Ethics and culture

ETHICS AND VALUES IN BUSINESSEthics and Values in Business

To start off with a simple question.....

All companies have ethical values and codes of conduct. But

EMRON

LEMAN BROTHERSGESCARTERA

PARMALAT

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Do they apply them correctly

when they do business?

The concept of business ethics

Business ethics are the set of moral principles or guidelines governing or influencing conduct in organisations doing business.

As the standards which organisations use when interacting with individuals and in business relationships, the ethics of a particular organisation can be diverse.

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What is business ethics?

Many organisations have already gained a bad reputation just by starting up in business. For some people, business organisations are only interested in making money. Making money is not wrong in itself. What really matters is how individuals and organisations conduct themselves when doing business.

Good business ethics should be part of every business. There are many factors to be taken into account. When an organisation does business with another individual or organisation whose conduct is not ethical, is the first organisation also considered to be acting unethically because of its business relationship with such individual or organisation? Some people would say yes. The first business has a responsibility and it is now a link in a chain of unethical businesses.

Many global businesses, including most of the major brands used by the public today, do not seem to appreciate the need for good business ethics. Many major brands have been fined millions for breaching business laws on ethics.

Money will always be the deciding factor.

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What is business ethics?

If an organisation does not adhere to business ethics and breaks the law, it is usually fined. Many organisations have broken anti-trust, ethical and environmental laws and have been fined millions. The problem is that the money that these organisations make is often much higher than the fines which are imposed on them. Huge profits make organisations blind to business ethics.

An organisation may be a multi-million seller, but does it use good business ethics and do people care? There are popular soft drinks and fast food restaurants that have been fined time and time again for unethical behaviour. Business ethics should eliminate exploitation at all levels, whether it is employing young children to make sneakers or paying low salaries to coffee-serving staff. Business ethics can be applied to everything from the cutting-down of trees to sell paper to the importing of coffee from certain countries.

In the end, it may be up to the public to make sure that an organisation conducts its business ethically. If the organisation’s profits are high, it may not wish to pay much attention to ethical conducts. There are many organisations which pride themselves in their correct business ethics, but in today’s competitive world, they are few and far between.

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What is business ethics?

Let’s get down to basics.....................

Ethics

• To talk about ethics, we have to talk about philosophy as ethics, also known as moral philosophy, is a branch of philosophy that deals with moral principles.

• The most widely-accepted understanding of the word “ethos” comes from Aristotle who defined it in the following terms: temperament, character, habits, manner.

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The nature of ethics

• Ethics is a philosophical discipline.

• Ethics deals with the study of morals.

• Ethics is the rules or standards by which we should live.

• Ethics is reflexive in that it studies actions not as they are, but how

they should be.

• Ethics is practical in the sense that it is concerned with human

actions.

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How is ethics defined?

• Ethics is defined as:

“A set of principles which guide us in our conception

of life, people, judgements, actions and morals”

• When we talk about ethics in business, ultimately we are talkingabout responsibility.

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Responsibility and its different meanings

• Liability to pay the cost of something, e.g. Drivers of motor vehiclesare responsible for damages caused by their vehicles.

• Commitment, obligation, duty to do something and assume theconsequences for our actions. e.g. My responsibility as president willbe to lead our country to prosperity.

• Cause of something, e.g. Cigarette smoking is responsible for a highpercentage of deaths from lung cancer.

• Being able to be blamed for something, e.g. He is mentally ill and hecannot be held responsible for his actions.

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Legal responsibility

• Legal responsibility arises when a person fails to carry out a duty ofconduct which, unlike moral principles, is established by a body otherthan the person in question (mainly the State through laws) and iscoercive.

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Corporate ethics

Does it exist?

Is it always correct?

Corporate ethics

• Ethics are the fundamental pillar of corporate governance and itsdefining factor.

• Ethics are what determine the general public’s perception ofcompanies.

• For this reason, companies should have a code of ethics, which theyshould provide to shareholders, staff, clients, suppliers and theauthorities of their sector.

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Ethics and companies. Ethics and directors

• In general, all ethics aim to establish ideal standards of conduct.

• Deontological ethics are concerned with the duties which areimposed on people according to the various areas or fields of theirlives.

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Ethics and competition

• Fair competition with fines for unfair competition.

• Fair competition using legal weapons, i.e. quality and a low price dueto efficiency.

• Advertising based on truths, not on lies or half-truths, and withoutdenigrating competitors.

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Virtues of the businessman

• Businessmen should be hardworking, imaginative, upright.

• Their duties should be based on the truth, firstly the duty to betruthful and transparent in their dealings and to ensure the quality ofthe products and services which they offer.

• Secondly, the duty to be prudent and refrain from using informationwhich they obtain to the detriment of their competitors.

• Thirdly, the duty to be bold and assume risks which ultimately arewhat justify their gains.

• Their actions to obtain their gains should be moderate and restrainedand should not be taken at all cost.

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Suppliers, clients and workers:Climate for values

• The climate should be one where values are governed by regulationswhich safeguard the equilibrium and which do not impose morestringent rules for certain parties than others.

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Creating value in companies

• The basis of “value” in companies lies in the way directors run theirbusinesses.

• Being a “competitive director” is not enough. Directors shouldbecome leaders who know, above all, that they are people and thatthey are surrounded by people.

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Three values created by companies

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• financial

• psychological

• ethical

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Professional ethics

• Professional ethics regulate the activities of a profession. Professionalethics is a discipline of applied ethics as it refers to a specific part ofreality.

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Relationship of business ethics and corporate actions

• In one of Domenec Melé’s studies, he refers to the effect which ethicalactions and morals may have in business relationships.

• According to him, these actions may be of the following types:

Work motivation.

Practical wisdom (prudence).

Corporate culture.

Reputation or good image.

Gaining trust.

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Work motivation

• Obviously, work motivation largely depends on the worker’s level ofsatisfaction and the employment climate as well as the human valuesand qualities of his work colleagues and superiors.

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Practical wisdom

• When faced with situations and events that arise, decision-makingrequires prudence as well as maturity, initiative and a sense ofresponsibility.

• In addition to these qualities, people who provide services need tohave managerial skills.

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Corporate culture

• Corporate culture is knowledge, experience and practices or ways ofdoing business which are typical in an organisation and are based onthe values and convictions of its members.

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Strong culture versus weak culture

• Strong cultures in organisations where key values are highly regardedand widely shared by their members have a bigger impact on workersthan weak cultures.

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• The greater the number of members of an organisation who accept itscore values and the greater their commitment to such values thestronger its culture is.

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How is culture transmitted?

How do workers learn about corporate culture?

• Culture is transmitted to workers in a number of ways, the mostfrequent of which are:

Stories

Rituals

Material symbols

Language

Let me give you a visual example.

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Stories

• Stories of the organisation are usually about key events or peoplesuch as the organisation’s founders, rule-breaking, rags-to-richesstories, staff reductions and relocations, reactions to past mistakes,and solutions to problems.

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Rituals

• Rituals are repetitive sequences of activities which express andreinforce an organisation’s key values and its most importantchallenges. They help an organisation decide who is essential for theorganisation and who is not.

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Material symbols

• Examples of material symbols are the physical layout of anorganisation’s business premises, the clothes worn by workers, thecompany vehicles provided to executives, whether the organisationhas its owns aeroplanes. etc.

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Language

• Many organisations and their divisions and departments uselanguage as a means of identifying their members. Merely by usingspecific language, members show that they accept the organisation’sculture which helps to preserve it.

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Reputation or good ethical image to attract clients

• A good reputation of loyalty and decency is one of the main assets oforganisations which all workers should promote with the utmostcare.

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Gaining trust

• A certain amount of trust is always required for large economicoperations.

• Carrying out operations requires:

A certain length of time for negotiations.

The favourable testimonial of a known third person.

More than just superficial relations.

Ethical actions and professional competition at all times.

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june 2012