Since several years, the term “business ethics” has been used and discussed daily in the media, mission statements, political speeches and in the business and academic world (Mullins 2013, De George 2014).
Several unethical business events happened the latest years. For example, Enron’s fraud scandal where accountancy rules were manipulated and enormous losses were hidden, Tesco’s horsemeat scandal, the Libor scandal in the financial services sector and the collapse of the apparel factory in Bangladesh where Primark produced their clothes and 1,100 people were killed (Forbes 2013, Burke 2013, Uzel 2013). Dominique Strauss-Kahn, the French former chief of IMF sexually attacked a hotel maid in 2011 when she tried to clean his room (Williams 2012).
As a result of the increasing scandals in the business world, there’s a rising awareness of ethics and social conscience. Customers demand higher ethical standards. Furthermore, they want products that don’t destroy the planet or clothes that don’t come from a sweatshop (Mullins 2013, Uzel 2013). Additionally, in many universities the subject Business Ethics has been implemented as an academic discipline to impose values (Berinde and Andreescu 2013). Furthermore, governments imply legislations concerning ethics such as anti-bullying and equal treatment laws (Perryer and Scott-Ladd 2013).
What does business ethics mean?
Business ethics focuses on the set of individual and collectively rules, actions and moral standards achieving the economic goals of a company (De George 2014, Berinde and Andreescu 2013).
An ethical company has shareholder and as well stakeholder view. A company should not only have the goal of making high profit and remuneration for staff but it has as well a social responsibility (Mullins 2013). The implication of ethics can promote the sustainable development and strategy of a company and consequently give the business a competitive advantage (Berinde and Andreescu 2013). A company obtains a positive corporate image by using renewable resources, not employing child labour in its factories and providing good training and development for staff (Mullins 2013). As a consequence, this positive brand image will be good for sales.
An ethical company represents reliability, honesty and trustworthy and serves stakeholders inside and outside the company (Mullins 2013). Business ethics also has to do with accepting diversity, respecting human rights, labour standards, the environment and no corruption (Mullins 2013). Moreover, Corporate Social Responsibility means as well transparency and openness, contribution to the communities, safety of products, unambiguous information and providing excellent products and services to your customers (Mullins 2013).
The good examples
Ethisphere ranked the World’s Most Ethical Companies of 2014. For example, in the apparel industry Gap Inc, Hennes & Mauritz AB and Levi and Strauss & Co are recognized as companies doing business ethically (Ethisphere 2014).
In 2003, the Co-operative group launched a new ethical strategy for 5 years in order to become “The Most Socially Responsible Business In UK” (Bertini 2013). The number of women on their board will be increased, higher animal standards required and local communities will be helped (Bertini 2013).
In the video, entrepreneur Sir Richard Branson states that businesses need profit to survive but also have to give back to society and solve the world’s problems.
In order to further improve ethical business, managers can adopt ethical leadership by setting out an ethical mission statement and code of conduct. Furthermore,the ethical leader can change the value and beliefs of a company to more ethical ones (Mullins 2013). When hiring employees, managers should attract candidates with ethical views in line with the organisations values (Mc Ferran, Aquino and Duffy 2010). He can ask a candidate during the interview which actions he or she would take to improve ethics in the company. Additionally, managers have to identify aspects of the organisation that need further ethical improvement and set ethics as a corporate value (Mullins 2013).
The bad examples
An example of an unethical company is the Belgian company Lernout and Hauspie founded in 1987. The company developed speech-recognition technology and had promising future perspectives to become global leader in its market. In 1995 it was noted on the Nasdaq stock exchange and thousands of technology investors and Belgian share buyers put their money in the company (Forelle and Maremont 2010). Until in 2000, the first doubts came ahead when a Wall Street Journal investigation found that the company’s profit numbers were far to positive (Forelle and Maremont 2010). In 2001 the company was declared bankrupt because of wrong revenue records in the financial statements and fraudulent bookings of South Korean customers (Forelle and Maremont 2010). Founders were given sentences of 5 years and shareholders lost all their invested money (Forelle and Maremont 2010). US company ScanSoft Inc acquired Lernout and Hauspie’s scan software (Forelle and Maremont 2010).
Lernout and Hauspie clearly didn’t have an ethical organisational culture and didn’t treat their stakeholders and shareholders with the highest moral principles, integrity and neither with dignity (Perryer and Scott-Ladd 2013).
A solution to avoid those situations in the future could be for businesses to set out codes, rules and conducts. These rules could be about fair dealing with customers, employees, suppliers and protection and proper use of the company assets (Hopkins 2013). These can give a clear guidance and direction to employees about what is expected from them and it sends a message to the outside world about the company’s standards (Mullins 2013). However I argue whether the set code of conduct will be used in the daily work routine and if it’s not only about theory. For example, in the 3 hotels where I worked, the first day I had to quickly read and sign a code of conduct but afterwards I never took a look back at it again. Employees may hear a companies’ mission statement about ethics but when the “communication fanfare” is over, what is left and what will be implied in the organisation (Mullins 2013)?
Lance Armstrong is an example of an unethical public figure. Finally in 2013, after years of denials, he told via Oprah that he doped. The cyclist who survived cancer denied for 13 years and called people who accused him “liars” (Fry 2013). After that, he lost all his major sponsors and stopped the activities of his Livestrong foundation (Fry 2013). Because of his unethical behaviour, Lance lost respect from his fans and sponsors, he got a bad image and lost profitability.
From my point of view, a company should not only measure financial indicators against the competition but as well the broader performance with the Corporate Social Responsibility View (Mullins 2013). Businesses should imply ethics in order to adapt a positive brand image because everyone has quick access to a wealth of information about your company and it can affect the company’s brand image. Businesses should combine their strategy with business ethics.
Governments play a large role in promoting business ethics by implying legislation and interventions. They should fight against corruption, make laws on child labour and restraint from trading. For example, in 2012 the US banned BP because of the 2010 Gulf of Mexico Oil Spill (Financial Executive 2013).
A challenge could be that companies write an ethical statement but don’t take the Corporate Social Responsibility (CSR) serious. And what about a company in recession, should they spend money on CSR and worry about it? Is an ethically attractive company too idealistic? Will such a company survive in the current competitive global market? Moreover, employees can see ethical behaviour through different norms and standards (Perryer and Scott-Ladd 2013). For example, one person could think that frequent use of office supplies for personal use is not an abuse while others could think it is unethical and intolerable.
I can only support ethical and organic brands and hope one day every mission statement about ethics and code of conduct will be applied not only in theory but as well in practise.
Berinde, M. and Andreescu, A. (2013) ‘Business Ethics Implementation In The Organizational Culture Of Companies.’ Annals of the University of Oradea Economic Science Series [Online]22 (1), 44-53. Available from<http://web.a.ebscohost.com/bsi/pdfviewer/pdfviewer?sid=f7f99992-0f34-4fb3-beba-cd112cffda72%40sessionmgr4001&vid=7&hid=4207> [05/06/2014]
Bertini, I. (2013) ‘Co-operative launches new ethical plan’ [Online] Available from <http://blueandgreentomorrow.com/2013/03/14/co-operative-launches-new-ethical-plan/> [05/06/2014]
Burke, J. (2014) ‘Rana Plaza: one year on from the Bangladesh factory disaster’ [Online] Available from <http://www.theguardian.com/world/2014/apr/19/rana-plaza-bangladesh-one-year-on> [05/06/2014]
De George, R. T. (2014) A History of Business Ethics [Online] Available from <http://www.scu.edu/ethics/practicing/focusareas/business/conference/presentations/business-ethics-history.html> [05/06/2014]
De Standaard (2011) ‘Lernout & Hauspie: from hero to zero’ [Online] Available from <http://www.standaard.be/cnt/dmf20110724_109> [05/06/2014]
Ethisphere (2014) World’s Most Ethical Companies – Honorees [Online] Available from <http://ethisphere.com/worlds-most-ethical/wme-honorees/> [05/06/2014]
Forbes (2013) ‘5 Most Publicized Ethic Violations By CEOs’ [Online] Available from <http://www.forbes.com/sites/investopedia/2013/02/05/5-most-publicized-ethics-violations-by-ceos/> [05/06/2014]
Forelle, C. and Maremont, M. (2010) ‘Lernout & Hauspie Founders Guilty in Fraud’ [Online]Available from <http://online.wsj.com/news/articles/SB10001424052748703989304575503500899087566> [05/06/2014]
Fry, E. (2013) 11 most scandalous business events of 2013 [Online] Available from <http://fortune.com/2013/12/27/11-most-scandalous-business-events-of-2013/> [05/06/2014]
Hopkins, S. (2013) ‘How Effective Are Ethics Codes and Programs?’ Financial Executive [Online] 29 (2), 42-45. Available from <http://web.a.ebscohost.com/bsi/pdfviewer/pdfviewer?vid=8&sid=f7f99992-0f34-4fb3-beba-cd112cffda72%40sessionmgr4001&hid=4207> [05/06/2014]
McFerran, B., Aquino, K. and Duffy, M. (2010) ‘How Personality and Moral Identity Relate to Individual’s Ethical Ideology.’ Business Ethics Quarterly [Online] 20(1), 35-65. Available from <http://web.a.ebscohost.com/bsi/pdfviewer/pdfviewer?sid=f7f99992-0f34-4fb3-beba-cd112cffda72%40sessionmgr4001&vid=8&hid=4207> [05/06/2014]
Murray-West,R. (2013) Co-op Bank is losing its ethical edge [Online] Available from <http://www.telegraph.co.uk/finance/personalfinance/consumertips/banking/10135338/Co-op-Bank-is-losing-its-ethical-edge.html> [05/06/2014]
Perryer, C. and Scott-Ladd, B. (2013) ‘Deceit, Misuse and Favours: Understanding and Measuring Attitudes to Ethics.’ Journal of Business Ethics [Online] 121 (1), 123-134. Available from <http://web.a.ebscohost.com/bsi/pdfviewer/pdfviewer?sid=f7f99992-0f34-4fb3-beba-cd112cffda72%40sessionmgr4001&vid=8&hid=4207> [05/06/2014]
Uzel, S. (2013) ‘Scandals put ethics on agenda for global business’ [Online] Available from <http://www.yorkshirepost.co.uk/business/business-news/scandals-put-ethics-on-agenda-for-global-business-1-6169337> [05/06/2014]
Williams, M. (2012) ‘Dominique Strauss-Kahn settles sexual assault case with hotel maid’ [Online]Available from <http://www.theguardian.com/world/2012/dec/10/dominique-strauss-kahn-case-settled> [05/06/2014]