The importance of Business Ethics

Ethics concern an individual’s moral judgements about right and wrong. Decisions taken within an organisation may be made by individuals or groups, but whoever makes them will be influenced by the culture of the company. The decision to behave ethically is a moral one; employees must decide what they think is the right course of action. This may sometimes involve rejecting the route that would lead to the biggest short-term profit.

The discussion on business ethics probably started in the developed economies with business scandals, such as the savings and loan crisis and have become stronger since the asian financial crisis and then Enron. The idea of business ethics caught the attention of media and business  in a big way since the sub prime mortgage in the US & the consequent global  financial crisis, since 2008. 

Ethical issues include the rights and duties between a company and its employees, suppliers, customers,  fiduciary responsibility to its shareholders and its communities. Related issues include corporate governance, corporate social responsibility, political contributions, issues over asset stripping, human (employee) rights, executive pay, corporate tax avoidance and bribery and corruption.

Corporate Social Responsibility though is like a fad, leads to ethical behavior of organizations and can bring significant benefits to a business. For example, they may:
# attract customers to the products, thereby boosting sales and profits
# make employees want to stay with the business, reduce labour turnover and therefore increase productivity
# attract more employees wanting to work for the business, reduce recruitment costs and enable the company to get the most talented employees
# attract investors and keep the company’s share price high, thereby protecting the business from takeover

Unethical behaviour or a lack of corporate social responsibility, by comparison, may damage a firm’s reputation and make it less appealing to stakeholders. Profits could fall as a result, in the longer term.

About surenraj

“Views expressed are my own”
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