Over the past three decades, ethical and moral business behavior, commonly referred to as business ethics, is a major concern. Companies have been striving to act honestly and fairly in their dealings with key stakeholders such as customers, employees, suppliers, consumers, the government, its agencies and contractors among others. Parboteeah and Cullen define business ethics as a process by which organizations apply ethical and moral principles while dealing with their stakeholders (17). It involves making the right and principled decisions when solving problems in a business environment. The opinion is divided on ethical business practices, for example, some people argue that it is acceptable for a company to pollute the environment to some extent having usually non-harmful levels. Meanwhile, others argue that the environmental pollution is inherently immoral and intolerable in society. According to Parboteeah and Cullen, an ethical and moral conduct has become a major concern for many businesses today because it provides them with a competitive advantage over rivals in a highly competitive and dynamic business world (23). For instance, corporations conducting business ethically by focusing on the impacts of their activities on the environment and the society, as a whole, are likely to attract and retain more customers. They are compared with those companies that care less about the impacts of their activities on the environment, hence, causing massive pollutions. Ethical business behavior is important because it defines guides and governs the conduct of businesses.
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According to Luetge, business ethics has two major dimensions, namely normative and descriptive dimension (41). The need for businesses to act honestly and fairly evolves from the interactions between the companies and their stakeholders. It also evolves from the need to maximize economic benefits such as profits and non-economic benefits, i.e. increased preservation and conservation of the environment. Business ethics dictates that all business activities must be sustainable socially, economically, and environmentally.
History of Business Ethics
The history of business ethics dates back to more than four hundred years ago. It can be associated with the Code of Hammurabi (Bowie & Schneider 177), which was developed in the middle 17th century. According to Bowie and Schneider, the Code of Hammurabi was created to determine and examine the responsibilities of companies and their agents as a way of creating an ethical and moral business environment in the society (181). Between the late 1960s and early 1970s, the interest in business ethics had accelerated drastically due to an increased need for the social responsibility of corporations. What followed was the development of sets of rules and codes that was serving as a means of protecting the society from possible exploitations and infringement of moral values and principles. These sets of rules and codes were sued to guide general activities, rights and responsibilities of companies and their stakeholders.
In the United States of America, business ethics became a major concern for doing business in the mid 1970s (Castro 95). An increase in concern for the ethical conduct of companies also led to the development of courses about business ethics at many colleges and universities in the United States. According to Castro, business ethics as a course was integrated in almost all business-related courses (98). Moreover, an idea of ethical conducts among business was also supported by many professional societies such as the Society for Business Ethics. It was formed in the mid 1980s (Castro 103). During the late 1980s, large corporations in the U.S. had started to highlight their statues in relation to the ethical behavior of businesses. De George also affirms that one of the major factors that has led to the emergence of ethical business behaviors was the emergence of large corporations such as multinational companies. They had limited relationships with their stakeholders especially the communities in which they were operating (140). The large corporations were becoming increasingly insensitive to communities. As a consequence, guidelines were developed in the form of Codes of Conduct to direct and govern their behaviors. This has led to the emergence of a formal business ethics regime. Most corporations have started distancing themselves from unethical and irresponsible conducts being potentially harmful to the society. A corporate image and reputation have become a serious concern for most organizations. Another factor that has led to the emergence of business ethics was the increase in corporate scandals and misconducts; for example, the explosion of major business scandals such as the Enron and WorldCom (Editors of Fortune Books 55). The latter one has resulted to increased pressure and calls for businesses to act ethically.
Today, almost every business is concerned with the impacts of its activities in the society and the environment. Businesses have also become increasingly committed to ensure that their actions and activities have the least negative impacts on the environment and the society As possible According to Shaw, businesses have become more concerned with increasing social benefits and other non-economic benefits in societies where they operate (164). This has led to the development and implementation of ethical codes and social responsibility strategies. In order to ensure ethical business conducts, the federal, state and local governments have also developed laws and regulations that govern the conducts of businesses in attempts to ensure that the impacts of actions or activities of these businesses are less detrimental or prejudicial to stakeholders and the society, as a whole.
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Application of Business Ethics
The major areas in which business ethics applies most include corporate governance, social contributions, production and sale of goods as well as some services in the society. Moreover, environmental protection and conversation, the compliance with legal requirements and regulations, the creation of employment opportunities to members of the society and a proper use of natural or economic resources such as raw materials and minerals of the society during production processes are also involved.
Why Businesses Should Behave Ethically
The field of business ethics presents the juncture between social ethics and business where corporations are able to make important decisions relating to their actions or activities and their impacts. This meeting point is important because ethical decision-making is highly complex. According to Leigh, ethical business behavior is vital because corporations are perceived as individuals in most jurisdictions. Hence, they should behave ethically and morally (38). Businesses are artificial persons that are legally created by law. Persons usually have the rights as well as responsibilities. They are also expected to behave in accordance with specific norms, values and principles. Therefore, business activities should have both economic benefits such as profit maximizing for owners of the company and non-economic advantages such as environmental protection and conservation. Corporations should also be ethical when using new technologies such as nuclear power being potentially harmful to the environment and members of the society.
Secondly, business ethics is also important because it determines a fundamental purpose of the company by guiding its actions, activities and operations. For instance, a corporation should not produce goods and services that would be harmful or pose health risks to consumers. Businesses should not produce such products that are potentially harmful to clients. In case potentially dangerous goods that might pose danger to the well-being of consumers are accidentally produced, the businesses are responsible for disclosing all relevant information relating to such dangers or health risks. Companies should as well inform their consumers before they make purchases or consume such products.
Thirdly, businesses should behave ethically and morally because their actions affect other parties or entities. The actions and conducts of businesses do not only affect them but also impact other third parties. For example, businesses should provide truthful financial reports in their financial statements in order to facilitate the rational decision-making by shareholders and other investors that would like to invest in firms. Ferrell, Fraedrich and Ferrell also assert that financial reports of the company should not be falsely reported or manipulated because they are essential for decision-making processes by investors (82). This interdependency between the conducts of businesses and other entities calls for ethical behavior by companies.
With regards to sales and marketing of goods and services, businesses should show ethical behavior by deploying appropriate sales and marketing strategies such as good advertising, direct selling and the provision of after-sales services to clients. Corporations should not provide deceitful or misleading information to consumers during advertising. According to Kotler and Armstrong, the conducts of marketers should be guided by appropriate principles, values and ideals during their activities (237). De George also argues that marketers should develop and deploy influential or persuasive marketing strategies without necessarily using the deceitful or misleading information (149). Consumers should be encouraged to make informed choices without coercion or trickery. Harmful products such as tobacco and alcohol should bear warning signs or messages with the caution to clients on their consumption.
Businesses can also show ethical behavior by practicing fair pricing strategies. Fair
pricing is also a key issue in business ethics (Kotler & Armstrong 240). Therefore,
companies should charge fair prices for their products and services without exploiting consumers.
Fourthly, ethical conduct is vital for businesses because it defines the culture of organizations. For instance, companies that care about their employees would develop and deploy appropriate human capital management practices. Through proper human resource management (HRM) practices, business executives should ensure that they recruit suitable candidates to work in their organizations. Moreover, businesses should ensure that they provide their workers with suitable, realistic and reasonable remunerations by adopting suitable employee remuneration programs. For instance, the executive or senior management in a company should not be paid extremely higher than other workers in the organizations. It would lead to high job dissatisfaction among junior employees. Holden and Beardwell also emphasize that appropriate employment practices such as indiscrimination of workers based on differential factors such as race, gender, age, religion and nationality among others should be highly prohibited within organizations (120). A corporation would also provide training opportunities to workers to enable them advance and grow in their careers. Corporations should also act ethically by providing a safe and healthy workplace that would not cause any harm to workers. For example, the corporation would modify the workplace, disclose potential hazards within the workplace or provide appropriate trainings to workers to help them overcome workplace injuries and accidents.
Major Concerns or Issues in Business Ethics
Some of the major concerns or issues related to ethical behavior of companies include the rights and duties towards their stakeholders such as employees, suppliers, customers, the members of the community and the government. Business ethics requires corporations to create and maintain mutually beneficial relations with their stakeholders. Individual ethical behavior is also a key issue in business ethics because every business has its own values, standards and principles. Globalization has also made the implementation of business ethics a great challenge to many organizations.
Personal View of Business Ethics
In my view, the definition and understanding of ethical business behavior should be founded on a critical review and analysis of responsibilities and rights of businesses. It should be performed with regards to expectations of stakeholders such as customers, the government, suppliers and the general public. Thus, the ethical or moral behavior is a conduct that conforms to the universal values, principles, norms and beliefs in the society. The ethical or moral behavior involves doing what is right in accordance with the expectations of the society. I would assert that companies should behave in accordance with expectations of its stakeholders. Ethical business behavior should be beneficial to all parties and should take into consideration the interests of all the parties included. Corporations should conduct business in conformity to the values, beliefs, norms and expectations of the community. For example, an organization should ensure that it does not pollute the environment regardless of whether there are environmental laws prohibiting this pollution. Businesses should strive for improving their well-being of the community and environment. In my view, all businesses should deploy ethics and morality in their activities to govern and direct their actions and business activities. It is also important for companies to draw a clear line between economic and non-economic benefits of their activities. I would also assert that business ethics should go beyond government control or regulations. It involves recognizing the importance of social responsibility while conducting any affairs. Thus, it is the responsibility of businesses to ensure that they act fairly, ethically and morally when doing business. They should be concerned about the impacts of their business activities on the environment as well as the society with or without government regulations and control.
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Challenges to Ethical Business Behavior
One of the major challenges in ethical business behavior is a rapid evolution of the business environment. The business environment is rapidly evolving, hence, making it difficult for corporations to cope with and adapt to changes that occur within it. Secondly, the variation in business standards and principles within the international context is also a major challenge to ethical business behavior. It is related to the fact that international business presents varying business environments with different characteristics such as cultures and regulatory environments. Consequently, the conduct that would be ethical in one business environment such as in the United States would be unethical in another business community, e.g. in Africa. Ethical issues arising from international business transactions such as a fair trade movement and transfer pricing have made it difficult for companies to achieve ethical conducts. Globalization and cultural imperialism have also rendered efforts for ethical business behavior fruitless. For instance, globalization has resulted to increased difficulties in achieving ethical business behavior because of disparities in societal values, beliefs, norms, traditions and expectations. The integration of the global economy has also led to increased challenges in ethical business behavior. For instance, many multinational corporations, especially in developed or industrialized countries, have been accused of taking an advantage of developing countries. Hence, it has led to unethical business practices. For example, multinational corporations are often accused of exploiting workers from developing countries. Nike Inc., for instance, was accused of using child labor in its production processes and sweatshops in the United States of America (Schmidt 117). Multinational corporations have also been accused of using dumping as a competitive threat in developing countries. It refers to selling products at lower prices in foreign countries than they are sold in their countries of production or origin. A wide spectrum of a business environment also makes it difficult to observe ethical business behavior. The expansion of the environment has also led to collision of some values and societal norms. Social expectations from key stakeholders towards businesses also are changing. However, Bowie and Schneider argue that business ethics should evolve concurrently with the changes in the business environment and the society. As time passes, social beliefs, values, norms and expectations also change (195). Therefore, it is important for businesses to incorporate changes in the business environment within their business activities as appropriate.
In my view, ethical behavior is essential in business because it guides the conducts of corporations as they do business. Therefore, there should not be any disconnection between the code of conduct and actual business practices of the company. Corporations should adopt appropriate strategies such as a triple bottom line (TBL) approach which advocates for an increased concern and focus on three pillars of corporate responsibility. They are profits, people and planet to promote ethical behaviors within their business dealings.
It is also important to note that businesses are sometimes meeting ethical dilemmas. In such a case, a company should weigh and decide on the most appropriate action to take that would maximize benefits to both the company and the affected parties. For instance, in a scenario where an organization would incur excessive costs in preventing environmental pollution caused by production processes, the company should create a balance between economic and non-economic benefits of producing products. Ethical business practices should also focus on religious views. For instance, the activities of the business should conform to religious views, beliefs and values of its customers. For example, a commercial bank such as the JP Morgan Bank that would like to operate within a Muslim Community should not charge interests on loans. It is because Islam prohibits such acts. Businesses should give adequate considerations on the relationship between ethical business conducts and religious traditions.
I would finish off by stressing that corporations should recognize the importance of ethical behavior in their operations and business activities. Other related disciples such as social justice, a fair competition in the marketplace and corporate governance should also define ethical business behaviors.