1.1 The idea of corporate ethics

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. Some corporations have well defined ethical parameters and others don’t, or they sacrifice ethical behavior to profit and determine that gaining profit and power are the most desired motives. When discovered in this type of activity, there is often a strong backlash that results in losing profits. This suggests that even if the decision to adopt defined corporate ethics is purely motivated by profit, it may be good business.

The ways companies conduct business are multiple and complex, and corporate ethics  may operate on numerous levels. Ethical considerations can determine how a corporation competes at the business level with other corporations.

Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes.

Corporate ethics reflects the philosophy of business, one of whose aims is to determine the fundamental purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility.

Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. Issues concerning relations between different companies include hostile take-overs and industrial espionage. Related issues include corporate governance; corporate social entrepreneurship; political contributions; legal issues such as the ethical debate over introducing a crime of corporate manslaughter; and the marketing of corporations' ethics policies.

While corporate ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade. Many new practical issues arose out of the international context of business. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields include:

• The search for universal values as a basis for international commercial behaviour.

• Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP and [Corruption rankings].

• Comparison of corporate ethical traditions from various religious perspectives.

• Ethical issues arising out of international business transactions; e.g., bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.

• Issues such as globalization and cultural imperialism.

• Varying global standards—e.g., the use of child labor.

• The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries.

• The permissibility of international commerce with pariah states.

The success of any business depends on its financial performance. Financial accounting helps the management to report and also control the business performance.

The information regarding the financial performance of the company plays an important role in enabling people to take right decision about the company. Therefore, it becomes necessary to understand how to record based on accounting conventions and concepts ensure accurate records.

Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.

Very often it is held that business is not bound by any ethics other than abiding by the law. But still companies that violate obvious ethical practices can result in huge consequences.  Problems usually start off small, but build into bigger ones unless standards are truly set and followed.  With the pressure to achieve the numbers, bad decisions can be made.  This can be pressure on the customer service representative to wrongly fill an order, to senior management falsifying the financial health of the company.  

 

Some corporate ethics, however, are much more easily recognizable as being obviously ethically wrong.  To name a few:

 

• Money lost to Fraud

• Money lost to Embezzlement

• Accuracy of books, records, and expense reports

• Proper use of organizational assets

• Protecting proprietary information

• Discrimination

• Lying

• Over charging

• Charging for work that was not necessary

• Withholding needed information

• Abusive or intimidating behavior toward others

• Misreporting actual time or hours worked

• False insurance claims

• Kickbacks and bribery

• Proper exercise of authority

• Theft of business equipment and supplies

• Trading or accepting goods for unauthorized favors

• Moonlighting, which causes poorer work performance

• Knowingly ignoring the health and safety of employees

• Sexual harassment

• Evading someone’s privacy

As part of more comprehensive compliance and ethics programs, many companies have formulated internal policies pertaining to the ethical conduct of employees. These policies can be simple exhortations in broad, highly generalized language (typically called a corporate ethics statement), or they can be more detailed policies, containing specific behavioral requirements (typically called corporate ethics codes). They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters.

An increasing number of companies also require employees to attend seminars regarding business conduct, which often include discussion of the company's policies, specific case studies, and legal requirements. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct.

Many companies are assessing the environmental factors that can lead employees to engage in unethical conduct. A competitive business environment may call for unethical behavior. Lying has become expected in fields such as trading.

Not everyone supports corporate policies that govern ethical conduct. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment.

Others believe that corporate ethics policies are primarily rooted in utilitarian concerns, and that they are mainly to limit the company's legal liability, or to curry public favour by giving the appearance of being a good corporate citizen. Ideally, the company will avoid a lawsuit because its employees will follow the rules. Should a lawsuit occur, the company can claim that the problem would not have arisen if the employee had only followed the code properly.

Sometimes there is disconnection between the company's code of ethics and the company's actual practices. Thus, whether or not such conduct is explicitly sanctioned by management, at worst, this makes the policy duplicitous, and, at best, it is merely a marketing tool.

Jones and Parker write, "Most of what we read under the name business ethics is either sentimental common sense, or a set of excuses for being unpleasant." Many manuals are procedural form filling exercises unconcerned about the real ethical dilemmas.