Role of Business Ethics in Modern Organizations

Business ethics are becoming more and more prevalent in today’s business world. Business ethics is a form of applied ethics that studies ethical principles and moral or ethical problems that arise in a business environment. There are an array of issues that have come under scrutiny, including community responsibility, pollution, whistle blowing, and sustainability. Business ethics is the conduct that a business adheres to in its daily transactions with the world. The ethics of a particular business can be different. They pertain not only to how the business interacts with the world at large, but also to their one-on-one transactions with a consumer. Many businesses have obtained a bad reputation just by being in business. To most people, businesses are only concerned with making money, and that is the bottom line. Making money is not wrong in itself. It is the behavior in which some businesses conduct themselves that brings up the issue of ethical behavior. Good business ethics should be a component of every business. There are many factors to consider. When a company does business with another that is considered unethical, they are usually considered unethical by association. The company has a responsibility to investigate the companies that they do business with. Many worldwide businesses, including most of the major companies that we do business with, can be viewed as not practicing good business ethics. Many major companies have been fined millions for breach of ethical business laws. Money is the driving factor. If a company does not comply with business ethics and breaks the laws, they usually end up being fined. In the US alone, many companies have broken anti-trust LAW, ethical and environmental laws and been penalized with fines worth millions. The dilemma is that the amounts of money these companies are making out weigh the cost of the fines.

What does Business Ethics mean to the Organization?

Business ethics have a newfound importance in an organization. The focus is now on maintaining the rights of the general public. If a company does not follow the business ethics, it will involve itself in misleading of financial statements, frauds, discrimination, price discrimination, etc. A strong ethical character can give a competitive edge to an organization, improve recruitment, and help retain current employees. It promotes morale because an excellent ethics program encourages such morale boosters as candidness and truthfulness. It can improve employee interaction and build a workplace atmosphere based on honesty, equality, integrity and candor, eliminating obstacles in communications.

Ethics commonly refer to the rules or principles that define right and wrong conduct. In the United States, many believe we are currently suffering from an ethics crisis. Behaviors that were once thought unacceptable – lying, cheating, misrepresenting, and covering up mistakes — have become in many people’s eyes acceptable or necessary practices. Concern over this perceived decline in ethical standards is being addressed by organizations, while companies rely on their Human Resource (HR) department to build an ethical culture. When employees in organizations make decisions to act unethically, they affect not only the company itself, but also its shareholders, employees and customers. Employees make a myriad of choices every day in businesses — if unethical, they can damage a company’s productivity, profits and reputation. Unethical decisions can come in many forms: the employee who conducts personal business on company time to the line worker who fails to report a product flaw just to meet a deadline, and even more serious, the manager who profits from illegal use of insider stock information. All these incidents lack ethics. In most companies today, the competitive advantage rests on the shoulders of its employees. These employees must be trusted to “do the right thing”, especially when no one is looking. It is up to HR to train, educate and communicate with employees on what is considered to be right and wrong in the workplace. After all, ethics is one topic that begins and ends with people.

In a study its found that 56% of all workers feel some pressure to act unethically or illegally. The study also revealed that 48% of workers admitted they had engaged in one or more unethical and/or illegal actions during the last year. Among the most common violations: cutting corners on quality, covering up incidents, lying to supervisors, deceiving customers, and taking credit for a colleague’s ideas. It’s good to defuse even the slightest impression among employees that management encourages unethical behavior in obtaining business objectives. In the empowered workplace where decisions are being forced down to the very lowest level, the employee must understand the importance of making that decision right the first time. Ethics are becoming more and more important, and HR departments are vital in establishing ethics guidelines.

Ethics should be instinctive when making decisions, and a good ethics program can successfully guide employees through the decision making process. Well-communicated guidelines help set the standards for employees. An important part of an ethics program is increasing awareness levels amongst employees. Companies with ethics programs find that many “unethical” decisions are not of deliberate commission, but of ignorance. An effective ethics program can be an important tool in an organization because as employees learn to use this tool, they become more confident in the self-regulating atmosphere of the new workplace. A clearly explained code of ethics plays a pivotal role in employee empowerment by clearing up any questions on their own. A code of ethics is a formal document that states an organization’s primary ethics and values that it’s employees are expected to follow.

Ethics are becoming more and more important, and HR must continually revise the code of ethics to address issues that come up in the changing workplace. Corporations must ensure the code of ethics is used effectively and not just as window dressing. Their effectiveness depends heavily on whether management supports them and how employees who break the codes are treated. When management considers them important, regularly affirms their content, and publicly reprimands rule breakers, codes can supply a strong foundation for an effective ethics program. However, winning the ethics battle isn’t only about how an organization punishes those who engage in unethical behavior, but how the company rewards both good and bad behavior. Although a usable ethics code and an accessible ethics officer will help get the message out, a successful effort requires active communication, education and training — a key role of the HR department. More and more HR departments are setting up hot lines, seminars, workshops and similar ethics training programs to try to increase ethical behavior.

The primary debate is whether or not you can actually teach ethics. Critics stress that the effort is pointless since people establish their individual value system when they are very young. However, supporters note that several studies have found that values can be learned even after early childhood. Evidence shows that teaching ethical problem solving can make an actual difference in ethical behaviors; that training has increased individuals’ level of moral development; and if it does nothing else, ethics training increases awareness of ethical issues in business. The most important aspect of an educational program is to teach employees to think independently about ethically sensitive issues. In this day and age, employees need desperately to have the opportunity to think through ethical situations. The training programs provided by HR must provide them with tools to think through those issues successfully.

An effective ethics program builds the morale of its employees because, most employees like to work for corporations they think are ethically intended. Ethics are free — the HR department has to put forth the effort to communicate, educate, and train its employees on the importance of their decisions. An effective program costs very little, but the absence of ethics can be extremely costly. A company that finds a way to change the system so people can be influenced to act ethically and responsibly is far more likely to succeed.

What does Business Ethics mean to the Individual?

A person’s sense of ethics has an impact on the type of conduct the individual will exhibit. When people are able to tell the difference between right and wrong and they choose to do what is right, then they are acting in an ethical manner. Business ethics aren’t just about the difference between right and wrong; they are the actual application of that knowledge to business. Individuals who work for businesses make decisions every day, and their actions can impact the lives of many other people. When business people make decisions that are not ethical, many people can be hurt – including employees, customers, and members of the general population — as well as the business itself. Companies that are operated by people who do not choose to do what is right are often entities that do not survive for the long term. Often, making business decision that are counter to what is right may result in short term profit but lead to eventual demise of the organization.

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