Business ethics are no longer a luxury for corporates but a necessity

Jan 29 • General, Group Discussion • 3011 Views • 2 Comments on Business ethics are no longer a luxury for corporates but a necessity

The study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities. Business ethics are often guided by law, while other times provide a basic framework that businesses may choose to follow in order to gain public acceptance.

Business ethics are implemented in order to ensure that a certain required level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors.
Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance themselves from the business scandals of the day, such as the savings and loan. The idea of business ethics caught the attention of academics, media and business firms by the end of the cold war. However, legitimate criticism of business practices was attacked for infringing the “freedom” of entrepreneures and critics were accused of supporting community

The current international economic crisis has, not surprisingly, resulted in trust in the business community being at an all time low: a BBC debate at the World Economic Forum in Davos in early 2009 noted that this extends to CEOs who are also not regarded as trustworthy.

Unethical behaviour – a failure of values or rules

Given that values and rules (which include laws, rules, regulations, systems and procedures) are two of the primary drivers of ethics, a particularly relevant question from an ethical perspective is whether this was a failure of values or of rules.If you compare these two drivers of ethical behaviour, it is clear that values and rules are neither focused on the same intended outcome, nor do they achieve the same results.

Rules aim primarily to achieve compliance, while values aim primarily for commitment – which represents a big difference, not least as regards sustainability. The tendency of most organizations to favour rules as a mechanism to shape behaviour represents an apparently easier option than a value-based approached.

Yet, while rules are necessary, they are not sufficient to achieve ethical behaviour. You also need values. And, you need values more, because ethical behaviour can be achieved with sound values and very few rules, but not vice versa.

Therefore in theory, if you have good moral values and good, comprehensive rules which are fair to all your stakeholders, you should achieve ethical behaviour from your employees and, consequently, achieve a positive ethical status for your organization. In practice, however, you will mostly need to provide a bit more detail about how to do this.

 Improving ethical behaviour

One approach is to reduce unethical behaviour. This can be achieved to a large extent by the more effective application of laws, rules, regulations, systems and procedures. The other approach is to improve ethical behaviour.

Two concepts are relevant in this regard: ethical maturity and ethical boundaries.

 Ethical Maturity

Ethical maturity reflects whether behaviour is shaped by rules or values. Low ethical maturity reflects compliance with rules, whereas high ethical maturity reflects a commitment to values

 Ethical Boundaries

A third approach focuses on ethical boundaries. a crucial, often neglected, facet of ethics which addresses the nature and impact of behaviour and/or decisions. Rather, this is a dangerous zone where self interest dominates.

By reducing unethical behaviour, increasing ethical maturity and expanding inclusive ethical boundaries, ethical behaviour – and an organization’s ethical status – can be improved.

Leadership is the most effective tool to achieve this. Leaders, whether formal or informal, exert the most influence in building a commitment to shared values and building compliance with rules, and good leaders are role models who lead not just for self, but for others.

The bigger question is whether ethics in your organization is considered an illusion, a luxury or a necessity?

It it is an absolute necessity, not only from a moral perspective because “it’s the right thing to do”, but also from a business perspective because ethics makes really great business sense. This derives from ethics being an increasingly important focus area for stakeholders – from the press to customers, suppliers, local communities, etc. Evidence of unethical behaviour, complements of global communication systems, is effectively shared very widely with numerous negative consequences, not least the erosion of corporate reputations and declines in sales.

So, if ethics matters to you and you regard ethics as a necessity, the final question is simply: “What you are going to do to make a difference?” First of all, luxury consumption is associated with the signal of wealth, power, status, and “group membership”, which is essential for consumers whose desire for luxury derives from social orientation. Secondly, – for more rational consumers – luxury goods serve the purpose of a financial investment or satisfaction of superior standards of quality. And thirdly, some consumers use luxury to express themselves based on hedonistic or

The biggest obstacle hindering luxury consumers in caring about ethics is without a doubt the above mentioned purpose of luxury goods itself. Both, the traditional notion of buying luxury to impress others, as well as personally oriented intentions (self-directed pleasure, self-gift-giving, congruity with the internal self, quality assurance) fulfil the function of generating satisfaction for the individual , rather than the larger society. When it comes to luxury consumption personal goals, like the ones mentioned above, are prioritised over group goals such as saving the environment or protecting animals.

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