Business Ethics

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THE IMPORTANCE OF ETHICS TO THE ORGANISATION AND TO THE INDIVIDUAL

Ethics

  • has to do with the rightness or wrongness of the decisions and behaviours of individuals and the organisation of which they are members.

The famous philosopher and founder of most modern ethical thinking, Immanuel Kant said:

You cannot solve ethical problems unless you start off with the motivation to do what is right, rather than simply doing what is convenient, personally gratifying or picking a solution at random.

Being well-meaning provides a motivation, but the accountant needs more than the desire to be good.

He called this 'the good will.'

An older philosopher, Aristotle, suggested that the foundations of good ethical reasoning are laid by cultivating fundamental virtues in people.

Essentially, if people value and practise honesty, integrity and openness, not only will they want to do what is best, but they will have the fundamental ethical compass.

The CIMA Code of Ethics starts with this same approach.

Business ethics

  • is the application of ethical values to business behaviour.  

    Ethical issues in organisations are more common and complex than generally recognised.

Some ethical issues influence the decisions that employees make daily. Some ethical issues involve factors that blur the distinction between “right” or “wrong”.

As a result employees may experience ethical dilemma.

There is no simple rule for making ethical decisions but the following points may act as guidelines or considerations:

  1. The consequences 

    – that is, the end justifies the means

  2. The motivation 

    of the parties concerned

  3. Guiding principles 

    – for example, treat others as you would like to be treated

  4. Duties 

    – for example, based on religious codes

  5. Key values 

    – for example, the importance of human rights

Ethical considerations are important for both the organisation and the individual.

The following points highlight some reasons why ethics is very important for organisations.

  • Ethics is a driver for profitability rather than a burden

  • Ethics is a part of good corporate governance

  • Ethics reassures investors about the company's approach towards risk management

  • Ethics create a warm environment in which employees are more motivated to work

The following points highlight the importance of ethics to the individual:

  • Consumers may choose to buy ethical items, for example fairtrade products even if they are not always the cheapest

  • Employees will not blindly accept orders to act in a manner that they personally perceive to be unethical

Examples of Acceptable business ethics:

  • paying staff decent wages and pensions

  • providing good working conditions for staff

  • paying suppliers in line with agreed terms

  • sourcing supplies carefully

  • using sustainable or renewable sources

Ethical behaviour is likely to be favoured by:

  • Customers

    - resulting in higher sales volumes and / or prices

  • Employees

    - resulting in the attraction / retention of the best employees and increased employee productivity

  • Business collaborators

    - resulting in increased opportunities for profitable projects

Ethical behaviour reduces risk and gives access to cheaper funds which, in turn, increase project profitability.

Unethical behaviour will, at some point be discovered resulting in a damage to reputation and potential legal charges.

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