Business firms of all types and sizes regularly face and even struggle with ethical decisions since many factors and stakeholders – customers, investors, employees, government, and the general public – are involved. To maintain their market share in this ever-changing, competitive world, they need to avoid ethical failures. Business ethics include issues which are the heart of social responsibility, such as “employee relations, philanthropy, pricing, resource conservation, product quality and safety, and doing business in countries that violate human rights.”[i] Ethics are inconsistent with quick profit maximization, but they are worth investing in for long-term success. Moreover, business firms must behave ethically to satisfy consumers who contribute significantly to their success. Consumers have the rights to be safe, to be informed, to choose, and to be heard. The bankruptcy of Enron – the company which led to one of the biggest audit failures – and the closure of Rid Pharmaceuticals Limited – the company which was responsible for the death of infants in Bangladesh – show that unethical firms cannot escape the law forever and that the outcome of unethical practices is always negative. Therefore, businesses should develop mechanisms and implement courses of action to prevent unethical behaviour and to encourage business ethics.
Discussion of the Issue
Introduction: Business ethics are “standards of conduct and moral values involving right and wrong actions arising in the work environment.”[ii] Firms are responsible to different constituencies, such as customers, suppliers, investors, government, employees, and the general public. When firms try to satisfy all of these constituencies simultaneously, conflicts in interest arise. Ethics play an important role in shaping the decisions and actions that firms take while resolving the conflicts.
Ethical failures can lead to “lawsuits, indictments, and judgments against firms.”[iii] It will have a negative impact on a firm’s image. For the long-term success, a business must take ethics into consideration at the expense of quick gains. In addition, firms realize that they are responsible to the “larger society that endorses their creation through various laws and regulations and supports them by purchasing their products and services.”[iv] Ethics are complementary to corporate social responsibility, which deals with society’s welfare. Therefore, firms, in addition to making profits, uphold high moral values and engage in corporate philanthropy. For instance, Johnson and Johnson is a company, manufacturing healthcare products, which demonstrates strong commitment to business ethics and corporate social responsibility with its code of conduct called Credo.[v]
The code states that the firm is committed to selling products and services of superior quality. It strives to keep production costs at a minimum in order to maintain reasonable prices. Great emphasis is placed on customer satisfaction. It also tries to ensure that suppliers make fair profits. It provides job security, fair and sufficient compensation, and comfortable working conditions for the employees. Employees are encouraged to voice their opinions, and any form of discrimination within the firm is eliminated. The code also mentions that the company pledges to support charities and promote improvements in health and education. It agrees to bear taxes. It also takes interest in keeping the environment and the properties and natural resources used in a good state. It harmonizes the concept of profit maximization with ethics as it realizes that businesses must make profits to cover costs and to engage in community service. It aims to invest heavily on research and development, innovation, new equipment, and new facilities. It maintains reserves for critical times. It is determined to satisfy stockholders with a good financial return.