Social responsibility requires individuals engaging in business endeavors to behave in an ethical manner. Ethics are principles of behavior that distinguish between right and wrong. Ethical conduct conforms to what a group or society as a whole considers right behavior. People working in business frequently face ethical questions. Business ethics is the evaluation of business activities and behavior as right or wrong. Ethical standards in business are based on commonly accepted principles of behavior established by the expectations of society, the firm, the industry, and an individual’s personal values.
Critically, “Business Ethics” can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce. In particular, it involves examining appropriate constraints on the pursuit of self-interest, or (for firms) profits, when the actions of individuals or firms affects others. (9) With unethical business practices often receiving publicity, the public sometimes believe that people in business are less ethical than others in society.
But ethical problems challenge all segments of our society, including government, churches, and higher education.
Most business leaders realize their firms cannot succeed without the trust of customers and the goodwill of society. A violation of ethics makes trust and goodwill difficult to maintain. In thousands of companies, executives and employees act according to the highest ethical standards. Unfortunately managers in some firms behave unethically, and these instances are often highly publicized. Personnel executive say the major reason managers behave unethically is to obtain power and money. Business ethics is a wider term that includes many other sub ethics that are relevant to the respective field. For example there is marketing ethics for marketing, ethics in HR for Human Resource Department and the like. Business ethics itself is a part of applied ethics; the latter takes care of ethical questions in the technical, social, legal and business ethics.
Origin of Business Ethics
When we trace the origin of business ethics we start with a period where profit maximization was seen as the only purpose of existence for a business. There was no consideration whatsoever for non-economic values, be it the people who worked with organizations or the society that allowed the business to flourish. It was only in late 1980’s and 1990’s that both intelligentsia and the academics as well as the corporate began to show interest in the same. Nowadays almost all organizations lay due emphasis on their responsibilities towards the society and the nature and they call it by different names like corporate social responsibility, corporate governance or social responsibility charter.
Primary and Important Sources of Business ethics
Ethics in general refers to a system of good and bad, moral and immoral, fair and unfair. It is a code of conduct that is supposed to align behaviors within an organization and the social framework. But the question that remains is, where and when did business ethics come into being? Primarily ethics in business is affected by the following sources – family, religion, culture, legal system, codes of conduct, and personal experience. It is for this reason we do not have uniform or completely similar standards across the globe. These factors exert influences to varying degrees on humans which ultimately get reflected in the ethics of the organization. For example, ethics followed by Grameen Phone Ltd. are different from those followed by Square Group or Unilever for that matter. Again ethical procedures vary across geographic boundaries.
A person’s values is the source of their ethics, and it is their philosophy, spiritual or religious beliefs that usually help mold and shape those values, but most of all it is how a person is raised by his family that sets the foundation for his ethics in later life. It’s the basic source of business ethics.
It is one of the oldest foundations of ethical standards. Religion wields varying influences across various sects of people. It is believed that ethics is a manifestation of the divine and so it draws a line between the good and the bad in the society. Depending upon the degree of religious influence we have different sects of people; we have sects, those who are
referred to as orthodox or fundamentalists and those who are called as moderates. Needless to mention, religion exerts itself to a greater degree among the orthodox and to lesser extent in case of moderates. Fundamentally however all the religions operate on the principle of reciprocity towards ones fellow beings!
Culture is a pattern of behaviors and values that are transferred from one generation to another, those that are considered as ideal or within the acceptable limits. No wonder therefore that it is the culture that predominantly determines what is wrong and what is right. It is the culture that defines certain behavior as acceptable and others as unacceptable. Human civilization is fact has passed through various cultures, wherein the moral code was redrafted depending upon the epoch that was. What was immortal or unacceptable in certain culture became acceptable later on and vice versa. During the early years of human development where ones who were the strongest were the ones who survived! Violence, hostility and ferocity were thus the acceptable. Approximately 10,000 year ago when human civilization entered the settlement phase, hard work, patience and peace were seen as virtues and the earlier ones were considered otherwise. These values are still in practice by the managers of today. Still further, when human civilization witnessed the industrial revolution, the ethics of agrarian economy was replaced by the law pertaining to technology, property rights etc. Ever since a tussle has ensued between the values of the agrarian and the industrial economy!
Laws or Legal System of a Country
Laws are procedures and code of conduct that are laid down by the legal system of the state. They are meant to guide human behavior within the social fabric. The major problem with the law is that all the ethical expectations cannot be covered by the law and specially with ever changing outer environment the law and specially with ever changing outer environment the law keeps on changing but often fails to keep pace. In business, complying with the rule of law is taken as ethical behavior, but organizations often break laws by evading taxes, compromising on quality, service norms etc.
Business Codes of Conduct
A business code of ethics is a series of established principles an organization uses when operating in business or society. Organizations often develop these codes to ensure that all individuals working in the company operate according to the same standards. Most individuals have an internal code of ethics or moral principles they follow in life. A situation one individual finds ethically reprehensible may not seem so to another individual. Using a code of ethics in business attempts to create a basic understanding of acceptable ethical behavior to be used when handling situations involving the company, government agencies and the general public.
If an individual is rewarded or is not punished for behaving unethically, the behavior will probably be repeated. This type of experience encourages other to do unethical things in future. Likewise the threat of punishment and the lack of reward for unethical activities encourage that particular person and all others to behave ethically.
Factors Influencing Ethical Behavior
To encourage ethical behavior, executives, managers, and owners of firms must understand what influences behavior in the first place. The several factors that affect individuals’ behavior in business: the business environment, organizational factors, and an individual’s personal moral philosophy.
The Business Environment
Almost daily, business managers face ethical dilemmas resulting from the pressure of the business environment. They are challenged to meet sales quotas, cut costs, increase efficiency, or overtake competitors. Managers and employees may sometimes think the only way to survive in the competitive world of business is by deception or cheating. In some instances, an organization may use someone else’s successful work without the permission of the owner or originator. Conflict of interest is another common ethical problem stemming from the business environment. Often an individual has a chance to further selfish interests rather than the interests of the organization or society. To gain favor with people who make purchasing decisions for their companies, a seller may offer special favors or gifts, ranging from a metal to clothing to trips.
Some offer cash-a kickback-for putting through a contract or placing orders with a company. Others offer bribes. Such illegal conduct will damage the organization in the long run. In order to limit unethical behavior, business firms must begin by expecting their employees to obey all laws and regulations. The international business environment presents further ethical dilemmas. Business people and government officials in different countries and cultures often operate according to different ethical standards.
The organization itself also influences ethical behavior. Individuals often learn ethical or unethical behaviors by interacting with others in the organization. An employee who sees a superior or co-worker behaving unethically may follow suit. An organization can also use rewards to influence the behavior of its members. If an individual is rewarded or is not punished for behaving unethically, the behavior will probably be repeated. Likewise the threat of punishment and the lack of reward for unethical activities encourage ethical behavior. The severity of punishment also sends a message to other individuals who might be considering similar activities.
The Individual Values
A person’s own moral philosophy also influences his or her ethical behavior. A moral philosophy is the set of principles that dictate acceptable behavior. These principles are learned from family, friends, co-workers, and other social groups and through formal education. In developing a moral philosophy, individuals can follow two approaches: The Humanistic Philosophy focuses on individual rights and values. Individuals and organizations adopting this philosophy would honor their moral duties to customers and workers. Individuals and organizations following the Utilitarian Philosophy seek the greatest good for the largest number of people.
Importance of Business Ethics
Most of us would agree that it is ethics in practice that makes sense; just having it carefully drafted and redrafted in books may not serve the purpose. Of course all of us want to be fair, clean and beneficial to the society. For that to happen, organizations need to abide by ethics or rule of law, engage themselves in fair practices and competition; all of which will benefit the consumer, the society and organization. Primarily it is the individual, the consumer, the employee or the human social unit of the society who benefits from ethics. In addition ethics is important because of the following:
1. Satisfying Basic Human Needs: Being fair, honest and ethical is one of the basic human needs. Every employee desires to be such himself and to work for an organization that is fair and ethical in its practices.
2. Creating Credibility: An organization that is believed to be driven by moral values is respected in the society even by those who may have no information about the working and businesses of that organization. British American Tobacco, for example is perceived as an organization for good corporate governance and social responsibility initiatives. This perception is held far and wide even by those who do not even know what business the organization is into.
3. Uniting People and Leadership: An organization driven by values is revered by its employees also. They are the common thread that brings the employees and the decision makers on a common platform. This goes a long way in aligning behaviors within the organization towards achievement of one common goal or mission.
4. Improving Decision Making: A man’s destiny is the sum totals of all the decisions that he/she takes in course of his life. The same holds true for organizations. Decisions are driven by values. For example, an organization that does not value competition will be fierce in its operations aiming to wipe out its competitors and establish a monopoly in the market.
5. Long Term gains: Organizations guided by ethics and values are profitable in the long run, though in the short run they may seem to lose money. For Example, Tata group, one of the largest business conglomerates in India was seen on the verge of decline at the beginning of 1990’s, which soon turned out to be otherwise. The same company’s Tata NANO car was predicted as a failure, and failed to do well but the same is picking up fast now.
6. Securing the Society: Often ethics succeeds law in safeguarding the society. The law machinery is often found acting as a mute spectator, unable to save the society and the environment. Technology, for example is growing at such a fast pace that the by the time law comes up with a regulation we have a newer technology with new threats replacing the older one. Lawyers and public interest litigations may not help a great deal but ethics can.
Business Ethics- Practice in Bangladesh
In Bangladesh, though practice of Business ethics is still not so commendable in public sector and small companies, but business ethics has been an increasing concern among larger companies, at least since the 1990s. Major corporations increasingly fear the damage to their image associated with press revelations of unethical practices. The following information about the functions relating ethics and social responsibility of 2 reputed companies of our country will give a brief idea about the practice of Business Ethics in Bangladesh.
Advanced Chemical Industries (ACI) Limited is one of the leading conglomerates in Bangladesh, with a multinational heritage. They have a mission to achieve business excellence through quality by understanding, accepting, meeting and exceeding customer expectations. They follow International Standards on Quality Management System to ensure consistent quality of products and services to achieve customer satisfaction. They are focusing on improving the food habit of consumers through providing more ready to cook products and ready to eat as well. Their visions are to establish harmonious relationship with the community and promote greater environmental responsibility within its sphere of influence. Their Values are Quality, Customer Focus, Fairness, Transparency, Continuous Improvement, and Innovation.
Societal Development through Educational Programs: ACI’s guiding principle in all its operations is to be a responsible corporate citizen. Thus Social Responsibility is a top priority for every individual at ACI. Their Initiatives and significant contribution to societal development is Continued Medical Education (CME) for medical professionals and Children’s Education Programs. ACI has also undertaken an English Education program in Faridpur, one of the remotest districts of Bangladesh. This provides support to teach English Language to school going children. Doctors in Bangladesh who are not living in the metropolitan cities have very limited access to the Internet or any other sources of information. In order to keep them updated on the developments in the medical practices regularly, the CME program has been proven highly effective. ACI believes that by promoting education of children, they are contributing to societal development by shaping the minds of their future leaders.
Environment Friendly Practices: ACI has undertaken extensive programs to educate crop farmers all over rural Bangladesh in Good Agricultural Practices. They have a team of agricultural experts working at the field level all across the country, holding a range of technical trainings and field demonstrations. ACI also has similar education programs for animal and poultry farmers. These include, Technical trainings on diverse aspects of farming, and on application of new technologies, Farmers‘ group meeting for sharing of learning and experience, Free visits to farms by veterinarians, to identify problems and give advices to individual farmers. Most importantly, making the farmers aware of ways to protect the environment from hazardous uses of chemicals on their farms, allowing them the opportunity for informed decision-making. ACI hopes to continue to play a leading role in promoting greater environmental responsibility among farmers in Bangladesh.
ACI Company produces some products which do not work properly, like ACI Aerosol. It is mainly produced for killing mosquitoes, but that’s not true. Most of the mosquitoes go away for sometimes but not killed. Sometimes some products like ACI Atta, ACI Maida, etc contains 1975 grams instead of 2000 grams but they fix their prices for 2kg of the products. These are unethical for their marketing practices.
Unilever Bangladesh Limited
Over the last four decades, Unilever Bangladesh has been constantly bringing new and world class products for the Bangladeshi people to remove the daily drudgery of life. Over 90% of the country’s households use one or more of Unilever products. They aim to give everybody a little something to celebrate about themselves every day. They believe that to succeed in business, it is essential to maintain the highest standards of corporate behavior towards everyone they work with, the communities they touch, and the environment on which they have an impact.
Effective Code of business principles: Their code of business principles describes the operational standards that everyone at Unilever follows, wherever they are in the world. It also supports their approach to governance and corporate responsibility. Code of business principles are- Standard of conduct, Obey the law, employees, consumers, shareholders, business partners, community involvement, public activities, the environment, innovation, competition, business integrity, conflict of interest, compliance, reporting, monitor. Women Development and Women Empowerment: Unilever strongly believes in the importance of empowering women in Bangladesh, because the progress of any society will be constrained if a significant part of its population is neglected and excluded from the benefits of development.
They believe, with economic and educational empowerment, women can become more vocal about their rights and become stronger in withstanding repression in any form. So they have established “Fair & Lovely Foundation”. The mission of this foundation is to encourage economic empowerment of Bangladeshi women through information and resources in the areas of Education, Career and Enterprise. It is this realization that has brought about the Fair & Lovely Foundation Scholarship Program. Under this scholarship scheme, women who have passed their HSC each receives a Taka 25,000 scholarship to support her tertiary level education.
Unilever produces Fair & lovely fairness cream, lotion, etc and they claim that skin color will be white after using this product. But that it is not true. There are no scientific values about whiteness. This is totally unethical performance in marketing activities of this company.
Comparative Customer Evaluation on Ethical Performances of 3 Reputed Companies of Bangladesh
Figure – Customer Response on Maintenance of Ethical Procedure by the Companies (1)
Figure – Customer Response on Deceptive Practices Used by the Companies (1)
Figure – Customer Response on Significant Contribution toward Ethical Marketing (1)
Figure – Customer Response on Satisfaction through Using Products of the Companies (1)
Figure – Customer Response on Changing of Defective Products by the Companies (1)
Bribery & Nepotism- A Curse against Ethical Practice
Corruption is a very strong example of unethical behavior and it is still prevailing in different business sectors of our country in the form of Bribery and Nepotism. Nepotism is the way in which someone approaches and compels a person of power and authority to take necessary steps to get his work done by capitalizing kinship, friendship or political lobbying. Bribery means offering gifts, money etc. to get a work done in unethical way. Often public officers are infamously alleged for taking bribes to award public contracts using their power. Bribery and Nepotism also exist in the corporate world, which is very harmful for ethical practices and creates hindrances in building proper and ethical business environment.
Managing or Encouraging Ethical Behavior
Managing the financial operations of a company can be a complex effort. Companies need to balance their desire to grow with the realities of maintaining their financial relationships, satisfying their investors and making a profit. Government Regulations: The government can do so by legislating more stringent regulations. But, rules require enforcement and when in many cases there is evidence of lack of enforcement even the ethical business person will tend to “slip something by” without getting caught. Increased regulation may help, but it surely cannot solve the entire business ethics problems. Trade Associations Setting Guidelines: Trade associations can and often do provide ethical guidelines for their members. These organizations within particular industries are in an excellent position to exert pressures on members that stoop to questionable business practices.
Companies Providing Code of Ethics: Employees can more easily determine and adopt acceptable behavior when companies provide them with a “code of ethics.” Such codes are perhaps the most effective way to encourage ethical behavior. A code of ethics is a written guide to acceptable and ethical behavior that outlines uniform policies, standards and punishments for violations. Because employees know what is expected of them and what will happen if they violate the rules, a code of ethics goes a long way towards encouraging ethical behavior. However, codes cannot possibly cover every situation. Companies must also create an environment in which employees recognize the importance of complying with the written code. Managers must provide direction by fostering communication, actively modeling and encouraging ethical decision making, apart from investing in training employees to make ethical decisions.
Whistle Blowing Technique: Sometimes, even employees who want to act ethically may find it difficult to do so. Unethical practices can become ingrained in an organization. Employees with high personal ethics may then take a controversial step called “whistle blowing.” Whistle blowing is informing the press or government officials about unethical practices in an organization. Whistle blowing could have averted disaster and prevented needless deaths in the Challenger space shuttle disaster, for example. How could employees have known about life-threatening problems and let them pass? Whistle blowing on the other hand, can have serious repercussions for employees; those who make waves sometimes lose their jobs.
The main objective of business is to serve people with their every need for the well-being of human being and to ensure that, there is no alternative of following business ethics. Since the practice of business ethics in our country is still not ubiquitous, we are not getting the proper environment for the business, and thus often we are facing some crisis situation and it is hampering our total economic development. Our policy makers and the top executives of the organizations should give more concern in making ethical policies and take proper steps to encourage business executives and service holders to follow them.
1) “Ethics In Marketing On Bangladesh Perspective: Study on Few Companies of Bangladesh”- collected from “World Journal of Management Volume 2. Number 2. September 2010”, the direct link- http://wbiaus.org/10.%20Tajmeela-FINAL.pdf
2) “Business for the 21st Century”- Skinner & Ivancevich
3) “An Integrated Approach to Business Studies” (4th edition)- Bruce R Jewell
4) “Business Studies” (4th edition)- Dave Hall-Rob Jones-Carlo Raffo- Alain Anderton