Improvement of ethical conduct is influential for the realization of sustainable social and economic development in any organization. Ethical conduct serves the important purpose of strengthening the reputation of an organization in the marketplace. In addition, improving ethical conduct is crucial in mitigating liability costs incurred by the organization. According to some economic and business management analysts, ethical business behavior in a company is instrumental in enhancing cooperation among its stakeholders, a move that functions to enhance the decision making process.
This is also important in improving efficiency of executing business objectives. This paper is written in support of the thesis that companies should choose to understand, report on, and improve their ethical conduct as a crucial tool in ensuring sustainable competitive advantage in the market economy. Ethical conduct in an organization is important in protecting and strengthening the reputation of the company (Barnum, & Richter, 1994). According to assertion by many people in the community, reputation of a firm is the most important marketing tool for its products.
Numerous research findings have provided sufficient evidence linking the purchasing behavior of customers with the perceived reputation of the producing organization. Such findings have been explained by the fact firm reputation is closely attributed with quality and reliability of services, a factor that serves to enhance customer loyalty. In addition, reputation of an organization is important in protecting and enhancing investor confidence (Barnum, & Richter, 1994).
As an example is the financial scandal of Enron and WorldCom corporations in 2002. these scandals did not only lead to the collapsing of these two giant American corporations, but caused loss of billions of investor capitals, a move that compromised investor confidence in the firms. All these have the indication that enhancing ethical conduct in a company functions to ensure its competitive advantage. Still on improving ethical conduct in an organization is that it enhances the reputation of its individual employees.
It has been evidently established that employee recommendations from some companies are highly recognized in the job market. This factor is driven by the fact that such companies have a strong corporate ethical code of conduct, a crucial element in defining the reliability and integrity of the individual. On the other hand, engaging in unethical business practices by individual employee serve both to enhance liability costs and compromise the reputation of the employee in the external job market.
Another importance of improving ethical conduct in an organization is that it eliminates liability costs in the organization. According to the provisions of the American as well as international business laws, unethical behaviors by investments are subject to legal proceedings. This is because the law functions the purpose of protecting not only the interests of the firm but also those of the general public, a purpose that is negated by unethical business practices (Barnum, & Richter, 1994).
Based on this reasoning, it means that organizations engaged in unlawful practices serve to hurt the interest of customers and investors. As an example on improving ethical conduct to mitigate liability is the legal implications brought by the ZZZZ best carpet company. According to available information, the ZZZZ Company was involved in fraud activities to enhance its competitive financial position. However, following the revelation of the scandal, it management were subjected to legal justice and the worth of the organization auctioned to compensate investor who lost in the scandal.
In addition, it is not uncommon to hear of customers filing damage cases against companies for falsified advertisements of products. Ethical business conduct is vital in ensuring efficiency of services provision in the organization. Instilling a corporate culture in an organization has it crucial function in ensuring commitment by employees serving in the organization. Just to be appreciated is the fact that the ultimate success of any organization is defined by its effectiveness in meeting the demands of its customers.
On the other side, effective ethical conduct dictates for commitment of all stakeholders to the vision, mission, and objectives of the organization. Therefore, improving ethical conduct in an organization is important in improving it service provisions, thus ensuring sustainable competitive advantage of the organization in the marketplace. Improving ethical business practices promotes the decision making process in the organization (Barnum, & Richter, 1994). Ethical business behavior serves to mitigate unfair dealings in an organization.
It is worth noting that the decision making process of an organization is mainly driven by the financial stand of its investment. This is because such are the defining force of the measures necessary to enhance its economic expansion. This means that, without reliable financial accounting practices, the organization’s decision making process is deemed ineffective. Such practices are to be blamed for the downfall of the big corporations like WorldCom. Thus promoting ethical financial practices is crucial in enhancing the decision making process of an organization.
In conclusion, business ethical practices are important component for the realization of long term competitive advantage of an organization in the marketplace. This is because they function to protect and strengthen the reputation of the firm as well as mitigating liability costs to the company. Thus companies should choose to understand, report on, and improve their ethical conduct as a crucial tool in ensuring sustainable competitive advantage in the market economy.