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Business or corporate ethics is the application of ethical principles in a business environment. It applies to an organization as a business entity, as well as to individuals, as business people.
It is used to answer the question of whether the profit (or self-benefit)-maximizing behavior of an organization overshadows its non-economic aspects. Business ethics has become of particular interest after the prevalence of large organizations with no interest in the communities in which they operated, being offshore companies or multinationals or simply strongly profit-driven. Many of these organizations have appeared indifferent, passive or even hostile to the needs of their stakeholders, the community in which they operate and the society at large, with the exception of their executive management and, at most, of their shareholders –in certain cases not even of their shareholders! This has led to the public opinion exercising criticism and expressing concerns regarding tactics that had been considered as norms for years, decades and more. Slavery, for example, used to be a norm once, whereas it is now, of course, unacceptable. Similarly, exploitation of natural resources and environmental pollution seemed irrelevant during the industrial revolution but by today’s standards are high in the public opinion’s agenda.
Governments and Regulators began establishing laws and regulations in order to exercise some control over professional behaviour. However corporate ethics extends much further than legal requirements.
Business ethics is dynamic. It changes in time depending on the perceptions and tolerances of the society and the business world. At any given time, they reflect the ethics of the society, as it is the same people who apply them and take action behind them. Business ethics is therefore based on the set of values adopted by current societies and may differ in various parts of the world.
> So who’s to judge what’s in the value set and what is not?
There is no single prescription available. It is rather the combination of laws, regulations, industry codes of practice, standards and stakeholder expectations. It is the avoidance of what would give adverse publicity to the organization, should it become disclosed.
> What does today’s business ethics cover?
For the employees:
- Gender equality
- Transparency in promotions, pay rises, demotions and layoffs
- Fairness in remuneration (e.g. performance related pay)
- Personal development
- Open and honest communication
- Employee involvement in decision making
- Occupational safety and health
- Respect of time off work
- Work – life balance
For the client market:
- Adherence to all legal and other relevant regulations
- Transparency in pricing methods (no engagement in cartels)
- True representation of products, constituent parts, ingredients
- User/ product safety
For the competition:
- Fair competition regarding tendering, advertising (no adverse publicity), refrain from cartel practice and bribing
For the suppliers:
- Prompt payments
- Fair terms of cooperation
- Open communication
- Transparency in agreements (e.g. exclusivity agreements)
For the society:
- Practical support to members of society (e.g. employment of disabled people, single parents, part-timers, support of local school programs, fundraising and charity work)
- Enforcement of the corporate code of ethics throughout the supply chain
For the environment:
- Minimization of pollution and usage of resources based on availability of alternatives
- Promotion of environmental preservation
- Arrangements for proper project / service / product / plant decommissioning
> How many organisations score high to all of these questions? A proud few.
> What do today’s businesses do?
Many corporations today promote their commitment to non-economic values under headings such as ethics codes and corporate social responsibility policies. Such declarations have little value, however, if not audited and proven true, or if intentionally applied selectively, to one or few aspects of the value set.
> Where does non-conformity to Business Ethics lead?
Failure to apply the Business Ethics Value Set in organizations (i.e. the corporate Code of Ethics), leads to a long list of familiar situations. To mention a few:
- Corruption
- Embezzlement
- Nepotism
- Bribery
- Price fixing
- Market manipulation
- Money laundering
> What should YOU do?
You can enhance your business ethics, while at the same time improve your overall corporate performance. You can formalize your adoption of business ethics by formalizing and enforcing a Code of Ethics or even by adopting a model of Business Ethics Excellence!
Do remember:
- A content workforce,
- a loyal customer,
- a trusting supplier,
- a respectful competitor,
- a reassured regulator,
- a sustainable environment and
- a flourishing society…
> How could it not?
4.11.2015