Essay: “what are advantages and disadvantages of ethical behavior in business? ” Business Ethics Some commentators, such as Milton Friedman, believe that the “primary and only responsibility of business is to make money” while abiding by the law. Supporters of this point of view argue that companies’ self-interested pursuit of profit benefits the whole of society. Profitable businesses clearly benefit shareholders, but other commentators, such as Edward Freeman, argue that businesses should also benefit other stakeholders.
Stakeholders are people and groups with whom the business has a relationship. This includes shareholders, but extends out to include employees, their families, the community within which the business operates, customers and suppliers. Advantages Business ethics offer companies a competitive advantage. Consumers learn to trust ethical brands and remain loyal to them, even during difficult periods. In 1982, Johnson ; Johnson spent over $100 million dollars recalling Tylenol, its best-selling product, after someone tampered with bottles of the painkiller.
The company followed its credo, a set of ethical organizational values, and the result was a boost in consumer confidence, despite the contamination scare. Society benefits from business ethics because ethical companies recognize their social responsibilities. Disadvantages Business ethics reduce a company’s freedom to maximize its profit. For example, a multinational company may move its manufacturing facility to a developing country to reduce costs. Practices acceptable in that country, such as child labor, poor health and safety, poverty-level wages and coerced employment, will not be tolerated by an ethical company.
Improvements in working conditions, such as a living wage and minimum health and safety standard,s reduce the level of cost-savings that the company generates. However, it could be argued that the restrictions on company freedom benefit wider society. People, Planet, Profit Companies increasingly recognize the need to commit to business ethics and measure their success by more than just profitability. This has led to the introduction of the triple bottom line, also known as “people, planet, profit. ” Companies report on their financial, social and environmental performance.
The Dow Jones Sustainability Index benchmarks companies who report their performance based on the triple bottom line. This type of performance reporting acknowledges that companies must make a profit to survive, but encourages ethical and sustainable business conduct. Purpose of ethical theory An ethical theory is to provide theory for people to value human beings through their behaviors, to access a person if he/she is ethical good or bad through his/her actions, like be honest, not to steal, not to kill, etc.
Although there are basic moralities that every person follows in all places (Beauchamp & Bowie, 2004), in different background culture or different situations, people have different judgments about the actions. Ethical theory gives us a guide to choose the best option of actions in a certain situation which counts as most significant ethically. Ethical people are those who recognize the difference between right and wrong and consistently strive to set an example of good conduct. In a business setting, being ethical means applying principles of honesty and fairness to relationships with coworkers and customers.
Ethical individuals make an effort to treat everyone with whom they come in contact as they would want to be treated themselves. Build Customer Loyalty Consumers may let a company take advantage of them once, but if they believe they have been treated unfairly, such as by being overcharged, they will not be repeat customers. Having a loyal customer base is one of the keys to long-range business success because serving an existing customer doesn’t involve marketing cost, as does acquiring a new one.
A company’s reputation for ethical behavior can help it create a more positive image in the marketplace, which can bring in new customers through word-of-mouth referrals. Conversely, a reputation for unethical dealings hurts the company’s chances to obtain new customers, particularly in this age of social networking when dissatisfied customers can quickly disseminate information about the negative experience they had. Retain Good Employees Talented individuals at all levels of an organization want to be compensated fairly for their work and dedication.
They want career advancement within the organization to be based on the quality of the work they do and not on favoritism. They want to be part of a company whose management team tells them the truth about what is going on, such as when layoffs or reorganizations are being contemplated. Companies who are fair and open in their dealings with employees have a better chance of retaining the most talented people. Employees who do not believe the compensation methodology is fair are often not as dedicated to their jobs as they could be.
Positive Work Environment
Employees have a responsibility to be ethical from the moment they have their first job interview. They must be honest about their capabilities and experience. Ethical employees are perceived as team players rather than as individuals just out for themselves. They develop positive relationships with coworkers. Their supervisors trust them with confidential information and they are often given more autonomy as a result. Employees who are caught in lies by their supervisors damage their chances of advancement within the organization and may risk being fired.
An extreme case of poor ethics is employee theft. In some industries, this can cost the business a significant amount of money, such as restaurants whose employees steal food from the storage locker or freezer. Avoid Legal Problems At times, a company’s management may be tempted to cut corners in pursuit of profit, such as not fully complying with environmental regulations or labor laws, ignoring worker safety hazards or using substandard materials in their products. The penalties for being caught can be severe, including legal fees and fines or sanctions by governmental agencies.
The resulting negative publicity can cause long-range damage to the company’s reputation that is even more costly than the legal fees or fines. Companies that maintain the highest ethical standards take the time to train every member of the organization about the conduct that is expected of them. Disadvantage: Polarization of Society Because it offers such an integral look into human nature, ethics — as a branch of philosophy — tends to create divisions among those of varying opinions. Within the United States, the reverberations of this effect are at the core of government policy.
Two groups, such as Pro-Choice and Pro-Life, work from similar facts and land on different notions of what is ethically and morally “right. ” These rifts within society may slow down legislation and other government progress. Advantage: Simplification One advantage of any firm ethical system is that when the time comes to make a decision, there is often an existing framework for making that decision. For example, if an ethical system decides that theft is wrong in all circumstances, then any person who firmly believes in that ethical system should be able to turn away ideas of stealing.
This process can expedite decision-making in general, as it has often already answered questions that may arise. Disadvantage: Varied Theories and Constant Change Ethics, as a whole, is a branch of philosophy that many consider to be necessarily unfinished. As technology and culture changes, new ethical issues are always arising, such as ethics within distributing content online. Likewise, issues of “cultural relativism” can create various interpretations of similar issues simply through the specific traditions of any given culture.
These problems, and others, cause ethics to be a field of tumultuous change with highly varied interpretation. Advantage: Building “Good” The Internet Encyclopedia of Philosophy notes that ethics “involves systematising, defending and recommending concepts of right and wrong behaviour. ” As such, the field is, by and large, dedicated to helping derive systems for understanding and improving human behaviour. As an end-result of finding and invoking a true ethical system, the world should evolve into a safer, friendlier and happier place.
If we have an ethical behaviour in our career we can do so much good. Due to this our business grows very much. Because due to this a discipline is develop in us and then we can set a high slandered and high level in our business. Bellows there are some goals we can use for continuous development. Working without deadly mishap. Eliminating work related diseases. We can increase varieties in our business. Increasing benefits of removal for local Increasing the benefits of mining for local areas. increasing energy competence By working towards these goals, we hope to gain a competitive benefit.
It is also help with its position on stock market. Many long terms sever, like pension funds that are run investments for millions of normal people in the foreign countries, think that to consider social and ethical issues is important for the company. Due to this the company puts in a stronger position. Ethical behaviour will help businesses to attain better height and is because it does what business should actually do and helps them in developing discipline, which will push, business work practise to a high level and set a high standard.
It actually promotes teamwork among worker. And this is because there is great respect place in elementary issues in the work place. Ethical behaviour also build confidence that will translate to trust among worker and they are more motivated towards theirs tasks. Ethical behaviour is really becoming very important for all our society because in the end it contributing in our society. It is not only contributing to our society directly but also keep the trust of the society. At the work place people who face ethical matter are versatile.
The ethical behaviour do contribute the organization in term of profit which is usually higher then the firm which are actually not operating ethically and are operating for their own interest. Business activities that meet the requirements of the law, but which are considered unfair by stakeholders can result in bad publicity. The best example is of a restaurant that pay minimum wage but keeps staff tips to boost profits is not breaking the law, however, run the risk of losing the goodwill of costumers. Bibliography: http://smallbusiness. chron. com/advantages-ethical-behavior-business-21067. html * http://www. studymode. com/essays/Business-Ethics-137790. html * http://smallbusiness. chron. com/advantages-disadvantages-business-ethics-10414. html * http://www. ehow. co. uk/info_8333081_advantages-disadvantages-ethics. html * http://www. businessdictionary. com/definition/ethical-behavior. html * http://www. ukessays. com/essays/philosophy/ethical-behaviour-in-a-business-environment-philosophy-essay. php
As part of Margot James MP’s Aspirations Programme for young people in the West Midlands in the UK, ACCA was invited along to tell them about a career in accountancy. We also held a blog competition about why ethics is important to business. The winner was Guvan Singh Riar, 16 years old, from West Midlands. Here is his blog
Ethics concern an individual’s moral judgements about right and wrong. Decisions taken within an organisation may be made by individuals or groups, but whoever makes them will be influenced by the culture of the company. The decision to behave ethically is a moral one; employees must decide what they think is the right course of action. This may involve rejecting the route that would lead to the biggest short-term profit.
Ethical behaviour and corporate social responsibility can bring significant benefits to a business. For example, they may:
- Attract customers to the firm’s products, which means boosting sales and profits
- Make employees want to stay with the business, reduce labour turnover and therefore increase productivity
- Attract more employees wanting to work for the business, reduce recruitment costs and enable the company to get the most talented employees
- Attract investors and keep the company’s share price high, thereby protecting the business from takeover.
Knowing that the company they deal with has stated their morals and made a promise to work in an ethical and responsible manner allows investors’ peace of mind that their money is being used in a way that arranges with their own moral standing. When working for a company with strong business ethics, employees are comfortable in the knowledge that they are not by their own action allowing unethical practices to continue. Customers are at ease buying products or services from a company they know to source their materials and labour in an ethical and responsible way.
For example, a coffee company which states all their raw beans are picked from sustainable plants where no deforestation has occurred, by people paid a good living wage, in an area where investments have been made to ensure that producing the coffee for a foreign market has not damaged the local way of life, will find that all these elements of their buying strategy becomes a selling point for their final product.
A company which sets out to work within its own ethical guidelines is also less at risk of being fined for poor behaviour, and less likely to find themselves in breach of one of a large number of laws concerning required behaviour.
Reputation is one of a company’s most important assets, and one of the most difficult to rebuild should it be lost. Maintaining the promises it has made is crucial to maintaining that reputation.
Businesses not following any kind of ethical code or carrying out their social responsibility leads to wider consequences. Unethical behaviour may damage a firm’s reputation and make it less appealing to stakeholders. This means that profits could fall as a result.
The natural world can be affected by a lack of business ethics. For example, a business which does not show care for where it disposes its waste products, or fails to take a long-term view when buying up land for development, is damaging the world in which every human being lives, and damaging the future prospects of all companies.
Ethics is important to businesses for many reasons. Businesses can increase sales or increase their reputation.