Code of Business Ethics - Report Example

Ethics of Business Introduction The need of ethical understanding of business operations can be judged based on two paradigms. Observation s that in cases of business situations controversy emerges in regards to the ethical behavior of the business organization. However, some other cases occur which reflects on the appropriate business behavior based on ethical principles. (Chryssides & Kaler, 1993: 3) Business behavior in order to grasp a larger market share had been tied to malpractices like paying bribes to acquire land, creating false promises for brand proliferation and in exploiting the natural environment. These adulterated business practices calls for a behavioral code through which business practices will be managed for betterment of society and helping the business concerns to make legalized profits. This behavioral code is referred to as Business Ethics. The scope of Business ethics in today’s world has expanded from the realms of business enterprises to government and non-government charitable and non-profit enterprises. (Crane & Matten, 2007:4-5; Hooker, 2003:1). Code of Business Ethics The business practices of the modern day business organizations center on meeting the expectations of its various stakeholders. Business enterprises function efficiently based on its different stakeholders which includes the customers, employees, government, suppliers and the society at large. These stakeholders expect the business enterprises to be trustful and dependent. Business enterprises in order to meet the growing expectations of dependency and trust need to maintain certain ethical conduct. Further, the management of such business conducts needs to be done based on some codes. These codes thus created by the business enterprises are termed as the ‘Code of Business Ethics’. The ‘Code of Business Ethics’ creates benchmark for behavioral conducts and judges between accepted and unaccepted behaviors. It further helps the business organizations to enhance business quality by setting high standards. Standards created also help in evaluating the business performance and quality paradigms. Moreover, the creation of ‘Code of Business Ethics’ helps in rendering enhanced accountability over business executives in terms of higher responsibility and professional conducts. (MacDonald, 2006) Business Ethics helps in fostering needed values and in creating a healthy professional and global image of the company. (Weiss, 2008) In writing the ‘Code of Business Ethics’ certain points needs to be kept in mind. Firstly, the code should be created in order to meet the specific organizational needs. Secondly, the involvement of the employees is highly appreciated in regards to the code creation for it is their behavior, which needs to be managed. Principal stakeholders of the company must be consulted while preparing the “Code of Business Ethics’ for they can generate useful suggestions to that effect. Further consideration should be made in regards to the scope of the code created in managing a certain section or the whole of the business practices. The code thus created would turn obsolete if it is not implemented in regards to time and need. The implementation of the business code also demands considerable training to be given to the employees to understand the efficacy and function accordingly. Implementation and training finalized strict rules should be created to force the employees abide by such codes. Rewards and punishment practices can be well implemented in regards to enforcement of the ethical codes. The ‘Code of Business Ethics’ created must not be allowed to turn redundant. The ‘Code of Business Ethics’ must be continually updated and reviewed based on certain time intervals to promote its growing efficacy. (MacDonald, 2006) Further considerations that should be kept in mind while formulating the code of business ethics constitute highlighting the purpose of such codes as to manage or inspire business conducts. The efficacy in formulating the code of ethics must be judged based on the vision and policy statements of the company. Observation suggests that ‘Code of Business Ethics’ has mainly two sub-parts. The first part concerns the basic objectives and the philosophy of the organization. In the second part the code underlines the rules and principles, which would be effective on its enforcement. (MacDonald, N.D.). The ethics code must be easily comprehensible and must be in detail. (Mitchell, 2003:95). In order to go for business expansion several staffs were recruited in key functional areas like Marketing, Accounting and Operations. However, it was found that unlike the previous period the business practices have been contaminated owing to fraudulent practices on the part of the staffs recruited. These fraudulent practices were found to tarnish the business image to the stakeholder groups who trust and are dependent on the business operations. Thus, the need for framing a ‘Code of Business Ethics’ was rightly considered. The ‘Code of Business Ethics’ created was based on some salient points of employee performance and behavioral conducts. Firstly, it was observed that the competition with the rival firms must be based on fair practices. The rules set in this regard require the employees to refrain from discussing business secrets with its competitors. It also required the operations to be free from deceitful and bribe paying practices to capture the market. Secondly, the ‘Code of Business Ethics’ emphasized that the employees must be well versed with the rules and regulations of the company. The employees of the company were expected in this regard to identify potential business threats and call for a legal intervention in such. Especially, while dealing with government bodies the employees were ordered to promote highest standards of business ethics and regulatory compliance. In the third position the ‘Code of Business Ethics’ created stressed on fair accounting practices. It required the company to rightly record business transactions in the books of record and not to take any resort of fraudulent practices of maintaining fake records showing enhanced business performance. The records made were required to be supported by valid documents like bills and vouchers. Fourthly, the ‘Code of Business Ethics’ created laid down that the employees of the company were in no position to accept any type of additional compensation or gifts from suppliers and customers. Fifthly, outside employment of the employees were strictly prohibited on the grounds that it constitutes employment with business partners and is taken within the scheduled business hours. Moreover, in the sixth position the ‘Code of Business Ethics’ required cash and bank transactions to be properly recorded in the books of accounts. It also stated that a cash officer must be made solely responsible in maintaining the petty expenses of the company. Finally, the ‘Code of Business Ethics’ mentions of some disciplinary actions in regards to non-compliance to the said rules. It states that employees not adhering to the said standards would be subjected to suspension; demotion, wage and salary cut or even can be shacked. (Fraud Prevention Programs, 2005:2-12). Justification of the ‘Code of Business Ethics’ based on Moral Standpoint The ‘Code of Business Ethics’ thus created aimed at making the company socially responsible to the large number of stakeholders consisting of consumers, suppliers, employees and the government. (Business Organization, N.D.) It is observed in this regard that the concept of social responsibility is adhered to the maintenance of business ethics. Social Responsibility is taken as the extended feature of business ethics. (McEwan, 2001:7). Moreover, it is observed that strict compliance to ethical standards of a business helps it to achieve better control on it corporate structure. It also reflects a positive side of the company to its stakeholders. (Fisher & Lovell, 2009; Philips, 2003). The Code of Business Ethics created would help in creating a favorable image in front of its stakeholders by restraining practices like taking bribes or gifts from customers and suppliers. It hints on the moral outlook of the company in its business dealings. Moreover, fair maintenance of accounting records rather than showing inflated figures further stresses on the business practices to be conducted based on a moral standpoint. Making Employees Share an Ethical Position The Code of Business Ethics thus created prioritizes the need of the employees to be well versed with the rules and regulations of the company. The employees need to operate abiding by such rules and business policies of the company. Moreover, the Code of Business Ethics strictly states that the company would not tolerate involvement of the employees with its competitor firms in regards to sharing of any business secret. It also states that employees cannot also engage themselves in additional employment within the business hours. The Code of Business Ethics also states that the employees must refrain from any fraudulent practice as to taking bribes from customers and suppliers and also in maintaining fair accounting records. It also held that employees found not abiding by such codes would be entitled to disciplinary action. (Fraud Prevention Programs, 2005:2-12). A Critique on the ‘Code of Business Ethics’ created based on Think Theory 2 The ‘Code of Business Ethics’ can be critically analyzed based on Think Theory 2. The theory sets priority in respecting company rules and ideologies, which is evident from the rules laid out in the code framed. The code even sets disciplinary actions for non-compliance to the company rules and business doctrines. Thus, the Code of Business Ethics rightly follows the ‘rights perspective’ of the Think Theory 2, which mentions of a universal approach in regards to protection of ‘basic rights’ in all situations. Further, the theory also mentions of emotional impulse in regards to ethical conducts, which helps restrain the people from wrong doings. This theory stated can be extended to employees conduct in relation to the stakeholders of the company. Herein, also it can be observed that the code of business ethics created restrains the employees from taking advances and gifts from customers and suppliers. Thus, it helps in setting positive impulses within the employees and thereby improves stakeholder relationship. It is observed that the ‘Code of Business Ethics’ created satisfies the ‘postmodern perspective’ of Think Theory 2. The clause of ‘Postmodern Perspective’ in Think Theory 2 helps create a moral approach in one’s dealing with others. It makes one distinguish between the wrong and right impulses coming from within and thereby to act accordingly for social good. The ‘Code of Business Ethics’ created in restraining the employees from accepting bribes or gifts from customers and suppliers helps in meeting the clause of ‘postmodern perspective’ of Think Theory 2. (Crane & Matten, 2010:1). Conclusion Business Ethics is a key factor, which helps in enhancing the goodwill of a business enterprise. It encompasses behavioral conducts of the business in regards to its different stakeholders. A healthy business does not only signify healthy profits but also a healthy business atmosphere free of deception and fraudulent practices. A code of businesses ethics will only help in fostering the above effect needed for sustainable business performance. References 1. Business Organisation, (n.d.), tutor2u.net. Retrieved on October 20, 2010 from: http://tutor2u.net/business/gcse/organisation_stakeholders_ethics.htm 2. Chryssides, G and J. Kaler. (1993), An Introduction to Business Ethics. Chapman and Hall. 3. Crane, A and D. Matten. (2010), Business Ethics: managing corporate citizenship and sustainability in the age of globalization. Oxford University Press 4. Crane, A and Matten, D. (2010). Business Ethics. Oxford University Press 5. Fisher, C & A. Lovell. (2009), Business Ethics and Values, FT Prentice Hall 6. Fraud Prevention Programs. (2005). Retrieved on October 20, 2010 from: http://phoenix.gov/safebiz/sbethics.pdf 7. Hooker, J. (2003). Why Business Ethics? Retrieved on October 20, 2010 from: http://web.tepper.cmu.edu/ethics/whybizethics.pdf 8. Mac Donald, C. (n.d.). Guidance for writing a code on ethics. Retrieved on October 20,2010 from: http://www.ethicsweb.ca/codes/coe3.htm 9. MacDonald, C. (2006). Considerations for writing a code of ethics. Retrieved on October 20, 2010 from: http://www.ethicsweb.ca/codes/codes-macdonald.pdf 10. McEwan, T. (2001). Managing Values and Beliefs in Organisations. FT Prentice Hall. 11. Mitchell, C. (2003). A short course in international business ethics: combining ethics and profits in global business. World Trade Press. 12. Philips, R. (2003). Stakeholder Theory and Organizational Ethics. Retrieved on October 20, 2010 from: http://www.bkconnection.com/static/stakeholdertheoryPR.pdf 13. Weiss, J. (2008). Business Ethics: A Stakeholder and Issues Management Approach. Cengage Learning. 14. Why Have a Code of Ethics?, ethicsweb.ca. (N.D.). Retrieved on October 20, 2010 from: http://www.ethicsweb.ca/codes/coe2.htm Read More