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moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.
Corporate fraud and general unethical behavior is well known, and played a part in the American economic crash of 2008. Since the revelations of amoral corporate behavior have become household knowledge, the importance of corporate ethics has been increased, and is more deeply ingrained in the public mind.
1. Features
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Corporate ethics is a form of applied ethics. General principles of basic moral behavior are applied to the day-to-day work of business. Its importance lies in the creation of a work and business environment that is predictable, stable and easy to navigate. Amoral or non-ethical behavior creates a hostile environment.
Types
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There are two general forms of corporate ethics. The first deals with legal compliance. This is an important part of ethics, but does not exhaust the whole. Legal compliance means that companies become scrupulous in applying legal standards to their business practices such as anti-discrimination legislation or environmental protection. The other might be termed corporate responsibility and deals with the immediate environment of business practices. This includes the needs of stockholders, employees and the community where the business is headquartered
Function
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Corporate ethics is important because it is the prime distinguishing mark between good business sense and buccaneer capitalism. This is not to say that profits are not the main purpose of business. It is to say, however, that ethical behavior helps ensure profitability and customer loyalty. Ethical behavior is generally seen as positive by the public, and those firms that work according to
basically accepted ethical rules generally have a loyal customer and supplier base. For example, a firm that goes out of its way to treat employees with fairness and respect are more likely to have a more productive and happy work force than firms that treat employees as machines.
Considerations
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The Rand Corp. financed a study on corporate scandal that points to income tax avoidance as the next possible area for corporate malfeasance. General pubic cynicism and strict government oversight cannot be good things for business, meaning that over time, corporate ethics is far more important than profits or corporate greed. Ethics means smooth sailing, while greed eventually leads to greater state oversight and public contempt. From a strictly capitalist point of view, ethical behavior is more profitable, over time, than amoral behavior.
As the fallout from corporate, banking and investment scandals continues to affect millions of Americans, the issue of business ethics has taken its rightful place on society's center stage. Smart companies are revamping their policies and polishing their public facades in an effort to show their customers that they are indeed "behaving well."
1. Internal Ethics
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Many companies now offer ethics and behavioral training to their employees, in an effort to foster a more positive work environment and to help create an ethical corporate culture that extends all the way to its customers and sshareholders/investors, the community in which it is situated, and the
government. Such programs typically are run by industry trainers who often model their moral paradigms on a relevant real-life situation that particular industry might be facing. For example, the trainer might ask an oil company's employees to discuss a hypothetical situation in which they discover that a rich oil field which the company holds the legal right to develop happens to lie directly beneath a sacred native American burial ground,
External Stakeholders
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A large company that wishes to maintain ethical practices has a responsibility to the external stakeholders to ensure their interests are met. For example, a company that operates in any city must ensure that in the course of operating that business it does not harm anyone in the community. For example if the company's business is manufacturing, and it releases toxic chemicals into the air during the manufacturing process, toxic chemicals are released into the air, that would harm the community and obviously represent an unethical business practice. . Ideally the community benefits from having a corporation located in the town. These benefits can include jobs to locals, or redevelopment of economically depressed areas or donations to local charities. The company must also be mindful of how its ethical practices might be perceived by customers. For example, if a company knowingly manufactures an unsafe product and the public finds out about it, in the long run the cheaper alternative would have been to recall such products and save the company's image. Smart companies are not only concerned with their image but also with how their business impacts the rest of the world. It can cost companies more to err on the side of caution in terms of their safety and ethical policies in the short run. Yet in the long run a company can be confident they are acting ethically, interested in external stakeholders and a sustainable future.
Companies that continually work to improve the world and behave responsibly ensuring that all their stakeholders are cared for can benefit in the long term by maintaining a respectable reputation. According to corpgov.net, one definition of ethics is "doing the right thing even when no one is watching". Through the practice of behaving correctly even when there is a low likelihood of being caught, companies are taking a proactive step in their ethical policies. If a company shares their ethical initiatives, policies and control mechanisms with the public, it
will present the image of a transparent corporation and likely create a favorable impression with the general public.