author believes that the practice of Human Resources Management (HRM) is beneficial to organizations in term of the outcomes they produce. The author categorizes ethics in the HRM practice as hard and soft models. Under the hard model, the effectiveness of HRM is measured in term of the organizational efficiency. For example, the outcome of the profitability, turnover rates and productivity levels are the measurement of the organizational performances. The hard model also believes that effective utilization of employees enhances the organizational performances, and this model largely considers employee as the means to an end. Contrarily, soft model believes that business performances are primarily attached to the employee well-being. From an ethical point-of-view, balancing the interests of the organizations and the needs of employees are important to enhance organizational performances and employees developments. In a modern business environment, employees are considered as assets, and they are being identified as important stakeholder to the organizations. Since the primary of objective of business organizations are to enhance business performances, the improvement of the employee well-being has been viewed as prerequisite for the enhancement of business growth. One of the methods that could be employed to improve employee well-being is to enhance employee training and development. Employee training and development have been seen as the effective methods to improve the competence and skills of the employees and the approach enhances employee job security.

Despite the general believe of the literatures on the importance of the ethical practice within an organization, Carey (1999) argues that there are absence of ethical considerations in the HR practice. "The transformation of the welfare and personnel officer into the human resource manager has left unresolved tensions between the 'soft' and 'bard faces of HRM." ( P. 53). Particularly, the coexistence of ethical management within the HR practices is still complex. Most HR professionals only focus on the compliance of law and company policies, and they demonstrate lack of awareness on their moral responsibility and employee ethical considerations. Winstanley & Woodall (2000) support these believe by arguing that modern businesses do not consider the ethical interest of employees. The author uses the review of literatures and theories to demonstrate the paucity of the ethical consideration for employees. The issue is alarming because there is a little concern for ethical consideration in the human resources development. Typically, lack of managerial interest serves as the major setback to address the problem. The author's work is built upon the concept proposed by Porter (2004) who reveals the underlying factors, which dictates how employees relate to heavy workloads. Porter (2004) argues that in the present era of technological development, work ethics is very important, and implementation of heavy workloads within a business environment has become obsolete. While there is a need to address the problem, both the management and workers serve as block to address the problem because both work towards the same level to maintain the status quo.

While the ethical practice is very important for the organizational effectiveness, many organizations are still paying close lips to the surrounding community while developing ethical codes within the organizational settings. Nyberg, (2008) argues that many organizations believe that the only symbolic values are to maximize the shareholders value. Although, large firms may have the ethical codes, however, they are only used to promote image and satisfying the stakeholders. Murthy (2007) support this argument by revealing that business ethics could not be separated from the corporate social responsibility (CSR). The author argues that if businesses effectively discharge its obligations towards society, businesses are bound to enjoy market benefits from the society, and inculcating business ethics into the CRS enhances organizational profits. Typically, businesses could not operate successfully without integrating CRS into the business ethics, alignment of business ethics towards society enhances market advantages. Firms that adopt inefficient policies towards society may suffer good corporate image. (Brickley, Smith, & Zimmerman, (2000).

The author work is built upon Collins (1994) believes who points out that good management and ethical behavior are not contradictory, and management need to apply ethical behavior in their business practice. Typically, effective management practice is to engage in the ethical behavior in a conscious manner. While the ethical practice within a business environment is important, maximization of profits and owner's satisfaction are still the guiding light of the management. Although, there are traditional believe that there may be conflicts between profit making process and ethical practices, however, the dominant objective of a modern business is to maximize profits. Businesses need to achieve greater balance in adhering to the ethical principles. Typically, it is impossible to separate business and internal structure of an organization. Firms' organizational architecture could be structured to produce desirable outcomes. A company could enhance its integrity if it has designed the ethical behavior towards society, customers, supplier and employee.


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