Importance Of Ethical Business Practice And Its Benefits

Overview of Business Ethics and its Analysis

The lecture one is helpful in giving an overview of the whole course and basic concepts of business ethics. Business ethics is analysing and understanding fair practices in business, especially about aspects, which are much debated and proper ethical standards of them is not universally accepted or applied. Business ethics may deal with governance of the business, corporate social responsibility and its issues, discrimination in work place, pricing of the products and product representation in the society (Ferrell and Fraedrich 2015). The specific aspect I will focus on from this lecture is the benefits of following ethical practice in business.

I have seen that there are many businesses that do not run with proper ethical standards. There are deceptive advertisements on television, overpriced products and even within the business there are unethical practices like discrimination and lobbying. Products often use terms like “natural, fresh, and scientifically proven” to win customer trust (Zinman and Zitzewitz 2016). In the very famous case of Volkswagen where the company misled the customers claiming that they were selling cars, which were very low on emission and were eco-friendly but the claim was false (Latif 2017). The company had to go through high value lawsuits and the reputation was ruined. In another highly unethical case of deceptive business practice, the famous supermarket chain in the USA Tesco was found to pile horsemeat in its beef burgers and other packed food items. In both of these cases, the companies had huge financial penalties, Tesco had to shed off $432 million after the scandal, the reputation was greatly impacted, and customer base was lowered (Heilpern 2016).

I believe that if the companies had not been involved in such unethical practices, they would have been in a much better place now. Ethical practices may not be producing immediate benefits, but they have long-term positive effect on the business. Ethical business organisations gain much higher reputation and good will in the market, in comparison to businesses that raise doubts among the population. The organisations with higher goodwill and reputation automatically brings in more customers and results in higher profitability. Business organisations with higher profitability are more sustainable and can operate for longer terms (Ortiz?de?Mandojana and Bansal 2016). The benefits of ethical business practice overshadow the immediate small economic benefits of unethical ways.  In addition to that, when unethical business practice of a particular organisation is exposed the reputation, profitability, customer base and good will of the business get shattered instantly. These intangible assets take a long time to build up but no time to be destroyed.

Examples of Unethical Business Practice and their Consequences

I have found the lecture 2 of the course module to be very effective in explaining the importance and implications of ethical standards in business. Either one empowered individual or a group of people who form a board takes the decisions in business singularly or collectively (Baker 2017). It does not matter who in the authority is taking the decision, but a decision when made influences the business in some way. Therefore, the decision makers in an organisation need to be careful about maintaining ethical standards.

There are number of importance associated with the ethical decision making process in businesses (Hartman, DesJardins and MacDonald 2014). Apart from attracting more customers due to the goodwill, it helps in employee retention as sustainable business practice help in creating better working conditions (Van Der Klink and Van Der Wilt 2016). The ethical businesses include better and reasonable employment conditions. A business that is ethical, boasting of high customer loyalty, goodwill and good working condition will naturally draw more investors. The investors would also know in their mind that the money they are spending is spent on ethical and moral practices. I have understood from the video that business ethics is not just about following the law but upholding the morality and humanity over blatant profit making.

The stakeholders who influence the ethical standards of the business include the management of the company, the employees, all the investors and shareholders, the customers, related government agencies and everyone who is in some way connected the business. I will specifically focus on my understanding of social responsibilities that lie on the management who are the prime decision makers in the process. There are various social responsibilities that the business has to perform including legal, economic and humanitarian. Economic responsibility is the one beyond profit making and giving something back to the society, to the people who need it. I have studied that businesses spending large amount on social causes actually get more in return in long term as they are perceived as credible (Tai and Chuang 2014). The lecture taught me how the key concepts of ethics in business has changed over time, from civil rights questions dominating ethical principles in the 1960’s, to cyber security and privacy becoming main concern in the 2000’s (Schrempf-Stirling, Palazzo and Phillips 2016). The ethical standards in business or any other fields have been dominated by the contemporary events and political scenario of the time. However, the basic principle of morality and maintaining the “good” quotient has remained the same throughout the times.

Benefits of Ethical Business Practice

Any individual or group of people who are affected by a business organisation or get affected by the decisions of the business organisation are known as stakeholders. I can easily explain the stakeholder’s relationship by understanding how the stakeholder’s are connected to the organisation. The video explains how the relationship with the stakeholders affects the profitability of the business. Apart from that ethical consideration are necessary to maintain such relationships. The stakeholders are the customers, employees, managers, owners, and governmental agencies (Lawrence and Weber 2014). There are two kinds of stakeholders, the primary and the secondary (Carroll and Buchholtz 2014). The primary stakeholders are the above-mentioned stakeholders and the secondary are those who are not affected by the business directly or directly do not affect the business. They are media, trade associations, special interest groups and the competitors. However, I believe that the competitors act more like primary stakeholders, because they have direct effect on the business organisation. I have seen that when one competitor in the field brings down the price of a product, others in the business have to also follow; this is a direct impact on the business. Therefore, I have my doubts about the nature of stakeholder that the competitors are.

Every company has to engage in stakeholder’s orientation. Stakeholder’s orientation is the process in which a business organisation gives attention to managing the interests of all the stakeholders and maintains good relationship with the stakeholders (Bottenberg, Tuschke and Flickinger 2017). I have understood that it is an ethical process to take care of the well-being of the stakeholders because of whom the business runs and grows.

The shareholders of the business and all the stakeholders have some kind of expectations from the organisation. Performing necessary activities to meet those expectations while abiding by the economic, legal, ethical and philanthropic responsibilities is known as “corporate citizenship” (Andriof and McIntosh 2017).

In a famous case the mobile application called “SnapChat” was   legally charged of misleading the customers that the SnapChat photos disappear forever whereas in reality these can be preserved (Frohlich and Calio 2014). The stakeholders of the business included the users of SnapChat who were misled and hence it is a case of failure of ethical business practice in terms of corporate citizenship.

I have found the lecture number 4 to be the most useful in understanding the ethical issues within the business organisation and the emerging ethical issues that were not known in the earlier decades (Askew, Beisler and Keel 2015). The emerging ethical issues mainly comprise of the digital space and include online privacy, intellectual property rights, and cyber security (Crane and Matten 2016).

Stakeholders and their importance in Ethical Business Practice

Ethical decisions have to be made on a regular basis within the businesses. These decisions are mainly about something, which is perceived as good or bad (Bishop and Lee 2017). Some examples can be made in this regard; a manager has to decide whether to continue a particular business decision, which is very profitable for the company but puts extra burden on the employees without much financial benefit for them. This is an ideal case of ethical question, which is related to business decision making. In order to remain on the correct side of such a contentious situation the managers have to be first eloquent about ethical dilemmas in business and their possible solutions.

In this regard, I will try to specifically focus on the reasons why the organisations or the employees within an organisation tend to behave unethically. The organisational unethical behaviour is caused due to collective unethical behaviour of the individual employees. Unrealistic targeting of profits can be reason why the organisation tends to become unethical. The overall unrealistic profit target of the organisation will be distributed among its employees this will pose unrealistic target on the individual employees and they will tend to become unethical in achieving those. They will start lying or misinforming the customers so that they buy the product. Fierce competition between several organisations leads to the individual organisations in taking unethical ways to go ahead of others. This is the reason misleading advertisements are published or broadcasted. Competition among the employees within the organisation forces them to unethically lie or misinform about each other to the higher authority. Often it is seen inhumane schedules of work lead to frustration among the employees, which increases the rates of work place abuse, sexual harassment to colleagues and unsocial activities.

The lecture number 11 has given me a clear context of the ethical issues and unethical practices that are happening due to globalisation and increasing worldwide business activities. Globalisation is the phenomenon, which has increased connectivity among various nations of the world. It has increased the business scope and activity among nations and more and more companies with enough financial capabilities are opting for operating in a multiple number of countries. These companies are also known as the Multi National Countries or the MNCs’.

The ethical problem of such companies that work in multiple countries is with the varied cultural and ethical values in different countries (Khadartseva and Agnaeva 2014). I have seen foreigners working for such companies often feeling uncomfortable in my country because of different culture, food habit and behavioural characteristics of the people.

Corporate Citizenship and its Importance

The private companies who want to expand into new nations have to first understand the culture of that nation to avoid any kind of fallacy or mistake in order to not offend the citizens of the host nation (Sethi 2016). There are various economic models followed in different countries. There are some countries, which follow the socialist economic model. The socialist model is developed from Karl Marx and Frederick Engels theory of socialism and communism, which implies that though the citizen’s may own their private properties and personal businesses but the larger public utility economic bodies, like banks, railways, hospitals, educational institutions will be owned by the government (Uysal 2016). The opposite theory of capitalism, which is liberal and allows individuals to grow economically without limitations is followed by most of the nations worldwide (Jahan and Mahmud 2015). I personally believe that a free market society where individuals will be free to pursue their economic ambitions is better than a system, which poses conditions on economic growth of the individuals. Therefore, it is evident that the practices, which would be considered ethical in the liberal capitalist countries, will be unethical in the socialist and communist countries. These are the ethical dilemmas that the organisations have to face in the globalised economy. It is true that there are some “global common values”, which are practices followed all over the world as ethical and moral, but the number of local cultural and ethical differences exceeds the global common values. The two organisations “World Monetary Fund” and “Word Trade Organisation” are formed by multiple countries in the objective of homogenising the business practices all over the world and synthesizing the difference of ethical standards in a way that would not be offensive to any nation, but would uphold the “global common values”.

References:

Andriof, J. and McIntosh, M. eds., 2017. Perspectives on corporate citizenship. Routledge.

Askew, O.A., Beisler, J.M. and Keel, J., 2015. Current trends of unethical behavior within organizations. International Journal of Management & Information Systems (Online), 19(3), p.107.

Baker, D.F., 2017. Teaching Empathy and Ethical Decision Making in Business Schools. Journal of Management Education, 41(4), pp.575-598.

Bishop, D.L. and Lee, D.S., 2017. Business Ethics: Ethical Decision Making and Cases (Asia Edition).

Bottenberg, K., Tuschke, A. and Flickinger, M., 2017. Corporate governance between shareholder and stakeholder orientation: Lessons from Germany. Journal of Management Inquiry, 26(2), pp.165-180.

Carroll, A. and Buchholtz, A., 2014. Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson Education.

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