Ethics: a Fundamental Element in Business

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In the business world, Business ethics is a fundamental element which all companies are expected to adhere to, if they want the organisation to yield the desired results they are aiming for, in reaching their bottom-line. Yet when a company’s survival is threatened many forgo enforcing ethical practices. For this reason I am going to examine the importance of ethics in business with reference to four areas which is discussed below.

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Ethics and corporate reputation

An organisations corporate reputation is dependent on how it is perceived by stakeholders through conduct and develops overtime. Sustainability and economic progress of a business is embedded in upholding ethical behaviour such as honesty and fairness in order to build a relationship of trust with its shareholders when ethical dilemmas arise.   In doing so, business obtains a good corporate reputation. On the contrary when unethical behaviour in administered organisations reputation is at stake and associated with costs to compensate for lost incurred, which can be done through compensatory justice.

An organisations reputation is a variable that determines many aspects such as a company’s capital flow. A good reputation gives rise to an increase of investors which in turn increase capital flow whereas bad reputation decreases the probability of an inflow of capital. It also impacts the employees it attracts a company w ho values their employees and treat them with respect and dignity will attract the talent required to aid in achieving and maintaining a competitive advantage.

Ethics business decisions

Business decisions are made in accordance to ethical standards identified by a company.  One has to keep in mind that each because moral upbringing and backgrounds differ, ethical standards differ from one individual to another. When determining whether or not a decision made which arose from an ethical dilemma, has been handled in an ethical or unethical manner is measured against four criteria namely; is it legal? Does it meet company standards? Is it fair to all stakeholders? Can it be disclosed? All business decisions hold ethical implications. Pg 166

Ethics ensure that all stakeholders within an organisation acts responsibly in ever business situation Ethical business decisions attempts to promote the company as a whole instead of one individual benefiting from a decision; this prohibits companies from closure. Unethical business decisions give rise to bribery, corruption and customer deception.

Leadership commitment

 Organisations leaders who have the power to influence others are the ones who determine the ethical culture within an organisation. Both internal and external stakeholders are motivated to perform when those they follow leaders who are committed to ethical behaviour which is trust, fulfilling obligations and committed to the overall good of own and others interest. Ethics is at the core of all relationships.

For employees guided under strong ethical leadership means increase in employee morale and individual performance, contributing to self-actualisation and which in turn benefits the productiveness of the company. Talented employees are also retained and employee turnover decreases.

For suppliers and customers, a company governed under ethical leadership portrays trustworthiness, openness, and loyalty which attract new investors.

For the company whilst addressing the needs of stakeholders they simultaneously meet their own objectives that are making a profit and achieving a competitive advantage.

Good ethical leadership ensure companies operate within the requirements of the law which in turn increases investor and employee confidence and promotes benevolence.

According to Leon Van Vuuren, leaders have an obligation to organisational ethics which constitute, Care, Consciousness, Competence, Conversation, Courage,  Choice, Creativity, Consistency and Congruence. Care illustrates empathy for stakeholders; Consciousness indicates an understanding of the importance of business ethics in a business and Courage acting on morale convictions even if it is not self serving to do so.

Managers who are fair in their dealings are more successful in motivating their subordinates then those who are not, A reputation for being unfair or biased is a liability for management success

Retributive justice ie requires fairness when punishing or blaming a person for doing wrong

Ethics and social responsibility of business

Distributive justice..distributing  societies benefits and burdens fairly

Social responsibility constitutes the relationship that exists between a business and the ethical expectations held by the society in which it operates. Corporations have a responsibility towards society by ensuring that their intended impact of their operations on the economy, workplace, social environment and natural environment are beneficial to society. The reason for this is because company’s success is dependent on their acceptance by the society, collaboration and support gained from stakeholders and an ethical obligation to pursue not only their own interest but interest of their stakeholders and society. Failure to do so will be detrimental to the success of the company because companies performance is affected by stakeholders and society in which it operates.

Adhering to corporate social responsibility indicates that company strive not to put the needs of the social elite before the needs of those less privilege who are affected by business

According to the Institute of Business Ethics, Operating according to ethical values is playing an increasingly important role in business today. Companies do not operate in a vacuum, but are part of a society which expects a certain standard of behaviour from businesses

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Ethics: A Fundamental Element In Business. (2020, Mar 23). Retrieved February 2, 2023 , from

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