BUSINESS ETHICS AND PROFESSIONALISM



BUSINESS ETHICS AND PROFESSIONALISM

DR. V BALACHANDRAN* & DR. V CHANDRASEKARAN**

Introduction

Change is the only constant factor in everyday life. It is witnessed from the Stone Age to civilized age. When change affects life it also affects the environment and business. The business environment becomes extremely complex as change inflicts variety and diversity leading to deep and fundamental ways. Change in the values, environments of business based on the expectation of society has alerted business houses to realign its priorities. The changing economic, political, legal and social environment has also made the business and businessmen to consider the ethical approach to business. Therefore, there is paradigm shift from the goal of maximization of profit or wealth to ethical means to achieve them. The last 150 years have been marked the world over for rapidity of change ushered in by the advent of technology and industrial revolution. This period has also been marked for its attempt to generate unquestioning faith in human reason and intellect. The last century has witnessed that the intellect are becoming the cornerstones of the society. The rapid changes have improved the standard of living, also establishing a lot of sensible relationships in and around the society.

There is a growing realization all over the world that ethics is virtually important for any business and for the progress of any society. Ethics makes for an efficient economy. Ethics is good in itself, ethics and profit go together in the long run and ethics alone can protect the society. An ethically responsible organization is one, which has developed a culture for caring for the people and for the betterment of society as a whole. Ethics has a considerable influence on the economy for efficient and smooth functioning. The government, the laws cannot always resolve certain key problems of the society and business. Ethical behavior enhances the quality of life. An ethically based economy can do wonders in the way of creating wealth or society.

The task of business is to optimize the outcome of economic activity. It is the economic environment of business, which is the primary consideration in evaluating the business tactics. The present day economic environment of business is a complex phenomenon. The economic relations with the government, public, society and community influence the trend and structure of economy. People and society are part and parcel of an organization. People want and need to be ethical not only in their private life but also in public. The people are the ultimate sufferers if the affairs of the organization were conducted unethically which are detrimental to the society. Therefore, they have a concern over this. Over the last two decades, there has been a shift in the attitudes of corporate and their executives towards ethics. A silent revolution is in under way in business ethics today. The ideas, beliefs and attitudes associated with the profit ethic are being challenged as never before. The historical idea of the divine right of capital no longer applies. The changes in the values, cultures and customs lead to change, which in turn lead to re-engineering of ethics.

The world of business ethics is quite broad and its tentacles spread into a number of areas in the larger sphere of business society relationship. The social responsibilities of businessmen, for instance, clearly involve ethics and morality. There is always a doubt in the mind of the businessmen about what is and what is not ethical. It is difficult to understand business or business society relationships, without knowledge of the ethics. Business ethics is what society expects from business. Mark Twain once said: “ To be good is noble. To tell people how to be good is even nobler”.

* FCS, Senior Reader in Corporate Secretaryship, Alagappa University, Kraikudi.

** Ph.D.

What is Business ethics?

Ethics is defined as the study of standards of conduct and moral judgment. Ethics is the study of what ought to be, what is the ultimate good and how to achieve it. People have always thought that the primary purpose of business is to serve society. Business must have a social commitment otherwise business cannot enjoy social sanction. It is a study of human actions in respect of being right and wrong. Ethics is an attempt to discover that ought to be. Ethics forms critique of both ultimate values and goals and the means used in trying to achieve them. The history of business ethics displays a growing recognition of the need to examine the social transformations that have impacted organization, management and society. Ethics is a mass of moral principles or sets of values about what conduct ought to be. Ethics is a written or unwritten set of codes or principles governing business or profession. Ethics is a study that constitutes good and bad conduct, including related values. It has to do with fulfilling the relationship with people and society at large. When this applied in a business context, it becomes business ethics. Ethics in business has become one of the most challenging issues confronting the whole business community. Establishing ethical climate is like starting an endless marathon. The first step should be to change unethical behavior. It is an “on going process”. It never stops. Ethics is a contract between the business and the community based upon certain values of principles. An effective program of ethics requires involvement and commitment from all. The constituents should ensure commitment towards ethical behavior at all levels. Ethical consideration and ethical behavior should run thro’ the marrow of the bones and should be carried by the capillaries to all parts. Maximizing return has made a paradigm shift towards to the concept that it should be ethically achieved. Mr.J.R.D. Tata in his own words, ethical values have too often been ignored in recent years in the belief that quicker profits would be result.

Major attributes of ethics

Concept : The field of ethics may be conceived as a discipline, science, study or evaluation.

Content : The subject matter of ethics is concerned with what is good or bad, right or wrong.

Judgment : Judgment is required to determine whether human action is ethical or not. The judgment concerns the overt act, not the motivations behind it. Behavior and its cause is that what which is judged.

Standards : Judgment is based upon standards, which are, of course, values.

Values : The final element of ethics therefore, is the set of values and criteria used as standards for judging human conduct.

Need for Ethics

Business ethics are very much influenced by social movements, social system and social preferences. No business can survive or grow without social harmony. Individual’s values, however best they may be, are not sufficient to attain the maximum level of ethical performance. Ethics and social responsibility are necessary for the survival because of the highly competitive climate that prevails today. The climate in which business operates has become cold and unfriendly to day as a result of revelations of unethical behavior that have rocked nations and the world. Ethics is crucial for an efficient and smooth operating economy. An ethically based capitalism can do wonders in the way of creating wealth for society. According to economic philosopher, Adam Smith: that our system of capitalism does not work well unless it has the moral co-operation of its participants. Jewish theologian wrote: “ It’s what people do when they all are alone, when one is looking that makes all the difference between civilization and the jungle.” Ethics is important because either government or legislation cannot do everything to protect society. Technology races ahead much faster than the government can regulate. People in an industry often know the dangers in a particular technology better than government regulators who sit at a distance. Ethics is good in itself. Ethics is important to create a smoothly and efficiently running economy. The Bhagavad Gita asks us not consider only the fruits of our actions. It invokes the notion of passionless action. The concept of Gita of doing one’s duty without seeking for the fruits, Manu’s concept of inheriting debts as well as property, the Mauriyan idea of accountability provide a basis for Gandhiji’s belief that politics and business must work hand in hand for the development.

Factors having impact on ethics

Ethical considerations vary by class, structure, economic group, industry, professional group and so on. Business ethics has to be on par with the ethical code of the society in which it operates. It is essential that the business adheres to the well-established ethics. The following are the factors that creates the basis to ethical consideration (a) Value, (b) Culture,and (c) Transformation.

VALUE

Values are additions or accretions to the image. Values are not fixed. They change. As they undergo change the society and its constituents also have to undergo the process. When the values undergo a change it takes the culture along with it. Values are crucially important factor in business relationships. Values create credibility with the public. It will certainly add value to the concern and create more credibility by being morally responsible and accountable. This creates a confidence in those who are directly and indirectly involved. An organization perceived by the public to be ethically, socially concerned will be honored and respected even those who have no knowledge of its actual functioning. Not only this enhances the credibility within itself but also with its employees. It creates a feeling of oneness among employees having a common goal. For an individual business values derive from multitude of sources, such as mission of business as a social institution, the nation in which business is located, the type of industry in which it is active and the nature. Over a period of time value become institutionalized with regard to business and society. These values perform two important functions. First they form as a guide to business environment. Second, they become strong motivators for people in business. They become the key factor in the system relationship of business with society. Business has certain rights but it also has certain responsibilities to society and in turn society has certain rights and responsibilities in regard to business activity. Value-ethical attitude helps management for better decision-making. The decisions are in the interest of public, society and environment. Ethical decisions are in the interest of public, society and environment. Value added rather based ethical decision-making will make an organization and its decision-maker to look into all aspects of economic, social, politico-legal aspects.

CULTURE

Culture is described as human environment of humans. The system aspect of culture is the set of relationship that makes it possible for human beings to create a society to pass the accumulated learning of the species from generation to generation and continue to make the accumulations of learning. Culture refers to activities, thoughts, feelings and artifacts which man acquires as a member of the society. Cultural differences separate the ethical attitude of different people. Much more emphasis is given to building and developing relationship and much less emphasis is given to the abstract concept issues.

TRANSFORMATION

Transformation is yet another reason for the change in culture and values. Transformation with regard to communication, viewing, travelling, shopping, working and playing envisage a change in the ethics and ethical practice. These phenomenal growth and development in these areas brought about a social change amongst public, society and business. These have improved the life style and quality of life, which in turn has created a change in the cultural and cultural values bringing out a revolutionary change in the ethical standards. Change is a permanent feature on man’s social life and social system in the form of transformation. The economy as a whole has been through five revolutions in the twentieth century, which have transformed its basic structure and method of functioning.

IMPORTANCE OF ETHICS

Ethics corresponds to basic human needs. Most people want to be ethical not only in their private lives but also in their business affairs. People want to be part of the organization, because they perceive its purpose and activity to be beneficial to society. The basic ethical needs are probably one of the most cogent reasons for ethical concern on the part of organizations.

Ethics create credibility with the public. A company perceived by the public to be ethically and socially concerned would be honoured and respected even by those who have no intimate knowledge of its actual working. Gaining the confidence of the community is vital to the business sector. Public opinion is the most powerful force in a democratic society. It is a way of achieving higher standards ethical behavior.

Ethics give management credibility with employees. It provides a common language for aligning a company’s leadership and its people. Ethics when perceived by employees as genuine create common goals, values and language. The management has credibility with its employees because it enjoys credibility with the public. It creates oneness among the employees.

Ethics help in better decision-making. Ethical decision made by the company will always be in the interest of the shareholders, stakeholders, public and their employees. This is because respect for ethics will force the management to consider all aspects of a question both economic, social and ethical aspects.

ETHICS IN MANGEMENT

Ethics are principles of conduct used to govern the decision-making and behavior of an individual or group of individuals. Management is concerned with making decisions within an organization. Ethics of the individual or group making decision have significant implications for the organization’s stakeholders, employees, customers, shareholders, suppliers, the government and the public at large. It is important to develop code of ethics for decision-making. A code of ethics is a written document that outlines the principles of conduct to be used in making decisions. Code of ethics is based on philosophical approaches: justice, individual rights and utilitarianism. The principle of justice involves making decisions based on truth, without bias and consistency. The principle of individual rights concerns making decision based on protecting human dignity. The principle of utilitarianism involves making decisions directed towards promoting the greatest number of people. The Laws relating to ethics in business speaks about consumer protection, product safety, shareholders and stakeholders rights and environmental protection. Having a code of ethics with an implementation program is the minimum requirement for reputation of the management. Ethics focus its attention on solving not only the internal problems of the concern but also of the society at large. The economy as a whole has been thro’ five revolutions in the twentieth century, which have transformed its basic structure and method of functioning. First, the organizational revolution led to increase in number, size and power of organizations of all types. Second, the corporate revolution expanded the scale of business enterprise and led to dominate of modern big business corporations. Third, the managerial revolution saw the emergence of a class of professional mangers who took over the active control of large corporation. Fourth, the property revolution separated ownership and management and diffused property rights within the corporation. Finally, the capitalist revolution brought about a change in the moral order of capitalism and greatly enlarged the public role of business and the economic role of government. In this changed socio-economic environment the focus of business ethics is on social responsibility. Social responsibility is a reaction to the goals of the society and the economic, technological, social and political forces that mould the society.

The ethics in the business community is not alienated or any different from the ethics in the society at large. The codes of ethics, legislative changes and the standards will not result in the desired holistic change. It is the mind set of the concerned people which matter most and not the stick that forces compliance with reluctance. Hence, there is an imperative need on the part of the corporate sector and profession to create a higher standard of openness, truthfulness, honesty, clarity, transparency and accuracy to ensure that all the stake holders have the best possible timely information. The corporates in general and professionals in particular must adhere to the highest ethical standards and assume a positive duty to unfold and update equivocally material information.

Institutionalizing Ethics

A business that seriously desires to operate in an ethical environment has to institutionalize ethics by drawing up a company policy and code of ethics, familiarizing all concerned at all levels with the code of ethics and ensuring the implementation. Code of ethics is nothing but a blue print of what is going to followed and adopted by the company from then onwards. The company’s ethical code should be printed and circulated to all those who deal with the company, by clearly bringing out what is unethical conduct. The company may appoint ethics committee which offer training within and outside. The duty of the committee is to report periodically to the Board and offer suggestion for the betterment. The committee must also review the code of ethics from time to time keeping pace with the changing environment. Business ethics has to be practiced and preached. Before setting business standards, ethics and morality have to be internalized so that they become a part of the blood stream. If the corporate becomes committed to self-imposed standards of business morality the whole country’s standards could be influenced.

Development of Program of Ethics

Merely endorsing a standard code or copying that of another will not suffice. It is important to find out on what topics and areas require guidance.

Select a prominent personality to endorse the business ethics policy.

Choose a framework, which addresses issues as they affect different constituents or shareholders of the company. The usual ones are: shareholders, employees, customers, suppliers, and local/national community. Some might even include competitors.

The code needs piloting - perhaps with a sample drawn from all levels from different locations.

The code of conduct framed should be distributed in booklet form.

Publish and send the code to all concerned.

Values and ethics are matters of governance. The board must be notified to involve themselves for ethical policing.

Practical examples of the code in action should be introduced into all areas.

Training for all concerned.

Review mechanism should be established.

A code master needs to be appointed.

facets of business ethics

Stakeholder/Shareholders or other providers of money

Transparency and openness in all dealings. Providing adequate information to the shareholders/stakeholders. The investment protection and ‘return’ on investment.

Employees

How the business values employees ? The company’s policies on: working conditions, recruitment, development and training, rewards, health, safety & security, equal opportunities, retirement, redundancy, discrimination and harassment.

Customer Relations

Customer satisfaction. Quality of product or service dealt. Fair pricing. After-sales service.

Society/Community

The laws of the society and community are to be respected. Environmental protection, Pollution abatement, Energy Conservation. In short improving the standard and quality of life.

Government

Business ethics from the point of view of business and businessmen is to provide information to the government in all matters that is required to be. Following the guidelines, policies and standard set up by the government. Paying the taxes that is legitimately due to the government.

A growing global role

People around the globe are more connected to each other than ever before. Information and money flow more quickly than ever. Goods and services produced in one part of the world are increasingly available in all parts of the world. International travel is more frequent. International communication is commonplace. This phenomenon has been titled “globalization.” While some people think of globalization as primarily a synonym for global business, it is much more than that. The same forces that allow businesses to operate as if national borders did not exist also allow social activists, labour organizers, journalists, academics, and many others to work on a global stage.

— It means communication, interconnectedness.

— It means accomplishing things easier, cheaper, and quicker.

— Something on a bigger scope than local.

— It means opportunity, reducing trade barriers, growth.

— It means that there are many different ways to do things, all of which are valid in their own right.

— It means a composite of things, an aggregate view.

— It means reallocating resources away from poorer nations to wealthier nations.

— Its meaning depends on your point of view.

Globalization is a medium which touches nearly every aspect of contemporary live in the “civilized’ world. Globalization is the engine of trade and of explosive economic prosperity. Globalization is a dynamic concept of universal proportions. The result is the pressure on business to play a role in social issues will continue to grow. There is a growing interest, therefore, in businesses taking a lead in addressing those issues in which they have an interest where government has failed to come up with a solution. It is the continuing commitment by business to behave fairly and responsibly and contribute to economic development while improving the quality of life as well as of the community and society at large.

Unless there is accountability and transparency in the dealings the business cannot be socially responsible. The values of accountability, social responsibility, long-term vision, and ethical behavior have become more important. The wealth maximization or profit maximization begins at the floor level leading to value addition. When once value is added the concept of social responsibility would creep in. The present day scenario is different and far from reality.

The world is entering a century with unprecedented changes for peace and progress. Globalization is the buzzword in the context. Business is the silken thread that binds the whole world. Therefore globalization of ethics is needed. The need is envisaged in the following areas.

Global need for

— Stable and honest governments

— Transparency and openness to promote honesty in governments

— Commitment to internationally recognized human rights

— Developmental programs for environmental protection, pollution control, energy conservation

— Evolution for world code of ethics for business

Conclusion

A society cannot function without a set of values. Society is undergoing social change. Business system is a product of customs and beliefs of the society in which it exists. Ethics is a study of what is right and wrong. Ethical considerations decide whether the business enterprise is on par with the society’s needs. Society is undergoing social change due to ethical considerations. So long as the value systems and philosophies of business go together, society will accept it. The resultant contribution would be positive. Social and ethical challenges in business take several forms and the impact is multidimensional and corporate governance is the key phrase. The changes that are taking place in the internal and external environment in which the business operates gave rise to a re-identification of their mission statement as “BE INFORMED. BE INVOLVED. MAKE A DIFFERENCE.” This new ethical standard and social attitude is blooming everywhere.

References

1. Bowie, Norman E; Business Ethics; Prentice Hall Inc., New Jersy.

2. Davis Keith & Blomstrom.R.L.; Business & Society; McGraw Hill, New York.

3. Donaldson, John & Others; Business Ethics; Academic Press, London.

4. Dr. Robert F. Drainan; Globalizaion and Corporate Ethics; JRD TATA foundation for ethics in Business, XLRI Jamshedpur.

5. Kumar.A, Joshi.K.M, & Jagni.B.J.; Ethical Issues in Management; Commonwealth Publishers, New Delhi.

6. Mathias,T.A.Sj; Corporate Ethics; Allied Publishers, New Delhi.

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