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Factors influencing business ethics
1. Factors influencing business ethics:
Leadership, strategy and performance, individual characteristics, corporate culture and
environment
Leader is a person who leads the people towards achieving a common goal. Leader can
be good or bad, great or small they arise out of the needs and opportunities of a particular
time and place. Not all leaders are considered to be perfect in their decision making
because each and every decision they make will depend upon the character of person
which differ from person to person. Character of a person includes their inborn talents,
learned and acquired traits which were imposed upon them by life and experience.
Leaders are models and mentors to their followers therefore they follow the path way set
by their leaders. In a large organisation the top level managers or CEO are considered to
be the executive and supervisory leader. The CEO should have strong commitment
towards ethics and ethical conduct and should give a constant leadership in renewing the
values of an organisation. They play a key role in creating, maintaining and changing the
ethical culture. It is necessary for the leader to set good examples, and follows ethics.
One such good leader is JRD Tata who set a good example for his successor and they still
follow it. Where there are good leaders there will be good ethical practices in business.
Corporate governance: is the set of systems and processes that a company follows to
ensure that it is in the best interest of the stake holders. Stakeholders are the shareholders,
employees, customers, creditors and the community.
Sustainability has three components according to john elkington's triple bottom line
concept they are economic, social and environmental. According to elkington the
business does not have one single goal of attaining profit but to extend the goal set by
adding environmental and social values. Thus sustainability has become the new goal set
by the organisation.
Environmental perspective: natural resources.
Economic perspective: about the future generation.
Social perspective: over exploiting of employees and not providing equality in gender
employment, caste creed and religion based employment employing child labour.
Organisational culture: is the set of shared values, beliefs, goals, norms etc that prevails
within an organisation. The organisational culture emphasis on ethics but as it grows it
may change, as in the case of tyco where its organisational culture supports unethical
practices. If the company makes huge profits in unethical way then individual who joins
the organisation would also have to practice unethical things to survive in the company.
As in the case of enron where many executives and managers knew that the company was
following some illegal and unethical practices, but the executives and the board of
directors did not know how to make the ethical decisions and corporate ethical culture.
Thus they fall back and managers have to pay in the form of fines and imprisonment.
2. Business ethics is the application of ethical principle in the organization or business. An
organization should produce or make its own ethical cultures, but this ethical culture
formulated should be drawn from the concept of what is ethical to all and not what is
right for the organization itself. The employees of the organization, also has to follow the
same ethical principles. The organisation being ethical will provide certain social
responsibilities such as they do not harm the stake holders, the general public and the
society as well. "business that treat their employees with dignity and integrity reap
rewards in the form of high moral and productivity" (Frederic, Post and Davis).
There are three major types of ethical issues that arise in a business they are, face to face
ethics, corporate policy ethics and functional area ethics. Face to face ethical issues
happen between the employees of an organization in their day to day organizational life.
the employee face these ethical conflicts when their personal standards differs from what
their job demands. Corporate policy ethical issues happen in the basic operations of a
company. The top level management including the board of directors and CEO's are
responsible for ethical practices of the organization. Functional area ethics issues arise at
all functional levels of the organization. For example in the accounting department, if
unfair pressure is put on employees to deliver an audit report which has been altered or
not showing current accounts of the organization would be un ethical, as it does not
follow the standards and policies set by the organization.
Causes for unethical issues:
There are many reasons for an organization to follow unethical practices they are
personal gain and selfish interest, competitive pressures on profits, business goals and
personal goals, cross cultural contradictions. When an employee gives more importance
to his greed or concern for his personal gain rather than any other concerns, irrespective
of the harm it can bring to the organization is termed as unethical practices that arise due
to personal gain and selfish interest. When a company has tough competitors in a limited
or static market; it may engage some unethical practices just to be in business or to
protect their profits. If the organization uses some unethical means to achieve its goal that
is unaccepted by its stakeholders will give rise to ethical issues under business goal and
personal goal. Here the organisaiton has set a goal that would conflict with the personal
goal of its stake holders. Under such conditions the individuals involved have two
choices either to follow the ethical ways of the organization or "blowing the whistle" on
organization.
Environmental perspective relates to the exploitation of natural resources in business. The
company should make sure that the natural resources are not exploited; it should sustain
the resources so that the future generation can also enjoy them as we did. One such
example is the restriction of fishing in the North Sea, to sustain the availability of
diminishing cod fish to the consumers.
Economic perspective of sustainability relates to the economic growth and fall in the
society. The short term adjustments made by the companies such as bribes and cartels
will only be for a short period of time, it will never achieve a long time sustainability the
3. organizations attitude towards the environment in which it is embedded. If the
organization does not pay taxes are said to behave unethically similar in the case of
organization that does not give donations to public institutions such as schools, hospitals,
police and other justice systems.
Social perspectives of sustainability refers to the social future of an organization which it
is able to give.
Business ethics if practiced properly in an organization would provide scope to its
stakeholders (which includes employees, customers, shareholders, bank and other lending
institutions, government), personal policy level, social level and internal policy level.
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