Code Of Business Ethics: Do They Really Work?

Understanding the Importance of Ethics in Business

Question:

Do codes of Business Ethics really work?

The word “ethics” is defined as the set of rules that allow one to distinguish between what is right and wrong, further encouraging one to do the right thing. It can be said that ethics let individuals decide upon the best possible course of action especially when caught up in situations where they may not be sure of what should be done (Bornstein, 2010). Similarly, ethical behaviour refers to the behaviour that conforms to our ethics; it is simply based on our values such as responsibility, justice, respect, trustworthiness, good citizenship, caring & our obedience towards moral rules; moral rules refer to the rules that we use while deciding on what is good or bad.

When discussing ethics, one should know that these are simply based on the beliefs of an individual along with the standards defined by the society. Ethics vary from culture to culture, situation to situation and person to person. When discussing ethics in the context of ethics, it is important to understand that business ethics are simultaneously linked with both, societal & individual ethics i.e. those who we buy products from (company) and who we work for. The following essay discusses “Code of Ethics” and aims to strategically answer the question “Do codes of Business Ethics really work?” In order to develop a thorough understanding of the importance and relevance of the code of ethics, it is highly essential for one to recognize what is truly meant by code of ethics.

Any day to day business faces several ethical questions regarding the service they provide their customers with or the products that they manufacture and sell or their conduct of dealing with members from within and outside the company (Champoux, 2012). For this reason, several companies follow a code of ethics. Code of ethics refers to a set of documents that exclusively explains how employees are to respond ethically in the different situations they face on a daily basis. This code of ethics is particularly useful at the time of occurrence of problems; it allows different individuals to solve a difficulty using a similar approach. Several programs have been established that educate individuals on how to behave in an ethical manner

 However, the problem or concern that arises while ensuring the application and creation of code of ethics is “where to draw the line when deciding between what is right and wrong?” How are we to decide whether if a particular behaviour of conduct will be considered appropriate and acceptable in context of business? For instance, would it be wrong for a politician to call up a dear banker friend and ask for loan assistance regarding a business loan? Or would this be seen as using “political influence” for the purpose of resolving personal matters. Often in such cases, it becomes essential for one to question oneself whether if the course of action will result in any type of sufferance for either of the parties involved (Debaljak, 2008). There isn’t necessarily always a need of code of ethics or set of guidelines when deciding if a course of action is wrong.

Types of Code of Ethics that Have an Impact

Ethical dilemma refers to a moral problem that has both, potential right & wrong answers and often occurs when decisions are made by weighing morals & values against competiveness & profitability. For instance, some ethical dilemmas include of disposal of toxic waste, downsizing of staff, cost control, pollution control, changing law & technology, allocation & depletion of resources that are scarce in quantity, product safety, woman and minority discrimination and employee rights (Frederick, 2010). For the purpose of solving such dilemmas, it becomes of utmost importance to work honestly, co-operatively, respectively, willingly, responsibly, loyally, dependably & with pride & integrity. One should understand that the ethical dilemmas that we encounter on a daily basis and the means of resolving such dilemmas continue to change and develop with time.

So what would happen if an ethical dilemma remains unresolved? What if individuals choose not to behave ethically? Several scenarios take place in daily life, where individuals face ethical dilemmas and resolve it by choosing to behave unethically. Several accounting scandals and frauds associated with business matters have become major issues of concern. The crime of fraud simply involves the act of lying and pretending. Several cases associated with the act of misleading customers so as to maximise profit, have come up in the past (Genest, 2005). An act banning such activities was established in 2002; it prohibited any projection of misleading or false advertisement along with business comprising of “bait & switch” selling.

Code of Business Ethics: Do they really work?

In order to answer the question “Do the code of business ethics really work?” one requires having a thorough understanding of whether if codes have an impact or not and if so, then what type of codes. The following section specially focuses on the types of codes that have an impact.

When creating ethical codes, legal adequacy, inclusiveness of concepts and satisfying critics become the underlying focus; these also happen to be the aspects of focus that one is mistaken about. The codes of ethics that usually have an impact are those that question the behavioural, organisational and political objectives of any given business. For this reason, it is of utmost importance to obtain a clear and definite understanding of the behavioural, organisational and political beforehand.

Behavioural objectives simply revolve around the idea of what type of behaviour should be encouraged or discouraged (Minztberg, 2002). Often several codes give result to consequences that are unintended for due to minimal clarity regarding the expected behavioural impact. Similarly, organisational objectives are of critical importance; such codes are designed in order to protect the organisation’s reputation. This again, solely depends upon the type of reputation that the organisation aims to maintain. Though, one should note that any broadly applicable codes should and are required to take into account the integrity of all of the missions falling under it.

Several codes are inclusive of political objectives; the reality is that all ethical codes comprise of political objectives and many codes are not established until a crisis i.e. codes of ethics are often instituted in response to frauds, corruption scandals or external pressure of stakeholders.  Any codes that successfully align the code’s function with the political leadership purpose, also effectively meet the political objectives of legislature. Though, if to speak of its “downside,” it would be none other than corruptive leadership.

Behavioral, Organizational, and Political Objectives of Ethical Codes

Furthermore, codes that do not promise too much tend to have an impact; codes are required to exhibit their importance by creating a concrete change rather than promising unattainable aspirations (Omidyar, 2011). They should target areas of vulnerability and focus on bringing about a change since it will result in increased credibility of the code along with reality & perception. Similarly, all successful codes tend to be supported with feedback received from clients and employees. The codes of ethics are continuously assessed for their success and failure by considering all the available survey and aggregate data. This data not only allows administrators to indentify the code’s effectiveness and success but also generates insight regarding the necessary changes or reallocations that are to be made.

Any codes that give raise to unrealistic expectations tend to fail the most; it is necessary to note that codes succeed due to their successes and these successes must be targeted along with being reasonable in nature. In case the number of failures outnumbers the number of successes, the resulting outcome is similar to a spiralling effect i.e. more & more violations seem to take place. Similarly, any codes that control “too much” tend to fail miserably; their primary aim is to establish a regime that allows employees to work effectively without having to deal with any ethical dilemmas (Porter, 2002). Research suggests that public cynicism in an unanticipated and inevitable consequence of creating ethic codes and that it should be taken into consideration while designing the ethics program.

As previously mentioned, the support of institutional systems is often linked with the success of the code. However, support of excessive number of such systems can be equally problematic. By holding too many committees responsible for interpretation of code of ethics, the number of ethical advices received would be countless and would vary from person to person, resulting in confusion. This may also lead to employees perceiving favouritism within the organization which further allowed them to get away with whatever they want. Another reason explaining the failure of code would be the shift in the political will; due to the changes in political leadership, several changes within the policy agendas can be expected; often politicians engage in criticizing ethic codes and regard them as being ineffective which in turn results in unemployment along with changes  and replacement of the entire ethics system. It might be several years before the new system is set and operating (Sabeti, 2011).

Additionally, lack of a viable legal system in countries often results in failure of code; laws dealing with corruption must be implemented and practiced. Coping with the gaps in the legal system, makes it difficult for ethic codes to function adequately. Similarly, professionalism is another major aspect affecting the code’s success. If the employee do not feel motivated enough to accomplish their work and their missions, it will be very difficult for the code to effective operate (Sabeti, 2011). One needs to understand that for codes to be used as a means of building professionalism, if requires enough professional public service.

Another reason why codes fail to work would be exclusion of the business community from its development and operation. The standards of public service is of utmost importance when it comes to determining their vulnerabilities which in turn are used as a means of planning effective rewards that encourage ethical behaviour. Also, by aligning the standards off the business with those of the government, a profound impact can be made. In addition, organisations should ensure that they do not copy of codes from a different organisation that they might admire (Sabeti, 2011). There is no valid reasoning for why the organisation cannot establish and implement its own codes of ethic and codes of conduct; it is very easy to identify the “lack of fit” within the organisation in such cases. This “lack of fit” may also be evident in cases when the ethic codes become old and irrelevant due to the changing dynamics of the government and organisation. With the increasing technological changes, the codes take no time in becoming outdated and thus, are required to be changed or update at regular intervals of time.

Conclusion

Ethics vary from culture to culture, situation to situation and person to person. When discussing ethics in the context of ethics, it is important to understand that business ethics are simultaneously linked with both, societal & individual ethics i.e. those who we buy products from (company) and who we work for. Code of ethics refers to a set of documents that exclusively explains how employees are to respond ethically in the different situations they face on a daily basis. This code of ethics is particularly useful at the time of occurrence of problems; it allows different individuals to solve a difficulty using a similar approach (Shaw, 2013).

So, to answer the question “Do the code of business ethics really work?” Codes of business ethics may not necessarily be successful until or unless a clarity regarding the behavioural, organisational and political objectives is received. Arriving upon a definite conclusion i.e. saying whether codes really work or not, is rather difficult. As mentioned above, several aspects impact the success of ethic codes; in other words, the success of ethic codes is dependent on factors such as objective of the code, customer expectation, institutional support, shifting political will, viable legal system, professionalism & professional public service, changing organisational & technological dynamics and time. 

References

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Champoux, V., Durge, J., McGlynn, L., 2012, ‘Corporate Facebook pages: when “fans” attack’, Journal of Business Strategy

J., Krkacˇ, K., 2008 ‘’Me, myself & I’: practical egoism, selfishness, self interest and business ethics’, Social Responsibility Journal

Frederick, H., H., Kuratko, D., F., 2010, Entrepreneurship 2e, Cengage, South Melbourne.

Genest, C., M., 2005, ‘Cultures, organizations and philanthropy’, Corporate Communications: An International Journal

Mintzberg, H., Simons, R., Basu K., 2002, ‘Beyond Selfishness’, MIT Sloan Management Review,

Omidyar, P., 2011, ‘EBay’s Founder on Innovating the Business Model of Social Change’, Harvard Business Review

Porter, M., E., Kramer. M., R., 2002, ‘The Competitive Advantage of Corporate Philanthropy’, Harvard Business Review

Sabeti, H., 2011, ‘The For-Benefit Enterprise’, Harvard Business Review

Shaw, W. H. 2013, Moral Issues in Business, 2nd Edition, Cengage Learning.