Introduction:

Ethical principles provide the foundations for various modern concepts for work,
business and organizations, which broaden individual and corporate priorities far beyond
traditional business aims of profit and shareholder enrichment. Ethical factors are also a
significant influence on institutions and public sector organizations, for whom the traditional
priorities of service quality and cost management must now increasingly take account of these
same ethical considerations affecting the commercial and corporate world.

Ethic is actually two things. First, ethics refers to well-based standards of right and wrong
that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to
society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the
reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical
standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical
standards include standards relating to rights, such as the right to life, the right to freedom from
injury, and the right to privacy. Such standards are adequate standards of ethics because they are
supported by consistent and well- founded reasons. Secondly, ethics refers to the study and
development of one’s ethical standards. As mentioned above, feelings, laws, and social norms
can deviate from what is ethical. So it is necessary to constantly examine one’s standards to
ensure that they are reasonable and well-founded. Ethics also means, then, the continuous effort
of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the
institutions we help to shape, live up to standards that are reasonable and solidly-based.

Ethics can be defined as a set of moral principles or values which is concerned with the
righteousness or wrongness of human behavior and which guides your conduct in relation to
others (for individuals and organizations). Ethics is the activity of examining the moral standards
of a society, and asking how these standards apply to our lives and whether these standards are
reasonable or unreasonable, that is, whether they are supported by good reasons or poor ones.

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 As in other social entities, ethics are inevitable in organizations. Research has already
shown that ethics do pay. Since unethical practices cost industries billions of dollars a year and
damage the images of corporations, emphasis on ethical behavior in organizations has increased
over the recent years. Societal expectations and pressures from legal and professional bodies
have forced organizations to be more concerned about their social responsibilities and ethical
practices. In the mid-1990’s Shell faced one of its worst public relations nightmare due to its
unethical business practices in Nigeria. In 1997 the Financial Times in its annual survey of
Europe’s most respected companies identified Shell’s ethical problems as the key reason for the
company’s dramatic drop in rankings. Shell turned upside down in the aftermath of these
unfavorable experiences and thus started correcting itself for sustainable growth. Like Shell,
many other organizations whose business practices are perceived to be unethical and their
products are considered to be harmful to the consumers (e.g. cigarettes) face strong social
condemn.

Ethical problems are problems of choice. Ethical problems arise not because of people’s
tendency to do evil, but because of the conflicting nature of standards and interests, which are
valid in themselves. Problems in ethical decision-making and behavior occur only when
individual interests and social norms conflict with each other. Every organization has its own
accountability towards its stakeholders – employees, capital investors, consumers, government,
competitors, suppliers, and other community members. In most situations the organizations are
able to balance its obligations towards these varied stakeholders. However, sometimes conflicts
do arise between the interests of two or more stakeholders. In such situations the more influential
and powerful group could gain precedence over others, to protect their own interests. In order to
ensure ethical business practices of an organization, it is important to ensure ethical orientation
of the people who own, manage, and work for it. Adopting proper structures and practices could
ensure it. Structure, policies and practices of an organization influence ethical behavior through
flow of communication, reinforcements for ethical behavior etc. Many successful organizations
consider ethical conduct a critical measure in performance evaluations and compensation.

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Literature Review:

Previous research concerning the relationship between ethics codes and ethical behavior
in the workplace has yielded mixed results. Little is known about the process by which an ethics
code might influence employees' ethical decisions (Schwartz, 2001). We suggest that unless
ethics codes influence the perceptions of employees about the ethical values of their
organizations, that the codes are unlikely to positively impact behavior. Employees' beliefs about
their employers' ethical values appear to be just as important, if not more important, than the
"objective reality" of organizations' values, since research indicates that it is employees'
perceptions of the organizational context that influences their ethical decision-making (Akaah
and Lund, 1994; Barnett and Vaicys, 2000; Weaver et al., 1999). As people becoming more
aware of corporate responsibility, fair dealing, integrity and other higher qualities they will be
willing and eager to involve themselves in mutual business dealings (al-Razi, 1985).

Ethics is at the heart of good management (Friedman & Friedman, 1988). Ethical
management is reflected in the way employees are treated and influenced how they perform their
jobs (Waddock & Smith, 2000). When organizations operate ethically, they can develop
reputations for being reliable, trustworthy and conscientious. This reduces transaction cost and
increases customer loyalty (Wong & Snell, 2003). Giving importance to business ethics,
therefore, is a core issue in employee workplace effectiveness. As Peters & Waterman (1982)
pointed out in their study of excellent companies, nearly all the superior performance firms have
at the core a well-defined set of shared values, particularly ethical values (Hunt et al., 1989).
When the ethical standards/values of an organization are widely shared among its members,
organizational success will be enhanced in the long run (Keeley, 1983; Badovick & Beatty,
1987).

Singhapakdi et al. (1995) also empirically established that corporate ethical values
positively influence a marketer’s perceptions of the importance of ethics and social responsibility
in achieving organizational effectiveness. When employees believe that the organizations for
which they work have strong ethical values, they appear to be more likely to engage in ethical
behavior. Because we believe that ethics codes largely affect behavior through their impact on

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employee perceptions of the organizational context, our study was designed to assess whether the
simple existence of ethics codes affected perceptions of organizations' ethical values. Committed
employees generally feel a connection to company values (Schwepker & Good, 1999).Valentine
et al. (2002) revealed a strong relationship between corporate ethical values and individual
employee’s organizational commitment. An examination of 1246 marketing professionals
(managers and researchers) revealed that corporate ethical values are significant substantive
predictors of organizational commitment (Hunt et al., 1989). Sims (1991) explained that an
ethical context is developed by ‘managing the psychological contracts between the organization
and its employees, reinforcing the employee’s organizational commitment and encouraging an
ethically-oriented organizational culture’ (Sims, 1991: 495). Also, in their studies, Somers
(2001) and Okpara (2003) suggested that the presence of corporate ethical values were
associated with high levels of organizational commitment.

If the existence of ethics codes contributes to employees' perceptions that their

organizations value ethical behavior, then the codes might have the potential to positively
influence employees' ethics related behavior. The advancement of ethics codes may lead to more
ethical company beliefs and standards (Sims, 1991). Codes may operate to improve perceptions
of ethical values by "nurturing marketing practitioners' realization of the important roles of ethics
and social responsibility as determinants of business success" (Singhapakdi, 1999, p. 96). It is
also possible that organizations with ethics codes are more successful in socializing employees
so that they "internalize" the values of the organization. Another aspect of organizations' ethical
values is the ethical work climate, conceptualized by Victor and Cullen (1988) to consist of nine
dimensions. Research suggests that certain types of ethical climates, especially those
characterized by a concern for others (benevolence) and/or by a concern for adherence to
rules/codes (principled) are associated with individuals' ethical perceptions (Barnett and Vaicys,
2000).

Recent business periodicals and academic literature acknowledge the importance of

shared organizational values and beliefs as significant influences upon employee decision
making leading to behavior (Caudron 1992, Howard 1990, Schein 1985). Embodied within the
general organizational culture are shared normative values and beliefs regarding moral rightness

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and wrongness. These influence the ethical dimension of the employees' decision making and
behavior, and provide collective norms for right (ethical) or appropriate behavior for the
employees (Trevino 1990). The ethical values embedded in the organization socialized
employees toward proper ethical decisions and behavior (Smith and Carroll 1984). Empirical
assessments of organizational ethical climates are limited. Victor and Cullen (1988) report that
various organizational ethical climate types characterized the four firms in their study, as well as
discovering multiple ethical climate types within the firms. Other studies also found the presence
of multiple climates (particularly, Meglino et al. 1989). The review of the literature by Reed, et
al. determines that empirical studies are inconclusive. In the future, researchers should recognize
the potential importance of focusing upon "corporate culture as a factor affecting social
performance" (Reed, et al.1990 p. 36).

Weeks & Nantell (1992) showed that well-communicated codes of ethics led to increased
ethical standards and superior job performance of sales people in the American context.
Singhapakdi et al. (1995) empirically established that corporate ethical values positively
influence a marketer’s perceptions of the importance of ethics and social responsibility in order
to achieve organizational effectiveness. Thus, corporate business ethics individually or jointly
influence organizational performance (Wu, 2002). Managers at every level of the organization
should regularly discuss the ethical values and what it means to their division or department
(Stevens, 1999), otherwise it will not be accepted and adopted by employees. Since the presence
of corporate ethical values influences employee’s level of commitment, an important implication
of this finding is for management to encourage and support the development of written codes of
ethics. Ethical people are concerned for others and live their lives according to the highest level
of human principles (Fisher, 1998). There are examples of managers who stand-up for their
values under fire and are accorded the title of “true professional”.

Cook and Emsler (1999) demonstrate, career success, in the form of promotion is
typically decided by superiors, not those who are or will be subordinates. They suggest that
relatively little is known about the perceptions and expectations of potential subordinates,
notwithstanding the informal power that these individuals may later have in influencing the
relative success or otherwise of a manager’s achievements within any position.

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Arguments:

The need for transformations carries some urgency nowadays, because of increasing
pressures related to global warming and climate changes. The urgency of such transformations is
further amplified by the current rapidly spreading globalization, and, most importantly, by
‘’society’s growing awareness of the faults of some businesses, combined with business’s own
errors’’. And, I argue such transformations cannot take place UNLESS organizations adopt an
organizational learning and knowledge management approach to business ethics. If they were to
do this, business ethics would become an integral part of the organizational culture and a driving
force behind what the organization does. In this way, business ethics would be an enabler of
corporate responsibility, in a way which transforms culture, leadership and business so that these
are good for society.

There is little in the literature to infer about and/or illustrate the relationship between
business ethics and corporate social responsibility. This may be because the two are often seen as
intimately related in a way almost bespoke. It could also be because CSR encompasses business
ethics as a key component, and therefore intermittently discusses its nature. Still, Sims points out
that good business does not necessarily mean good ethics. I would add that good ethics (if
properly mainstreamed, as discussed previously) does mean good corporate responsibility and
from thereon - profitability. High ethics, high corporate responsibility and good business can co-
exist. As I have already pointed before, the more ethical an organization is, the higher chance for
it to be also responsible, sustainable, and profitably so. Sims further points out the need for a
stakeholder approach to corporate social responsibility which is ethical and participatory, in
other words, a stakeholder approach to corporate socially responsible behavior.

More and more leaders of businesses and other organizations are now waking up to the
reality of social responsibility and organizational ethics. Public opinion, unleashed by the
internet particularly, is re-shaping expectations and standards. Organizational behavior - good
and bad - is more transparent than ever - globally. Injustice anywhere in the world is becoming
more and more visible, and less and less acceptable. Reaction to corporate recklessness,

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exploitation, dishonesty and negligence it is becoming more and more organized and potent.
Employers, businesses and organizations of all sorts - especially the big high profile ones - are
now recognizing that there are solid effects and outcomes driving organizational change. There
are now real incentives for doing the right thing, and real disincentives for doing the wrong
things.

As never before, there are huge organizational advantages from behaving ethically, with
humanity, compassion, and with proper consideration for the world beyond the boardroom and
the shareholders:

1. Competitive advantage - customers are increasingly favoring providers and suppliers who
demonstrate responsibility and ethical practices. Failure to do so means lost market share,
and shrinking popularity, which reduces revenues, profits, or whatever other results the
organization seeks to achieve.

2. Better staff attraction and retention - the best staff want to work for truly responsible and
ethical employers. Failing to be a good employer means good staff leaves, and reduces
the likelihood of attracting good new-starters. This pushes up costs and undermines
performance and efficiency. Aside from this, good organizations simply can't function
without good people.

3. Investment - few and fewer investors want to invest in organizations which lack integrity
and responsibility, because they don't want the association, and because they know that
for all the other reasons here, performance will eventually decline, and who wants to
invest in a lost cause?

4. Morale and culture - staff who work in a high-integrity, socially responsible, globally
considerate organization are far less prone to stress, attrition and dissatisfaction.
Therefore they are happier and more productive. Happy productive people are a common
feature in highly successful organizations. Stressed unhappy staffs are less productive,
take more time off, need more managing, and also take no interest in sorting out the
organization’s failings when the whole thing implodes.

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5. Reputation - it takes years, decades, to build organizational reputation - but only one
scandal to destroy it. Ethical responsible organizations are far less prone to scandals and
disasters. And if one does occur, an ethical responsible organization will automatically
know how to deal with it quickly and openly and honestly. People tend to forgive
organizations who are genuinely trying to do the right thing. People do not forgive, and
are actually deeply insulted by, organizations who fail and then fail again by not
addressing the problem and the root cause. Arrogant leaders share this weird delusion that
no-one can see what they're up to. Years ago maybe they could hide, but now there's
absolutely no hiding place.

6. Legal and regulatory reasons - soon there'll be no choice anyway - all organizations will
have to comply with proper ethical and socially responsible standards. And these
standards and compliance mechanisms will be global. Welcome to the age of
transparency and accountability. So it makes sense to change before you are forced to.

7. Legacy - even the most deluded leaders will admit in the cold light of day that they'd
prefer to be remembered for doing something good, rather than making a pile of money
or building a great big empire. It's human nature to be good. Humankind would not have
survived were this not so. The greedy and the deluded have traditionally been able to
persist with unethical irresponsible behavior because there's been nothing much stopping
them, or reminding them that maybe there is another way. Alas, this would no longer be
the case. Part of the re-shaping of attitudes and expectations is that making a pile of
money, and building a great big empire, are becoming stigmatized. What's so great about
leaving behind a pile of money or a great big empire if it's been at the cost of others' well-
being, or the health of the planet? The ethics and responsibility zeitgeist is fundamentally
changing the view of what a lifetime legacy should be and can be. And this will change
the deeper aspirations of leaders, present and future, who can now see more clearly what
a real legacy is.

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Suggestions:

Ethics are talked about frequently and addressed in the news when unethical decisions are
found. Sadly, people do not hear about ethics when others are engaging in ethical behavior on a
daily basis. Keep in mind that things that are not illegal may be unethical. Ethics are an
individual belief system that consists of knowing what is right and wrong. Ethics can vary person
to person. Ethics is in part analyzing decisions, beliefs, and actions. Within the business context,
businesses are expected to have good ethical values and act socially responsible. The problem is
that the ethics of a business is a mixture of individual sets of ethics. This is why it is important to
have good individuals as employees. It is also equally important that when you go to work
somewhere that you feel like you share the values of those you work with. Ethics is not just
talking about the right thing. It is doing what is right in every decision that is made.

Social responsibility can be an example of ethical behavior. It is enhancing society in

general. However, a business can’t afford to go around doing good deeds if there is no potential
pay off. If the business were to loose too much money, then it would cease to exist, hurt
customers, and leave employees jobless. There are some that argue that social responsibility is
shown only when companies go beyond what is optional, and really intend to create a benefit for
others besides the company. Additionally, some companies may not benefit from some forms of
social responsibility. These businesses should focus on what they do best as a business and give
back what they can. Examples of socially responsible behavior range from projects that raise
money for research on diseases, raising money for the needy, requiring workers to volunteer
within the community, recalling products that may be dangerous, promoting recycling, and
offering free services to the disadvantaged.

There are innumerable ethical dilemmas that may arise in a business setting. Some of
them are more obvious while some of them are more obscure. There is a simple basis that helps
keep decisions in perspective. Businesses should operate in a manner that is legal, profitable,
ethical, and within social norms. By being within social norms means that you need to use
society to gauge if your decisions are appropriate. Some cultures would define what is ethical

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differently from other cultures. Due to the fact that all businesses need to be profitable,
sometimes there is an over emphasis on making more money. Social norms should govern what
is appropriate to compensate individuals as well as to charge customers. Profit expectations and
goals should not require a business to cut corners in an unethical way or to misrepresent or twist
facts.

Then where do ethics come from? People begin to develop their internal beliefs from the
time they are small children. Factors such as the conditions that an individual grows up in affect
the way that they see the world. For example if a child was raised in a household with a lot of
violence, they might feel that fighting is okay. The beliefs of the peers around you may influence
how you see things. It is human nature to want to belong and some are more apt to give into peer
pressure. People have a lot in common with their peers due to similar values in the first place.
However, it is hard to find two people that feel exactly the same about every situation. Some
people would feel that if they found money that they should be able to stick it in their pocket and
keep it. Others would feel as if they should take it to the lost and found area. Keeping money that
you find on the ground in a public place is not illegal, but some people would not be able to
benefit from a situation while the person who lost it could be potentially found. Powerful
situational factors may cause people to compromise their values and resort to measures that they
would not normally take. If someone is having financial problems, then they are more likely to
steal. An individual that is very angry with another person may have a hard time being objective
and fair.

Then why do people engage in unethical behaviors? Many people feel that they won’t be
caught. An employee that steals a few dollars out of petty cash may eventually result to taking
large amounts of cash if they are never caught. Someone with lots of authority may feel like they
can cover their tracks by lying to subordinates. Some people are unethical because they can
justify what they are doing. If an employee sees other people not being punished for unethical
behavior, then they may feel like they should be able to do it to. Some individuals make a poor
choice and instead of coming clean about it feel the need to make more choices to cover it up.

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Once bad decisions are made, they tend to get worse until they are eventually caught. The
biggest reason people are unethical is because they feel that they can gain from it, or that they
need to hide something that can hurt them.

There are many things that an organization can do to facilitate good ethical behaviors.
One of the best things to do is to make sure that the underlying culture of an organization
promotes strong values. People should not be punished for coming forward with problems. As a
matter of fact, workers should be allowed to communicate problems anonymously. Some
organizations have a phone number to call or a suggestion box. Always allow employees to share
any ethical concerns with authority above them when there are ambiguities about the right thing
to do. Include a code of ethics as a written document for employees to read. Develop brochures,
mission statements, and other media that express the company beliefs. Higher authorities within
the organization should possess the beliefs and demonstrate the values that they want to see their
employees have.

Another method for implementing ethical conduct is to make sure that unethical conduct
can’t occur. The ability to safeguard resources is an important function of internal controls.
Examples of internal controls are to make sure that more than one employee works with cash and
accounting related materials. This way there is more than one person who knows what is going
on and can identify theft. Other methods are to require signatures, to lock up valuables, use
security cameras, have employees rotate jobs, and randomly check employee work. The more
secure your business is, the less likely that individuals within the organization will make
unethical decisions.

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Barnett, T. and C. Vaicys: 2000, 'The Moderating Effect of Individuals' Perceptions of Ethical
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