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However, any factor that separates a business’ success from its failure is a critical one. One such actor that will be focused on is that of ethics; business ethics, and its impact internally and externally. Firstly, one must understand what ethics is. Ethics is the moral rules that govern and limit our conduct. It investigates what is right and wrong, fairness, and unfairness, good and bad, duty and obligation, justice and injustice, as well as moral responsibility and the values that should guide us (Shaw, 2008).
In short, ethics is concerned with the right and wrong in human actions, good and evil in the world, and the virtuous and non- virtuous characteristics of people. Therefore, business ethics is known as the ode of ethics. This is a form of applied professional ethics; that examines ethical principles, and moral or ethical problems which can occur in any business environment. Along with business ethics, there is ethical behavior; these two go hand in hand for greater success and to gain more profitability. Ethical behavior focuses directly on the employees and or groups.
Ethical behavior is firstly addressed in the interview or hiring process, it deals with what is appropriate and what is not. It addresses harassment, work attire and language. Matters that are usually addressed with ethical behavior are mployee’s integrity, accountability, teamwork and their commitment to the task at hand. All employers wish to have an honest employee, which does the right thing each time, despite whatever situation may occur. For example, an employee handling cash should always exhibit integrity by recording each transaction correctly and not being unethical by taking some funds for their own personal use.
The accountability aspect deals with how the employee deals with responsibility; this may be examined through reporting to work at scheduled time, working honestly, meeting deadlines despite how tedious a task may appear. Another concept is that ofteam work. Being able to work with other is a vital part of business ethics. This is proven as in some cases, when group members are selected to work together with someone with whom they do not ‘get along with. Under the business ethics concept, it would be the ethical to put away any animosity and complete the project.
Failure to adhere to such procedures can have a consequence of a warning or a demotion, whereas working well with others can provide some advancement and recognized as a good team player. The final key concept is that of commitment, although possessing the equired skills for a job is great, dedication along with those required skills can prove to have a greater success. Commitment to procedures can be vital and go a long way. In some cases it is an act Of motivation to oneself, but moreover to other employees.
As recognized above, business ethics and ethical behavior are crucial factors in business environment. Along with their high importance these two concepts have a huge impact internally and externally on an organization. In the internal aspect, issues may occur amongst the managers, directors, owners, corporate culture and employees. Amongst these stakeholders, issue an occur for numerous of reasons; such as manager’s attitudes towards the firm or towards the employees, the different management skills exhibited by directors, managers and the owners.
An example of this could be how managers seek to control profits, whereas owners seek to maximize as they will earn a bigger and better return on investments. Another instance, can be through employees damaging property, lack of technical skills, absenteeism, deliberately attending late and go slows just to name a few. To control these internal problems the matter of corporate governance comes into action. Corporate governance is the system of rules, practices and processes by which a company is directed and controlled.
It also involves balancing the interests of the many stakeholders and acts as a framework for obtaining company’s objectives and each part of management. External issues on the other hand are those affairs that are produced by government, nature, culture, law, economy and technology. Unlike internal issues that can easily rectify, an organization has little or no control over external influences. However, performing good ethical standards they can use their knowledge to keep any ethical issue at minimum as they cannot revent them.
Government plays an important role and may be seen as the most effective factor in the external environment. This maybe said because they are seen as the backbone to each country’s economy and successful development. Problems that occur with government is delaying to pay taxes and neglecting their responsibilities. Payment of these taxes correctly and timely can lead to the formulation of the country’s budget, prevent tax evasion and allowing citizens to know where and how their money is being spent. Another factor is nature.
No one has control over the weather; however procedures are set in lace to safely evacuate if something does happened. What we can control are the inappropriate use, storage and disposal of hazardous chemicals in the environment. If such a problem cannot be addressed and handled then the consequences can be a significant loss. An example of this is the disaster that occurred at Bhopal in 1 984, claiming the lives of over 9000 citizens including employees and leaving the living with life lasting illnesses, which occurred because Of inappropriate storage Of hazardous chemicals.
The rapid advancement of technology can pose issues relating to business thics; although when thought about, proves to be more advantageous. However, the issue of lack of privacy occurs, this happens when the social life cannot be separated from business life despite qualifications. It can also occur when employees are monitored daily and can be told whatever they have done especially on the computers. The disappearing of social values is also an influence on business ethics. As what was once seen as morally correct to do are no longer put into place.
These changing thinking perspectives have led to employees indulging in bribery, illegal activities and stealing just to name a few. Overall establishing code of ethics in a business that are followed can be very successful and promote the business giving it a good reputation. This promotion can also be accomplished through the implementation of corporate social responsibility. Corporate Social Responsibility (CSR) is the initiative to assess and take responsibility for a company to be effective on the environment and impact on social welfare.
The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups. When CSR is implemented into a business it can increase productivity nd profits and act on the best interest of employees, stakeholders and on a greater scale environmental friendly and comply with all laws and regulations. LITERATURE REVIEW BUSINESS ETHICS Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles, and 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. The two dominant theories of ethics are utilitarianism and deontology. The former tells managers that the end result of their actions hould be the greatest good for the greatest number of people, and this objective can be achieved ‘by any means necessary. It also states that when we have a choice the right thing to do is that which brings about the ‘greatest happiness of the greatest number’. Therefore, any managerial action is justified if it achieves positive consequences for the majority.
The latter informs the manager that respect for employees means recognising and upholding their rights and ensuring that they are treated fairly and justly. Managers, in other words, should treat people as ends and not means; and hey should for example, pursue just and good ends regardless of the consequences (Collins 1 994; Starling 1997), (Campbell Jones, 2005). Utiliarianism Utilitarianism has had a significant impact on the modern world and has been especially influential in shaping politics, economics and public policy.
Utilitarianism, therefore has had, and continues to have, an enormous influence on business. It sees the creation of value as the goal of management. Value is created when entrepreneurs satisfy the customers’ requirements. However, customers are not only those who purchase goods nd services, but all who are impacted by entrepreneurial decisions. Value created within this broad definition will result in the greatest good and reach the greatest number of people. It advocates the view that to act morally is to attempt to secure the most good for the most people, and stay agnostic about what the good might consist in. Collins 1994). Utilitarianism is a consequentiality ethics. Good and bad acts are determined by their consequences. Utilitarian’s are pragmatic thinkers; no act is ever right or wrong in all cases in every single situation. You must choose to do that which seems to benefit the majority mostly. However, that is dependent in most cases in what other people do as well. For example, acting in an unethical manner to achieve comparative advantage in a competitive market. Acting in this manner is neither right nor wrong in itself.
It might have been a situation in which this act will produce greater overall good that acting ethical. (Desjardins, 2006) Deontology This approach has both matters of individual morality and of public policy, emphasising the fact that sometimes the correct path is determined not by its consequences but by certain duties, which includes obligations, commitments and responsibilities. Deontology posits that the building of trust is a key business strategy. To create trust, managers should respect the people with whom they interact with by giving help when it is required and respecting personal autonomy.
Respect is further engendered when subordinates are given latitude over their work, useful information, education and training (Cadbury 1987; collins 1994) (Campbell Jones, 2005). Employees who exhibit a duty-based ethic usually justify their behaviours in terms of honouring the companys policy or satisfying their customers wants and needs. Although there are more than a dozen major ethical paradigms, he duty-based approaches emphasize the satisfaction of expectations as the major contributor to their behaviour; it’s just what they have to do.
For example, the manager of a retail store with a posted merchandise return policy may choose to honour the policy or to make exceptions, depending on the circumstances of a particular return. Managers with a strong duty-based ethic will typically hold closely to the literal text of the policy and make fewer exceptions, because she views upholding her employer’s policy as her job. Consequentiality that is, people who favour evaluating the outcome Of an act ather than the act itself may be more willing to grant exceptions to keep customers happy.
Thus Kantian theory our fundamental ethical duty is to treat people with respect, to treat them equally capable of living an autonomous life. In short, since each person has this same fundamental duty towards others, each of us can be said to have the right to be treated with respect, the right to be treated as an end and never as a means only. Ethical Business Dimensions Dr David A. Robinson in his paper, “Ethics & Ethical Dilemmas”, 2003, eloquently stated that ethics in business has to do with making the right hoices; often there is no apparent one right way and one must choose the best in the circumstances.
Managers are sometimes faced with business choices that create tensions between ethics and profits, or between their private gain and the public good. Any decision where moral considerations are relevant can potentially give rise to an ethical dilemma, for example: A decision that requires a choice between rules. A decision where there is no rule, precedent or example to follow. A decision that morally requires two or more courses of action, which are in practice incompatible with each other. A decision that should be taken in one’s self-interest, but which appears to violate a moral principle that you support.
It is the imperative to act, combined with the uncertainty of which action to take, that causes a dilemma (Robinson, 2003). CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility is the continuing commitment by businesses to behave ethically and contribute to the economic development while improving the quality of life of the workforce and their families as well as of community and society at large (Sims, 2003). LIME Barbados Ltd. longstanding ommitment to corporate social responsibility has become an integral part in its growth and competitive advantage as well its continuous connection with stakeholders.
This company also plays an integral part in the Barbados community by supporting nation development and economic development through contributions to cultural, educational and sports events. Environmentally, to eliminate corroded cable lines, LIME Barbados Ltd. has made the decision to switch to optical fibre cables. This cable has coated individual plastic layers, which are suitable for the environment because of its mmunity to electromagnetic interference, data security, non-conductive cables, ability to eliminate spark hazards, ease of installation and finally its high bandwidth over long distances.
Barclays Bank defined C. S. R. through the concept of responsible banking in that responsible banking means “making informed, reasonable and ethical decisions about how we conduct our business, how we treat our employees and how we behave towards our customers and clients”. (Barclays Bank 2007) However Tesco’s C. S. R. policy includes playing their part in local communities, working with their customers o help the environment and supporting good causes, Barclays Bank and other companies like them should incorporate some of these practices in their companys concept of C. S. R. they take a more philanthropic outlook and make a more philanthropic contribution, after all it is their customers that ensure their business success and pleasing their customers would mean improved financial performance. Companies like Barclays bank, The Royal Dutch Shell Company, British Petroleum and 3C achieved the best results by virtue of the fact that their C. S. R. policies were able to meet the required 6 GRI reporting guidelines. This research showed that U. K. companies tended to disclose the positive impacts they made on the environment, which has to do with environmental issues.
Another policy was labor practice, it was discovered from the study that most of the also made labor practice a priority, as they focus on providing employees with a safe working environment and diverse workplaces with equal opportunities. Other companies should get their C. S. R. policies to meet these required reporting guidelines (SEE APENDIX 1). CARIBBEAN RESEARCH In the Caribbean we have been faced with a series of ethical issues relating to oor corporate governance which have negatively impacted businesses, government regulation, economies, and the society systematically throughout the region.
One such was the collapse of the largest insurance company in the Caribbean, Colonia Life Insurance Company T & T (CLICO). It was concluded that unethical behaviour from poor corporate governance was one of the reasons for its demised. CLICO was the flagship of the parent company, CL Financial (CLF), which is the largest privately-owned conglomerate m the Commonwealth Caribbean with operations spanning its core business of nsurance, but which also includes financial services, real estate development, manufacturing, agriculture and forestry, retail and distribution, energy, media and communications .
CLF operated in 32 countries through its associated and joint venture companies and more than 65 subsidiaries spanning the Caribbean, Florida, Europe, the Middle East and Asia. It controls assets in excess of TT$IOO billion. This shows the sheer size of this conglomerate and the many industries that were impacted by its’ collapse. “The CLICO/CLF meltdown posed systemic risk not only to Trinidad and Tobago’s financial ector but also that of the wider Caribbean. In fact, CLICO/CLF collapse had spill over effects in all 15 CARICOM states, with the exception of Jamaica and Haiti. (Persuad & Soverall, 201 2:17) Evidently, CLICO made unethical investment decisions because of its little or no regulation and profit driven motives. Its business model was high risked and highly levered, it took large amounts of short -term deposits and used them for long-term investments which was viewed as a type of investment fraud called a ponzi-scheme. Their managers engaged in such risky strategies all for the self interest of aximizing shareholders wealth with little care for their policy holders.
In the end the company experienced liquidity problems as a result of inter-group transactions and high levels of withdrawals from panicking customers. Soverall (2012:172) concluded that deficiencies in poor corporate governance such as weak risk management practices, inadequate failure of directors’ duty of care and skill, conflicts of interested, along with external factors such as political influence and the “soft touch” approach to regulation all led to the collapse of CLICO.
Another noted example ofa collapse due to unethical usiness practices in the Caribbean was that of Texas billionaire Robert Allen Stanford, the founder and sole owner of the Stanford Financial Group (SFG). The Antiguan based group of companies included Stanford International Bank (SIB) and Stanford Capital Management (SCM) which specialized in wealth management, with assets under management in excess of IJSS50billion. The U. S.
Securities Exchange Commission (SEC) alleged that SIB, through a network Of Stanford Group Company (SGC) financial advisors, executed a massive Ponzi scheme that sold approximately IJS$8 billion of certificates of eposit (CDs) to investors around the world with the promise of higher returns than available through traditional banks. As a result of these illegal activities, Allan Stanford was charged with fraud and imprisoned in Texas. (Soverall, 2012:172). Both these conglomerates showed unethical business practices which caused systematic effects through the Caribbean for both private and public sectors.
Resulting from these, economies dropped, “After 15 years of positive economic growth, the Trinidad and Tobago economy declined in 2009 (-3. 5%), as a result of the impact of the global crisis, and more particularly, the collapse of CLICO. Soverall, 201 2:166). Closure of businesses across the region (subsidiaries in St. Lucia and Caymans became insolvent whilst in Barbados, Bahamas, Belize and St. Kitts where placed under judicial management, and losses in thousands of dollars of stakeholders’ investments.
In Barbados, five years later policy holders are yet to receive their cash surrender values. The catastrophic outcome of these two companies proves that no success can come from unethical corporate governance. Companies not just in the Caribbean but around the world are being encouraged and are promoting self regulated ethical management hich has not only improve corporate governance but has strengthened stakeholder relationships thus creating a competitive advantage. Socially responsible business models can enhance organizational functioning (e. , by raising employee motivation, trust, and retention), find or invent profitable market segments (say, for green or sweatshop-free products), insulate firms from certain risks (e. g. , from costly fines and law suits, or the imposition of onerous regulations), and so forth. (Norman, 2012:47). There has also been a slight improvement towards corporate social and environmental reporting by ompanies in the Caribbean. A Study was done which tried to examine the extent to which publicly-listed Caribbean companies provide social and environmental disclosure (SED) and the factors related to their disclosure practise.
The findings revealed that even though reporting was relatively low positive reporting was due to the size of the company, industry affiliation, foreign influence and organisational culture. (Borwin, 2013:259). Larger companies because of the need to compete and rely on international markets for financing would be more transparent in an effort to reduce agency cost. Also companies with affiliations to nations that promote better or more extensive SED are more likely to adopt the SED practices of those countries firms without such affiliations.