Category Archives: Business ethics

Ethics in Business – From Compliance to Commitment

Rana Group asked:

By the time this article goes to print all of us will surely have had our fill of news reports about Conrad Black’s infamous lawsuit. We’ll likely be numb to the never ending allegations of fraudulent practices at Nortel. But, how many of us as human resource professionals will be asking, ‘What does this have to do with me?’

It seems that, by and large, human resource professionals have been quite happy to have the accountability for their company’s business ethics and code of business conduct rest with their legal or audit departments. In so doing, human resource professionals miss an opportunity to help their companies shift from merely being compliant with the law to demonstrating their company’s firm and unwavering commitment to build an ethical business culture.

The ‘iceberg model’ helps us to better appreciate the influences that may undermine a company’s policies and practices with respect to business ethics. Think of the ‘the Law’ and your company’s Code of Business Conduct Policy as the tip of the iceberg, visible above the surface. Now, think about the influences that exist below the surface lurking within many companies. Things like:

? Pressures to conform (“Hey, we always take off early Friday afternoons, you need to join us or else someone’s going to take notice”)

? Desire to please (“I picked up the tab for a lunch I had with my boss. He told me it was the only way he could expense it without needing to get further approval. I did it because I wanted to stay on his good side!”)

? Accepted practices (“Don’t worry, we give box seat tickets to all our clients and they sure don’t have any problem with accepting them!”)

? Performance drivers (“Hey, maybe we should just alter our numbers a bit. If we do, we’re sure to be in the top category for a bonus this year!”)

When asked, most of us do not hesitate to say that we are ‘ethical’. In fact some people are offended when asked to sign a document confirming they have read and understood their company’s Code of Business Conduct Policy. However, what we fail to recognize and appreciate is our ability to rationalize our own behavior. Sometimes we justify our actions so convincingly that we no longer even perceive that what we are doing is inherently wrong or unethical. For example:

? “I’ll just pad my mileage claim this month, it’s not like I haven’t worked hard. The company owes it to me.”

? “I know I shouldn’t provide my son with supplies from the office, but university is so expensive and, I know this company can afford the photocopying I do and the pens and paper I take.”

? “If this company can afford a company jet, hey, they can afford for me to take a few sick days to ski!”

It is a slippery slope once employees believe they can justify actions and decisions that are fundamentally unethical. Reading a code of conduct policy and signing a piece of paper every year does little to help employees grasp and understand the essence of ethical conduct. Nor does it help employees apply good problem solving skills when they are faced with ethical dilemmas in the workplace. It may surprise some to know that virtually all the companies who have become household names (including Enron) as a result of their unethical business practices had well articulated policies and codes of conduct dutifully signed off yearly by their employees.

Few companies are making the effort necessary to address these underlying influences and regrettably, only those that do will truly build ethical cultures. By taking the following 7 steps, human resource professionals can play a critical role in helping their companies move beyond compliance, raising the bar to demonstrate their deep commitment to developing an ethical business culture.

1) Adopt a multi-disciplinary approach to building an ethical culture

2) Communicate your Code of Business Conduct in plain language

3) Ensure relevant policies, processes and practices align with your Code.

4) Develop ethical leadership

5) Gain employee buy-in

6) Facilitate reporting

7) Model the way

Adopt a Multi-Disciplinary Approach

Human resources must have a ‘seat at the table’ when matters of business ethics and code of conduct are discussed. That said, it would be wrong for human resources to act independently. Companies that are truly committed to developing ethical cultures adopt a multi-disciplinary approach that includes representation from their legal, financial, communications and human resource disciplines. Working together they develop a strategy that enables the development of an ethical culture that is truly sustainable.

Use Plain Language in Your Code

Most human resource departments do provide employees with a personal copy of their company’s Code of Business Conduct Policy at the time of hire. Many companies host their Code of Business Conduct and related policies on their intranet. However, few companies have taken the time to provide a document that is actually readable! By working with their partners in Communications, Human Resources can provide employees a document that is both easily referenced and easily read.

Align Policy and Practices

More than one company has been surprised to learn that upon review, some of their policies and accepted practices are not consistent with their company’s Code of Business Conduct Policy. Human resources can ‘lead the way’ by ensuring its policies and practices are ‘squeaky clean’; not only in the way they are written, but also, in the way they are executed. However, it is not only human resource policies that require review, virtually all corporate policies need to be reviewed in light of the company’s Code of Business Conduct Policy to achieve proper alignment.

Develop Ethical Leadership

Developing ethical leadership ought to be a primary goal of every leadership development program. Surely it is the role of human resources to ensure the topic of business ethics is adequately addressed in all leadership development programs. Not only do leaders need to know and understand their company’s Code of Business Conduct Policy but, they must also understand the role they play in facilitating an ethical culture. This is just as true for leaders at the frontline as it is for leaders at the executive table. Leaders often justify their own behaviors based upon what they see modeled by those to whom they report. Ethical leadership depends upon each leader understanding they are responsible and accountable for their personal actions and behaviors regardless of the actions of those at more senior levels of the company.

Demonstrating ethical behavior as a leader is inextricably linked to building trusting relationships, the cornerstone of many leadership development programs. However, while many of these programs address the matter of trust and trusting relationships, few make the link to ethical behavior and the expectations of leaders. Whether through instructor-led training or on-line training, every leader needs to have exposure to the topic of business ethics. Leaders must be fully cognizant of behaviors that develop a strong ethical culture and those that erode that culture. They need also to understand their accountability when employees raise ethical issues and/or report unethical behavior.

Gaining Employee Buy-in

Ethical cultures are built when employees, like leaders, have exposure to training that helps them differentiate between ethical and unethical behavior. Depending upon the size of your company this can be accomplished either through instructor-led or on-line learning modules. Regardless of the methodology, employees need to be exposed to different scenarios and situation
s that they may face within their own work. Employees need an opportunity to learn in a non-threatening environment what is appropriate and what is inappropriate. Your company’s Code of Business Conduct Policy is an important topic that must be addressed not only in all employee development programs but in your company’s orientation program for new employees.

However, learning in and of itself is insufficient. Building an ethical culture requires continuous reinforcement through a well thought out and on-going communication strategy and plan. Ethics needs to be woven into company newsletters, be reinforced through visual cues such as posters, and integrated into team discussions if a company is going to make significant head-way towards building a strong ethical culture.

Facilitate Reporting

Companies need to provide their employees with a means of reporting behaviors, decisions or actions they perceive are unethical and contrary to their company’s Code of Business Conduct Policy. This is best facilitated by providing access through a third party provider although many smaller companies encourage such reporting to their legal department or external legal counsel. That said, it is only through both educational and communication programs that employees understand their obligation to report unethical behavior and to realize that their company will fully support their actions provided, of course, that the reporting of unethical behavior is not maliciously motivated.

Model the Way

Finally, human resource professionals must model the way. For new employees, human resource employees are like a beacon signaling the strength of a company’s ethical culture. And, whether we realize it or not, the manner in which we conduct employment searches and implement recruitment practices sets the tone. Employees tend to assess the strength of a company’s ethical culture based upon their own personal experience and the experience of those with whom they have a close work relationship. They are sensitive to preferential treatment whether in regards to recruitment, compensation, performance management, or succession management and promotions. Human resource professionals must demonstrate through their actions an unerring commitment to ethical business conduct.

Since the Enron fiasco it’s hard to pick up a daily paper without seeing some reference to or allegation of unethical business practices. And, based upon these articles it would be easy for us to assume that unethical behavior is limited to those at the very top of organizations. This is simply not the case. While building an ethical culture depends upon the full commitment of senior executives to set the standard of acceptable behavior, each and every employee directly influences the strength of your company’s ethical culture through their day-to-day actions. Cleary, code of business conduct policies are insufficient in and of themselves to shape ethical behavior. Human resource professionals must help their companies move beyond compliance with the law and, they can do so by ensuring each and every employee develops the knowledge and skills necessary to build strong ethical cultures.

Business Ethics and Values Do Not Have Expiration Dates

Walk through the aisles of any grocery story or even convenience store, pick up any product and you will see an expiration date. These dates are for your consumer safety as well as to receive the most benefit from the nutrients within the food product.

Yet, recently, I have come to observe that many individuals in business who profess to be true professionals as well as those in government are demonstrating business ethics or values with expiration dates. Initially statements specific to their behaviors are made without a date. Then realizing that change is more difficult than originally expected or will take additional effort a date is added. If the added date is not made, a new date pops up.

The work ethics associated with these behaviors become a moving object. As new dates are added, the impact of the quality decreases to those who are on the receiving end of these expiration dated values.

For example, how many times have we heard that during the tenure of this leadership or management team it will be the most ethical in the organization’s history? Then as time moves forward, we hear, not from leadership, but outside sources about unethical behaviors. Then leadership makes excuses and sets a new expiration date.

Why business ethics or values now have expiration dates may be connected to the relativism that has affected the U.S. during the last several decades. Relativism has many definitions, but essentially means that everything is truth and is relative to the individual. In other words, values become moving targets or simply are now produced with expiration dates.

The recent meltdown of Wall street, the bailout of Wall Street, the ponzi schemes, the individuals who knowingly violate the law and believe that they are above it are all examples of values with expiration dates. Even before these incredible examples, many of us heard this expression, “Do as I say, not as I do.” This is a values statement with an expiration date.

So how do business leaders and true professionals avoid values with expiration dates? First, make sure that you have a values statement that has been clearly articulated within your organization. Everyone from the bottom up to the top down understands the specific acceptable behaviors and equally unacceptable behaviors.

Next, enforce the values statement. Recent surveys of college graduates and high school students show an increase in cheating and that cheating is acceptable. These surveys also reveal that these cheating young people believe that they have high ethics.

The old expression everyone does it is another justification of having a values statement with expiration dates. In other words it’s okay to cheat to get the best grade in school and when I leave school, I will no longer cheat. If you believe that, I have a bridge I would like to sell you.

Having a values statement may cost you some business in the short term. However, in the long term you will gain far more than any potential short term loses.

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Exercising Moral Integrity in Modern World

Recent Scandals In the wake of the Blagojevich scandal, others come to mind. The foibles of Former New York Governor Elliot Spitzer, former Florida Congr ssman Mark Foley and retiring Idaho Senator Larry Craig, to name a few. In the corporate area, Madoff’s $50 billion Ponzi scheme, caps off years of scandalous reports about Enron, Tyco International, and World Com. The moral faults of corporate leade s con inue to cost investors billions. Is there a modern day standard bearer to guide the common man?

Ancient Warrior Code
According to Shannon French, author, The Code of the Warrior: Exploring Warrior Values Past and Present, the essential element of a warrior’s code is to set definite limits on what warriors can and can not do. In this sense, warriors value honor, integrity, justice and a sense of what is right and wrong. To the ancient warrior, the discernment between right and wrong is like night and day. Clear, obvious, unquestionable. To them, there are no gray areas, no “that depends on what your definition of ‘is’ is “(Bill Clinton). To the warrior, if something is not right, he will not do it.

Ancient Warriors versus Corporate Warriors
In ancient times, one looked to the warrior for guidance to the light; to serve as defenders of moral integrity. Today, though, the warrior, or rather corporate warrior is perceived as mere profiteers. Neocons, using natural disasters, social unrest, changes in regimes and wars- have been used ‘as a natural ally’ of corporate interests. Naomi Klein, in her book, the Shock Doctrine, indicates that heads of,companies, representatives of municipalities stood in the rubble of Hurricane Katrina in New Orleans and thanked God for the solution to the problem of housing in New Orleans. Similarly, PW Singer, in his book, Corporate Warriors: The Rise of the Privatized Military Industry writes that private corporations working for profit have the ability to sway the course of national and international conflict.

Warriors of Light
Paulo Coelho, in his book, Manual of the Warrior of Light made this observation: “Sometimes the warrior feels as if he were living two lives at once. In one o” them he is obliged to do all the things he does not want to do and fight for ideas in which he does not believe…Then all that is needed is a little daring, and his two lives become one.” p 181. Ancient warriors carried out actions that brought them closer to their higher ideal. Some political and corporate warriors, on the other hand have tended to capitalize on the weak. How might we attain warrior of light status?

Friends and Allies
First, we need to de-bunk the myth that warriors are ‘lone wolves.’ Throughout pop western culture, American icons: John Wayne, Rambo, Clint Eastwood, have presented the ideal warriors. These warriors exercise independence of mind, thought and action. Often, they are presented as friendless. A warrior of light, however, appears to revel in the company of friends, followers and allies. Twyan Towery, in his book The Wisdom of Wolves, argues that the ‘strength of the wolf is the pack, and the strength of the pack is the wolf.’ Coelho quotes John Donne and continues in his own words. “No man is an island. He can not fight alone; whatever his plan, he depends on other people. .. p 103.

When selecting alternative courses of action, the warrior, relies upon the wisdom of his closest friends. Prior to committing a whimsical act, how many have been spared public humiliation because a colleague quickly intervened?

Angels
Second, warriors of light recognize that they are fallible and need divine help. Theologians say there roughly 300 references to angels in the Bible. Coelho presents warriors of light as men who steadfastly rely upon angels, God and Jesus Christ.

“A warrior knows that an angel and a devil are both competing for his sword”hand. The devil says: ‘You will weaken. You will not know exactly when. You are afraid. ‘ the angel says: ‘You will weaken. You will not know exactly when. You are afraid.’ The warrior is surprised. Both angel and devil have said the same thing. Then the devil goes on: ‘Let me help you.’ And the angel says: ‘I will help you.’ At that moment, the warrior understands the difference. The words may be the same, but these two allies are completely different. And he chooses the angel’s hand.” p 123. How does the warrior of light know that the purpose for which he is fighting is just and pure? According to Coelho, ‘The warrior of light meditates. He sits in a quiet place in his tent and surrenders himself to the divine light…. A warrior of light knows that in the silence of his heart he will hear an order that will guide him.” p 55.

Open Heart
One would readily suspect that warriors, those who must exact judgment on a daily basis, are driven by hatred and unfettered greed. Instead, according to Coelho, “The warrior of light always keeps his heart free of any feelings of hatred. .. He accepts that his opponents are there to test his valor, his persistence, his ability t” make decisions. They force him to fight for his dreams. It is the experience of battle that strengthens the warrior of light.” p. 87 As keepers of the light, warriors are born with a spark of light. As each day passes, warriors evolve. Their spark flickers into a small and then larger flame through prayer, meditation and connection to the One. We turn to Coelho again for clarification, “Accumulating love brings luck, accumulating hatred brings calamity. Anyone who fails to recognize problems leaves the door open for tragedies to rush in.” p 53.

Conclusion
When the warrior reaches temporary defeat, he is comforted by this, “The warrior of light unwittingly takes a false step and plunges into the abyss. Ghosts frighten him and solitude torments him. His aim had been to fight the Good Fight, and he never imagined that this would happen to him, but it did. Shrouded in darkness, he makes contact with his master. ‘Master, I have fallen into the abyss,’ he says. ‘T”e waters are deep and dark.’ ‘Remember one thing, ‘ “eplies his master. ‘You do not drown simply by plunging in to the water, you only drown if you stay beneath the surface.’ And the warrior uses all his strength to escape from his predicament.” p 129. So too, there is hope for the likes of political and corporate warriors, Blagojevich and Madoff. Get up and aim to respect the true code of the warrior; value honor, integrity, justice and a sense of what is right and wrong.

Dr. Mead, PhD, MBA, MA http://www.ishareknowledge.com is a consultant specializing in human behavior, school and social psychology. She can be contacted at: tonya@ishareknowledge.com

Accounting Ethics Courses: Optional or Necessary

Justin Shomper asked:

Ethics and high morality are in high demand today especially among corporate America, and specifically within the accounting profession. After the ethical failures of Enron and WorldCom, a public outcry for future preventative measures resonated throughout the American Institute of Certified Public Accountants (AICPA), and the accounting community at large. Consequently, the Securities and Exchange Commission (SEC), the overseeing government board of the AICPA, released the Sarbanes-Oxley Act of 2002, otherwise known as SOX. The act requires a higher performance standard for accounting firms and the audits they perform to prevent future accounting scandals. SOX, which has been extremely beneficial, doesn’t change the ethical standards of an individual but instead takes away most of the opportunity to commit a scandalous act. The basic character of the fraudulent individual remains corrupt, even with legislation in place. The question is then posed: Can ethics be taught, and if so, what accounting or business ethics courses are available? The answer is not ironclad as the word ethics describes the morality of an individual, which is hard to measure. There are also very limited courses offered on ethics, however ethical education should be a required course in college and a prerequisite to new employment for all accounting firms.

Most higher education institutions, and some high school level institutions, are implementing brief ethical materials into their curriculum, but very few offer courses on the subject. The basic argument against incorporating a required accounting ethics course is that there isn’t any proof that individuals who take a course would be any more ethical than they already are. If this is truly the singular obstruction to imposing an accounting course in ethics, than why aren’t other courses in the curriculum subject to examination from proof. Many audits, specifically those at Enron and WorldCom, have failed because of poor functional accounting knowledge, not just ethical queries. Most other curricular accounting courses would fail a proof assessment required by those who oppose an accounting ethics course. It is necessary to have an accounting ethics course to properly prepare students for any future ethical temptation they may experience within the field. Without experience in fraud recognition or ethical righteousness, many new timid accountants are susceptible to fraud or ethical dilemmas. A recommendation would be to add not just one course on ethics into a curriculum, but possibly three or four. A course in ethical theory could tie into another ethics course involved in spotting frauds and ethical dilemmas while a third course could focus on answering these ethical uncertainties.

The need for an accounting ethics course is also very apparent in how much destructive attention financial catastrophes attract to the profession. The recent big company accounting scandals all brought negative publicity to the accounting field. The burden of the economic failures in today’s society must be placed somewhere, and many people look at accountants as an outlet to place that burden. All of these events from big companies provide a negative perception of the accounting field, and that’s not to mention the small business owners who have encountered other accounting mistakes or unethical occurrences. This is not to say that legitimate and honest mistakes will not be made by new students, but the ability to recognize the mistakes and evaluate ethical problems can be reduced with the addition of an ethics course. The more education and experience that new accountants have and acquire the fewer mistakes that will occur, and ultimately the less negative publicity the profession will receive. It is extremely important that in the accounting profession, clients feel secure and trusting of those who they employ.

Another need for an ethics course comes from a common stereotype of accountants. The stereotype is that accountants are known to simply follow the rules, or do just enough to meet the basic criteria. To correct ethical dilemmas, it is required to go above and beyond the norm to investigate and solve uncertainties. A class in the area of ethics could help prepare and motivate new accountants to become more proactive when evaluating a possible unethical or fraudulent scenario. Clients will feel a greater sense of security with a proactive accountant, and ultimately bring more profit to the profession.

Society can not function without ethical people. The business world and accounting profession can not function without ethical people. It is for this reason that an accounting ethics course or courses are imperative. The elimination of stereotypes, fewer mistakes, and a heightened sense of awareness is exactly what could be acquired from an accounting ethics course. It is important to add ethics courses immediately, and for employers to require that their new hire’s be educated in ethics knowledge. If an employee is not educated and courses are not offered, employers should take measures to offer a mandatory ethics course within their organization.

Ethics: the Conscience of Every Business

John Platania asked:

At the foundation of every business is a philosophy, a conscience if you will; businesses cannot function without these. This applies to both online and offline businesses. What drives the conscience of a business, however, is a set of rules that everyone knows and follows. These rules, or ethics, are considered obligatory and reflect not only laws pertaining to any given field and business in general, but also a sense of fair-mindedness and civility regarding proper conduct and the treatment of others—especially customers.

The thing with ethics is that entrepreneurs, and even the patrons themselves, must stay abreast of all applicably codes of conduct, written and implied, as well as the needs and preferences of their respective societies. A customer’s freedom to make informed choices regarding the businesses with whom they deal allows everyday interactions to become mutually beneficial to everyone involved. Ignorance is bliss, the saying goes, but not in the business world. How people conduct themselves reflect this. Shoppers, for instance, are not likely to feel confident by the judgement of businesses representatives who have no idea how to answer their questions or service them properly and satisfactorily. No one benefits from this, and both the customer and the business suffers. Lying and “winging it” don’t cut it, as that shows a blatant disregard and disrespect toward others and will hurt everyone; having and dispensing correct and up-to-date knowledge on merchandise and service will guarantee success.

As far as marketing goes, fair and equitable prices go a long way. Although quite a few entrepreneurs insist that higher prices bring greater profit, shoppers will gravitate to other markets where the merchandise they want can be obtained at a far cheaper cost. People like to save, and even though many might be desperate at times, they are drawn to low prices and bargains. Business persisting with merchandise in the higher price range eventually fail as a result. Comparing prices between competitors, not to mention doing research on what people are typically willing and able to spend on certain products, ensures that business representatives provide satisfactory service for the public. In the end, operations win favorable appraise and profits grow considerably.

At the heart of all this is honesty. Someone lied—it isn’t a crock. Being truthful, sincere, straightforward and genuine with others, and offering quality merchandise and service is always the best way to go. This is because shoppers return where they are appreciated and welcome, where they trust those who provide what they want and need, without hassle or complaining. The public might be uninformed regarding some things, but people are not stupid and do not tolerate being treated as if they are. Deception eventually comes to light, and businesses (and shoppers) who deal in such practices are subject to legal penalties and irreparably scrupulous reputations.

Ethical situations abound every day, which is why proper conduct can quite often be sticky. Being up on what these “rules” are is crucial for creating an atmosphere that is acceptable and pleasing. Terms like “trust,” “honesty,” “positive image” and “mutual respect” are involved for a reason; they are not only plastic words for describing an ideal world—they denote a social and economic way of life.

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What Are Business Ethics?

Naz Daud asked:

Business Ethics have only come to the fore recently. They state that there is more to business than just making a profit. The new focus is also on how the business treats the environment, reacts with the local community and works with its staff to build a responsible company that is both sustainable and adds value to the people that it interacts with.

“Greed is good” is no longer acceptable to most consumers. The consumer is now better educated with new means at his disposal. High speed internet access and forums like Ecademy now mean that good and bad news travels almost at the speed of thought. They are now demanding more from businesses even though their own ethics at times might be questionable!

Business ethics are now included in most business courses and the top management schools. The top graduates enter the corporate world ready to incorporate what they have learnt in the classroom.

Businesses need to have specific programmes in place to manage their staff and workplace in a responsible manner. They must give social welfare a high priority if they are to maintain their public image. They have to be seen to be recycling their waste and disposing of old equipment in an environmentally friendly way.

Businesses now have to be wary of using sweat shop labour in the third world especially if they treat them badly. Everybody realises that third world country wages are lower but they expect Western companies to treat their employees with some respect and dignity. Businesses that employ children are now frowned upon even though child labour is the norm in these countries.

Many “watch dogs” now exist that “police” most large companies and report any blatant abuse of ethics. Most of these have only been set up in the last twenty years. Most large media organisations also have special reporters whose sole purpose is to identify where breaches are taking place and publicise them.

The top brands in the world need to be extremely careful now. The value of a brand might have taken decades to build but can be destroyed in a matter of weeks. An example of this is when Gerald Ratner made a speech to the Institute of Directors and in humour referred to a cheap necklace that “everyone knows is crap”. These comments served to wipe out over a half a billion dollars of the companies value and played a major part in the downfall of a once thriving jewellery retailer in the United Kingdom.

There are now funds that specialise in only investing in ethical businesses. They refuse to invest in companies that produce weapons or manufacture cigarettes as an example. These funds have taken of spectacularly and have billions of dollars to invest in the stock markets. Before they invest in a business they send their fund managers in to investigate the business fully to see if they comply with their guidelines. If the company is not willing to answer all their questions fully then they might not get approved for investment.

When properly managed and executed the use of business ethics can actually serve to enhance the profitability of the company concerned. The business can proudly declare their values in brochures, newspapers, internet and television marketing campaigns. Reputation is the strongest asset that a company has and maintaining this and the value of their brands is essential to the long term future of the business.

What are Business Ethics and What is Their Importance?

William King asked:

Business ethics are a matter of much debate. Every MBA entrant is taught the meaning of them, and yet many will never follow these guidelines in their real life careers. It has become a vast and complex field, and is the subject of much research. Business ethics encompass a large and significant portion of what it takes to do business today. Under the umbrella of business ethics comes:

• The social responsibility that a business is supposed to have towards the community in general, particularly the one in which it operates or has any interests. An example of this would be the Exxon Mobil oil spill. It is the responsibility of a business to protect the interests of the people, animals and environment where it uses resources. Due to improper handling of the issue, it became a public relations nightmare for the company. Exxon has now been ordered to clean up the area which it should have taken care not to damage in the first place. Indifference to business ethics in this case, caused a negative public image for the company and a huge lawsuit.

• Issues regarding a company’s responsibility towards its shareholders. This is a heavily regulated area but one that requires a lot of government intervention due to certain unethical practices adopted by many companies in the past. The concept of increasing shareholder value is part of the fundamental principles of a company and if business ethics are not brought into play here, the business can collapse due to the pressure exerted by shareholders.

• Inter-company dealings and negotiations. Often rivalries in business can turn ugly due to the amount of money and ego riding on them. Hostile takeovers and business espionage are some of the examples of unethical behavior within the business world. If discovered, these deeds can be punishable by law or simply public opinion. To allow for fair play and keeping the best interests of the consumers in mind, the government regulates a great deal of what goes on in company dealings. Microsoft has been the target of much abuse and outrage due to its allegedly monopolistic techniques of doing business. While this has not sunk the IT giant, many say that it may have long term repercussions. The government has also stepped in to make sure that other businesses and consumers are not harmed.

• Stakeholder protection. Every business has stakeholders other than its owners – the employees, the stockholders and the general public. The business has to ensure that the rights and interests of all of these groups are adequately protected in the course of its operations. The recent outcry about the harassment and bad working conditions of employees in Wal-Mart led to the generation of a lot of negative press about the outsized department store. This gives the competition the lead and rivals take the opportunity to get ahead while the company is busy trying to do some damage control.

• Fundamental business practices of a company. Underhanded dealings, the use of substandard products, spreading misinformation about the product, hiring illegal workers at lower than minimum wage, etc. prove that a business is run in an unethical way and that it is not a high quality work place or service provider. For instance, cigarette companies that spent most of the seventies telling people that it was not unhealthy to smoke, though they knew this to be untrue. In a recent judgment, one such company was forced to pay out $28 billion.

Why Large Recruitment Firms are so Desperate to Sell Giant Advertisements to Their Clients

Toby Marshall asked:

Do large newspaper ads work and are they value for money? In the days before My Career, Seek and Monster the answer was sometimes. Today it’s NEVER.

Australia is unusual in having large numbers of expensive recruitment ads at the front of the papers. Some countries have a few but nothing to the extent that we do. We have a mass of recruitment agency-controlled ads and all are large and expensive. And these ads are bought in blocks by the recruiter ahead of time – and at wholesale prices.

Why is there incredible pressure to sell mass media ads at the big firms? There are at least five reasons:

1. It’s great free advertising – the ads raise the ‘profile’ of the firm, making them top of mind with clients and applicants. Their clients are unknowingly paying for their corporate positioning – or perhaps they do know but just feel they have no choice.

2. Applicants who are not suitable for the advertised role (that the client paid for) are sold to other companies. If he can’t get a quick sale, the recruiter gets new resumes that he can ‘reverse market’ to lots of other employers at the same time.

3. Many firms buy the ads wholesale, and sell retail. Some even put hidden ‘production costs’ on top of the retail price – they get two hidden fees. One firm I know adds 15% for ‘production costs’ as part of their normal business practice. This brings in a lot of $$s their clients are never told about.

4. All space is pre-booked. What page your agency’s ads run on is decided by how many you sell each week. On a regular basis, the newspaper assesses each group’s usage. If yours has fallen, another recruitment firm may be allocated some of your space. Or, even worse, you swap places in the paper – they come forward and you slide back to the pages few readers reach. Talk about strategic pressure to keep selling.

5. At least one of the major firms in Australia pays a hidden commission to their recruiters for each ad sold. As at mid 2005, this was $900 pretax. Quite an incentive for them to persuade their clients that an ad is the best solution. An even bigger incentive are the bonuses for reaching their ad sales quota for the quarter – which can earn them $10,000 or $20,000 extra.

Try this question on ‘consultants’ who are pushing a mega ad onto you:

“Ok, you clearly believe this expensive ad will find us good people. Are you happy for a panel of recruitment experts to evaluate it’s effectiveness at the end of the campaign, and then allow them to publish their conclusions? And if those are negative, will you rebate me some of the cost of the ad?”

Tough question! Should sort out the women from the girls!

Who would be on the Panel? Me for one and happy to find some more volunteers.

The panel’s brief? Assess the costs versus the salesman’s claims, and identify where good applicants were actually sourced.

For example, how many came from Search if the role is a senior one – and ask for their research files to see if they actually did any Search. Easy for them to claim they did, so asking for proof will keep the basta.ds honest.

The panel would then publish their conclusions in the mass media (or after August 16th at www.recruitershamefile.com) – in most cases this would be deeply embarrassing. Of course just asking the question makes it unlikely you will have wasted your money. Only a very brave or foolish ‘consultant’ would persist with selling you an ad on these terms – or one who was totally convinced that in this particular case it would work.

The pressure on the ‘consultants’ to sell these ads is intense, and the main focus of their internal weekly sales meetings. Directors often prowl these meetings intimidating ‘consultants’ – where I used to work, they walked around the table where we all sat waiting for our turn to be picked on! When I started my career over 19 years ago this was the practice – from talking to people who have recently left the large firms, the not-so-subtle intimidation may have become even worse. At least in my day my commission cheques weren’t linked to having to sell ads and no-one slipped $500 into my pocket when I did.

So, the large ads benefit the agencies and the media. Not the sucker that paid the bill.

How do they get away with selling so many expensive, wasteful ads?

There are four reasons why this incredible con continues:

1. Their sales pitch is built around the plausible sounding ‘attract the browser’ argument – the absurdity of this argument is shown below.

2. “They are a big, successful firm who are experts in recruiting – they know about these things, and if they tell us we need to spend $12,000, then we had better do it.” Remember, most managers or professionals only recruit once or twice a year and few know much about the secretive recruitment industry.

3. Some ads actually do work. They do catch some browsers – it is just that they are atrociously wasteful in terms of the ‘cost per appropriate applicant’ – surely the only valid measure of value. And given the Mega recruitment firms obsession with tracking and reporting on activity and results, it might surprise some people that they don’t track this. If they do, no surprise that they don’t share it.

4. Finally, who is to know whether the ad worked anyway? The applicant who finally got the job could have come from anywhere, and rarely is any tracking done. Remember that big firms have a high profile because they sell so many ads with their logo and other branding taking up a huge chunk of the expensive space. So applicants come to them directly, even if they didn’t see the ad (and that would be fine if they were blo.dy well paying for it).

The ‘browser’ sales pitch

I learnt this pitch 19 years ago when I worked at a giant recruiter with hundreds of ‘consultants’: it was drummed into us at the weekly sales meetings. We were made to practice it on each other and in front of the mirror. You had better believe that this pitch is the foundation stone of Australia’s major recruitment firms.

The pitch is simple, plausible and seemingly valid: people read the front of the newspaper, and their eye is caught by an advertisement so they become interested in it and apply. They are argued to be better applicants because they are more likely to be happy in their current job and therefore likely to be good at what they do. And of course, would not see jobs where active job seekers go to look – online or in classifieds.

Who could argue with something so self-evident??

No surprises that I’ll have a go. There are 3 counter arguments that rubbish the whole sales pitch:

Firstly one that came to me at 4.30 a.m. on a recent Cold August Night, the hour when all good ideas roam in a fevered brain. In the 3 years since I wrote a version of this Rant in my book, Get Great People, I had thought there were only 2 main counter arguments. This final one is the Big Momma – the last and very large nail in what is now virtually a metal coffin:

That we have moved to a world of Free Agents and the Internet. Where people manage and assess their careers constantly (even if usually not particularly well!). A world where people under 40 (Gen x and Gen Y) consider themselves independent of their employers, even if they enjoy their jobs. That they have a life outside work, or in more extreme cases, that they have a life, and work is just a small component of that. Something that many of us Boomers have also come to believe and live our lives by.

In this world, the Free Agents browse 10 or 20 or a 100 websites a week (even I, a geriatric, am on at least 20 different sites every week). And one of the sites they go to is MyCareer, Seek or Monster. Just for a look. To keep in touch. Because you never know. And what about all those niche job boards attached to professional forum sites: LOTS of browsers on those. And what about the snowballing LinkedIn and Facebook and all the other social networking sites. Full of browsers. Full of recruiters.

And because it is so easy to apply for jobs with just a few clicks they are more likely to make an enquiry than that browser reading the paper in a cafe or their garden.

Now, if the price was about the same, the ad salesman just might have a point. But we are talking chalk and cheese on cost. Not in the same ball park. A $100 versus many thousands.

So, you tell me:

Who are the browsers? Where are the browsers? And, in particular, where do the browsers go who in this ageist world are the most sought after by employers? Reckon there are way more of these valuable young applicants on the job boards and social network sites than there are reading the Early General News in the Saturday papers.

Maybe the ad salesman is looking a bit like a seller of dodgy cars – even before we get to the other two reasons ….

Secondly, we read the Saturday pages ‘eyes up’.

If there were only 2 or 3 job ads on a page, and they were designed to attract the eye, no problem attracting eyeballs. That’s the argument of all advertising agencies and media sales people and it’s completely valid.

With recruitment, all the ads are in a block at the bottom of the page. Or, even worse, they are on a whole page by themselves when you get towards the back! Great for browsers!

I can remember the incredible hubris one Friday when I was at a Mega Firm and we had sold a whole broadsheet page of ads – it was all us! We were so proud! We were the champions! But hey, didn’t we forget something: what sort of insane browser browses a whole page of ads!? Maybe a desperate job seeker?

The ads are all the same size and all look pretty much the same – even better they are now in color so stand out like the proverbial dog ba.ls. They are also conveniently located in the bottom half of the paper – so handy for folding the broadsheet in half as I lie in my deckchair on Saturday morning!

So after 30 years of such ads, those browsers know where the ads are – they know to keep their eyes focused on the top of the page. That is where they find what they are looking for: something interesting to read.

I don’t have any major research to quote, but I have talked to a lot of people – it is quite common to read the Saturday papers ‘eyes up’. Don’t you?

Thirdly, the Saturday papers are now conveniently divided into sections.

The sections help readers find the bits they want to read. And in what order they want to read. And of course it helps in selling ads to particular demographics (now there’s a thought: recruiters could place ads in sections that attract who they are trying to employ?!)

With the sections, many of us have developed very idiosyncratic ways of reading. Take how I read the Saturday SMH (apologies for those who don’t live in Sydney):

I start with the front page; quick glance at the back page for some scurrilous gossip; Mike Carlton and Peter Fitzsimons for a laugh; rugby news; the rest of News Review; Spectrum; and sometimes the Good Weekend. And finally, if I get through all that, I turn to the news bits where the recruitment ads are – pages 2 to about 20 – and religiously keep my eyes up. But most weekends I don’t get to it.

Again, no research on readership that I can quote, just an informal survey of professionals; but it is common practice to read selectively. Of course the newspapers do lots of market research, which lead them to create sections in the first place.

So, three strong reasons that rubbish the browser sales pitch – just tell the advertising salesman masquerading as a consultant to go and spin his B.S. to someone else.

Love to hear your stories of ‘consultants’ trying to sell you ads. Or, even better, a recruiter defending them!

Spurious Advertising research by Mr Ad Salesman

Ad salesmen have a standard pitch that goes like: “Mr client, only a tiny percentage of applicants who end up on the final shortlist are ever on a recruiter’s database. The best candidates are not actively searching for a job – we need to attract them to apply with an advertisement that catches the eye as they are browsing through the Saturday morning papers.”

A regular speaker to our industry runs a firm that sells giant ads. At a conference 3 years ago he asked the 110 recruiters in his audience: “What percentage of those who are ultimately short-listed were previously on ANY agency’s database?” I proffered a guess of “less than 10%” – obviously he wanted a low number and I wanted my ‘gold star’ for the right answer!

Now he is one of the doyens of our industry and has been financially very successful. Most of what he was telling us was great stuff about how to be a more productive as a recruiter – overall a great presentation which was well received.

He triumphantly and emphatically came back with “research shows it is less than 5%”

Extraordinary and a great sales tool if true so I wanted to track it down. But as I doubted it was true, it would have been aggressive to challenge him publicly (I was also on the speaking programme, though with a much smaller role) – after he finished I asked “could you tell me where to find this research?”

The answer and his body language were classic: He looked down, started to turn away and said “Oh, it’s old research, not sure where it is now”. And continued to turn away, and started speaking to someone else!

And no, he didn’t know me (it was before I published my book), and I had had a shower that morning.

Now, that got me thinking. Firstly, doing such research would be virtually impossible, as it would mean tracking each candidate’s job search. Very time-consuming and also candidates might not want to admit how hard they’ve been trying (and by definition, not successfully). Also, having just been rejected by an agency they may not be favourably inclined to help an agency do research. It would also be very expensive – who would care enough to spend maybe $50,000 with a research firm?

Easier to invent a figure that sounds plausible in front of an audience that wants to believe it.

Takes some chutzpah to create facts that are so easy to challenge, particularly when you are being paid a hefty fee to provide expert training. But …. maybe not. No-one else seemed to notice.

Secondly, on reflection, I believe the figure is actually much higher, more like 20 or 30% – remember it was any agencies books. But, as with the presenter, I have no evidence, just a feeling from years in the trenches – and I have no particular axe to grind. I don’t sell $12,000 ads that are virtually useless.

Thirdly, his usage of the words ‘old research’ is interesting. The world of advertising has changed a lot – if the research is so old that he and can’t find it, maybe that is another clue that it ain’t true, in the unlikely event it ever was.

If you want to sell expensive ads, and he and his company do, “less than 5%, proven by research” is a seductive sales pitch. Shame it’s a bald faced lie.

The Day the Victory Bell Wouldn’t Stop Ringing – The Completely Useless $35,000 Ad Campaign

I briefly worked at a Mega recruitment firm, back in the day when the internet was just for nerds.

We had a large brass bell hanging in the middle of the office – you rang it when you made a sale of an ad or a body. Crass I know, but lots of sales teams have them and we were in no doubt that that’s what we were – the bell kept the team focused on what really mattered to recruiters!

The bell started ringing one day. And kept ringing. And ringing.

The ‘consultant’ had just returned from visiting new clients – a restaurant chain was opening in Australia and needed 200 staff. The ‘consultant’ had sold the client the equivalent of 4 large ads in the front of the Herald, more than $35,000 in today’s money. He had sold 40% of the firm’s maximum pre-booked space for the week. He was only one of 15 recruiters in Sydney so it was quite a coup – our biggest ad sale in about 4 months.

That night we went off to celebrate with the Managing Director shouting the first drink. Later I asked the excited and merry ‘consultant’ about it, saying it seemed unlikely applicants would come from the front of the Herald – not the first reading choice of many kitchen staff.

His response with a huge smirk on his face? “Hey! My client also paid $2000 for lineage (classified) ads in the back of the Herald and Telegraph, that will fill the jobs.” And the cheap ads did, with barely one applicant from the quarter-page extravaganza.

His client, the poor restaurant chain, had made a sizeable and greatly appreciated donation to our firm’s profile and helped us hold onto our much valued position on pages 5 and 6.

Does it still happen? You bet.

Friday Night Specials – “Have we got a deal for you!”

I cringe remembering Friday Specials from my 12 months working at Mega Firm.

About every 3 weeks, usually late in the morning on a Friday, we were summoned to a quick stand up meeting around the Victory Bell and told “we have some discount ads to offer our clients”.

Our Director would ask each of us for the names of 2 or 3 clients to call – if we were reticent, he would suggest a few names.

We then trotted off to ring them and offer them a discount on ads in Saturday’s newspapers. The discount often started at 25%, getting rid of our wholesaler’s profit. By 2 p.m. it would fall to half price. Occasionally, if it was still not sold, we would have to run a filler ad for ourselves – a big loss so the company hated this.

One Friday I rang a good client with the special offer and got a very aggressive response

“Why do you have all these ads to sell?? Why is there such a panic? You don’t even know what I need! What’s in it for you?”

He was simultaneously both angry and confused – unusually he had been rung 3 times in just 6 weeks. As a good ad salesman who still half believed they worked, I gave him the company line: That we had had a last minute cancellation so are offering our good clients “the opportunity to be at the front of the paper at a great price”. But it got me thinking about these constant specials, and what this new industry I had joined was really up to.

The real reason why Friday Night Specials happened so often? Because on Tuesday we had to commit to how much space in Saturday’s paper we could sell to our clients. And there was always pressure on management to take a couple of extra ads to ensure we maintained our spot at the front of the paper (your position is based on how many you sell over the quarter versus the other firms). So we often had trouble selling the last few spots that our optimistic and hopeful managers believed we could achieve so they would get their bonus (remember, the entire strategy of these firms is based on their position in the paper and the free publicity from the ads.)

The loss to the firm if they couldn’t sell the ads, given the exorbitant prices, was significant. So the kudos you got for flogging these specials to a gullible client was huge – and lasted until the next time it happened. When you had to prove you had cojones once again.

Still happens? Of course.

Now, I can hear some of you say: Ok, guess we got the message that you don’t like the big ads at the front. What do you say about those at the back of the newspapers? The Classifieds.

Not one redeeming feature. Nothing. Zip. A complete waste of money. They just clutter up the job market and make it more inefficient.

Business Ethics: Why They Are Important For a Company and Its Success

Martha Vasquez asked:

Business ethics is an interesting branch of business theory, primarily because of the fact that they are inherently interesting in a market economy. People tend to be extremely distrustful of corporations in market economies and the bigger they are, the worse that problem of trust usually gets. Business ethics therefore are politically charged in many different circumstances and that in turn serves to make them interesting. Aside from this academic interest however, business ethics are also important for a company and its success. Here are some ways in which this is true.

Public Image

It is impossible to discuss business ethics as a branch of academia without taking a look at the relationship between business ethics and public image. Each corporation has a particular public image, which represents the way in which the public views the corporation. Wal-Mart, for example, has a terrible public image. Toyota, on the other hand, has a very positive one. These public images are the result of a number of different things, but they are primarily the result of the way in which a corporation acts with respect to the different things around it.

A corporation’s environmental policy, the way they treat their employees and the way they treat the communities they exist in are all part of their overall behavior and this in turn is the principle factor in determining their public image. As proof of this, you will notice that even though Wal-Mart makes products that have a decent quality and an extremely low price, they still have a negative public image.

Since public image is largely a result of company behavior, business ethics play a large role in determining public image since they determine behavior. And public image is important to success in most cases, which is one of the reasons as to why business ethics are important to a company’s overall success.

Investment

Another reason that business ethics are important is the relationship they have to investment. When a person or an entity is considering investment in a particular stock, there are a number of things they take into account. Aside from the quantitative factors surrounding a company’s profit margin a future prospects, consideration is also given to a particular company from the point of view of the qualitative aspects such as their public image and the products that they happen to sell. All of these things are taken into account before the final investment is made.

Therefore, a company that would like to encourage extra investment is a company that has a strong sense of business ethics. Part of business ethics is responsibility to the investor and for that reason companies with strong reputations in the field of ethical business behavior are also companies that tend to attract more investment from people that are new into the market. Investment is most definitely important to success.

Partnerships

In the business world, joint ventures happen all the time. They happen all the time because they are ultimately of great importance to the bottom lines of businesses. A business can be made or broken on just one joint venture and part of the reason that joint ventures are successful is that they combine the forces of two extremely powerful companies on occasion.

If you want your company to do well in joint ventures, then you need to have good partners. The only way to get good partners is to have a good reputation both in terms of a track record and in terms of your business overall. And of course, the best way to get a good reputation is to ensure that your company has a strong tradition of ethical business behavior.

What Happened to Business Ethics and Responsibility?

Mel Luigs asked:

I remember a “Business Ethics” seminar I took in college that confirmed everything my parents had taught me a child. I heard clearly that capitalism was not an easy way to steal money from others but a way to make as an honest living by providing a service or product to people who needed and wanted it. This secured my desire to become a businessman. During my career, I have held different positions in small, medium and even large Fortune 100 corporations. I have had the opportunity to work with great visionaries, empty “suits”, assembly workers, and, yes, those individuals who only wanted to get all they could while doing as little as they could.

The one constant I have always seen in the U. S. free market system is that a quality company with a quality product or service using quality employees always seems to do better over the long term than the snake oil vendor. Successful companies work hard to inject ethics and morals in everything they do and they take responsibility for their actions. Quality business leaders do not expect a “bailout” or feel they even deserve one. If they cannot assemble a team of enthusiastic employees who can achieve success, they clearly understand and believe they should fail and do something else. I have been involved with several business bankruptcies and none of the owners or employees of these companies felt anything but shame and failure for having left suppliers with debt, employees without a job and customers without a supplier. These leaders might have failed but many of them took their failure personally and worked as hard as they could to pay off all their debts and satisfy everyone who lost due to their bankruptcy. Those without ethics and morals merely started up a new corporation with a new name and immediately began to take advantage of others and repeat their failure.

I have been absolutely amazed at the automotive industry that very easily and arrogantly asked for taxpayer bailouts and are quick to blame the current economic crisis rather than themselves and their management teams. In our free enterprise system, a company that cannot manage its assets properly, has a product or service that the public wants to buy, and makes a profit for its shareholders goes out of business. Granted its employees, customers and suppliers lose money because of this situation but then they all find a replacement company and continue on with their futures.

Our free market concept is not extremely complex but must include ethics, morality and responsibility to achieve the highest of success and quality. The U. S. business model, for many years, was that ethical and quality concept the rest of the world not only envied but hoped to become. Even the Russians and Chinese, our fiercest Communist enemies for decades, are now embracing capitalism because we have become the world’s superpower with our ethical and quality business model.

Now here we stand about to enter 2009, and hopefully the last year of our largest economic downturn in the past 50 years, watching the CEO’s of the “Big Three” fail to admit their lengthy management failure which has allowed labor costs to be double any other auto manufacturer and provided exorbitant retiree pension and health care costs. For decades the “Big Three” bowed to their labor unions and were able to pass all the costs along to the consuming public with little or no competition to keep them honest. They fought and fought against every U. S. government agency that sought higher C.A.F.E. standards when oil was $25 a barrel but now believe they can retool and achieve amazing products and standards within the next two years if the US will only loan them a mere fifty billion dollars. This equates to $200 from every American man, woman and child living in the U. S. Our auto industry was, for several decades, the best in the world and an example of what innovation and technology could achieve. Many of us, in the business world, studied case after case on General Motors in business school and were impressed with the success and vision of the U. S. auto industry

While this is an astonishing and sad commentary on the ethics and morals of the management of these companies, I find something else even more disgusting. The media and many politicians are now discussing a “pre-packaged bankruptcy” as a possible answer to their management failure. While all of us have sometimes slipped from our ethical pedestal, this suggestion is the ultimate loss of ethics and responsibility in our society.

I always advise my clients that bankruptcy is a process to be avoided at all costs. It is the point of ultimate failure by every business entity. If a business is having severe problems, the company and its management should do the right thing and negotiate with all parties to solve its problems and do everything to stay out of bankruptcy. Bankruptcy is only good for lawyers and takes over complete control of a business. How many businesses run by lawyers and courts ever succeed? Bankruptcy, by definition, normally requires the vast majority of all parties lose money and should only be used as an absolute last step. Bankruptcy has no ethics or morals. It carries a stigma for many years and labels the company as being unable to negotiate, succeed or perform a valuable service for the public. What makes anyone want to buy a car from a manufacturer that entered bankruptcy because they could not properly manage their company?

The auto industry should take the responsible and ethical route to solve their problems. They should negotiate with their employees, unions, retirees, suppliers and customers to fix their issues. They should also immediately work to change their corporate culture and reinstate a sense of ethics, integrity and responsibility in their employees which probably entails changing senior management and the Board of Directors who have now demonstrated their inability to run their companies correctly.

I am not naive enough to believe that the unions, employees and some suppliers will do what is necessary to become part of the solution and bankruptcy could ultimately still be required to achieve the end goal of saving these companies. This would be a gross injustice to all concerned because the legal costs would be astronomical and the company culture would probably not see the change needed to again make the auto industry the best in the world. I would love to be able to discuss with my grandchildren their business college case studies on General Motors. I remain very optimistic that ethics, morals and responsibility will once again become a part of the U. S. business culture.

As to our politicians, I am not as optimistic since we have seen that many of our elected officials vote based upon constituent polls and campaign contributions from lobby groups. I agree with the vast majority of Americans who give the US Congress a very dismal approval rating. Their agenda is focused more on their next election than on ethical and responsible decisions for their constituents. It is also a sad commentary on America’s sense of ethics and responsibility when a convicted felon in Alaska came very close to winning reelection to the Senate. His Republican colleagues in the Senate are extremely happy he did not win because many of them would have had to take a new poll in their states before deciding whether to allow a felon to be seated in the next session of Congress.

A very positive note in this situation is that a review of American history reveals that ethics, morals and responsibility become more prevalent in the US after a serious financial recession. Religion and personal introspection seem to become more important to the American citizen when his or her savings and retirement accounts loose
half their value. Church attendance, volunteering at charitable operations, spending time with our children and even family dinners all see increases during recessions and I’m sure that will be the case when history is recorded on the 2008-2009 recession. Those politicians running for reelection in 2010 should be prepared for this moral shift.

Our current economic downturn is not the last we will see in our lifetime and the US will recover and be better afterwards as has been the case in the past. However, I do hope that we can say the same thing about our ethics, morals and business responsibility.

Ethical Issues in Contemporary Business

Andrew asked:

Business ethics is crucial to overall society well being and corporate organizations, if to view the issue from the business standpoint. Public confidence is ethical business operation is only yet to recover, as of February 2004, 75 percent of Americans found the image of big corporations either “not good” or even “terrible”. The crucial step when it comes to business ethics – is to admit existence of a problem that is essentially based in the difference in the corporate values of different stakeholder groups. While society wants to receive well paid jobs, the focus of many organizations remains on cost minimization and maximization of productivity levels. While society wants to purchase goods at the lowest prices possible, businesses are normally profit seeking entities. Finally, it is crucial for society to sustain environmentally clean surroundings, whereas for business – this goal is followed by additional costs. These conflicts are fundamental to the nature of business, it is crucial for managers to find the balance between different stakeholder groups including workers, customers, company owners, and the larger community.

Rapid technologic and scientific innovation followed by globalization makes the need to balance between stakeholders needs even more difficult. Ethical standards and practices often are not even able to keep with scientific innovation such as cloning. When it comes to business practices issues arise with U.S. job outsourcing to Third World community, valuation of intangible assets in the new technological era (Mayer, 2004). Despite the rising difficulties, it is crucial for managers to find the balance – otherwise a company might cease to exist unable to compete in the market place.

The role of business ethics in contemporary marketplace should be mainly discussed from the pragmatic approach. In order for business to exist, there must be a community of potential buyers and sellers, whereas this community and overall public morality are the two indivisible and integrated parts. Obviously, in order to preserve business, organizations must sustain a certain level of morality in order to successfully function and remain competitive. As business are interested in the first place in profitability of an enterprise, they are, therefore, interested in maintenance of a positive corporate image. Consequently, businesses are interested in ethical practices.

Consequently, marketplace is realizing undervaluation and investors are less likely to put own money to generate profits. The effect on economy overall is direct – while series of scandals created a boom in the stock market, now economy is developing at a lower rates, as the cost of funds to be used in business is raising. As such, the relationship between ethical malpractice and economic stagnation is direct – ethical scandals undermine public trust, whereas business, investors, and society overall are the ones to bare the costs of unethical practices of individuals. Consequently, the role of ethical behavior in contemporary marketplace from the value created for society can hardly be overestimated

Introduction To Business Ethics

Jonathon Hardcastle asked:

Is it possible for an individual with strong moral values to make ethically questionable decisions in a business setting? What affects a person’s inclination to make either ethical or unethical decisions in a business organization? Although the answers to that question are not entirely clear, there appear to be three general sets of factors that influence the standards of behavior in an organization; individual factors, social factors and opportunity.

Several individual factors influence the level of ethical behavior in an organization. An individual’s knowledge level regarding an issue can help to determine ethical behavior. A decision maker with a greater amount of knowledge regarding an object or situation may take steps to avoid ethical problems, whereas a less-informed person may unknowingly take action that leads to an ethical conflict. One’s moral values and central, value-related attitudes clearly influence his or her business behavior. Most people join organizations to accomplish personal goals. The types of personal goals an individual aspires to and the manner in which these goals are pursued have significant impact on that individual’s behavior in an organization.

A person’s behavior in the workplace is, to some degree, determined by cultural norms, and these social factors vary from one culture to another. For example, in some countries it is acceptable and ethical for customs agents to receive gratuities for performing ordinary, legal tasks that are a part of jobs, whereas in other countries these practices would be viewed as unethical and perhaps illegal. The actions and decisions of coworkers is another social factor believed to shape a person’s sense of business ethics. For example, if your coworkers make long-distance telephone calls on company time and at company expense, you might view that behavior as acceptable and ethical because everyone does it. Significant others are persons to whom someone is emotionally attached-spouses, friends, and relatives, for instance. Their moral values and attitudes can also affect an employee’s perception of what is ethical and unethical in the workplace.

Opportunity refers to the amount of freedom an organization gives an employee to behave ethically if he or she makes that choice. In some organizations, certain company policies and procedures reduce the opportunity to be unethical. For example, at some fast-food restaurants, one person takes your order and receives your payment and another person fills the order. This procedure reduces the opportunity to be unethical because the person handling the money is not dispensing the product, and the person giving out the product is not handling the money. The existence of an ethical code and the importance management places on this code are other determinants of opportunity. The degree of enforcement of company policies, procedures, and ethical codes is a major force affecting opportunity. When violations are dealt with consistently and firmly, the opportunity to be unethical is reduced.

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What Are Business Ethics?

Naz Daud asked:

Business Ethics have only come to the fore recently. They state that there is more to business than just making a profit. The new focus is also on how the business treats the environment, reacts with the local community and works with its staff to build a responsible company that is both sustainable and adds value to the people that it interacts with.

“Greed is good” is no longer acceptable to most consumers. The consumer is now better educated with new means at his disposal. High speed internet access and forums like Ecademy now mean that good and bad news travels almost at the speed of thought. They are now demanding more from businesses even though their own ethics at times might be questionable!

Business ethics are now included in most business courses and the top management schools. The top graduates enter the corporate world ready to incorporate what they have learnt in the classroom.

Businesses need to have specific programmes in place to manage their staff and workplace in a responsible manner. They must give social welfare a high priority if they are to maintain their public image. They have to be seen to be recycling their waste and disposing of old equipment in an environmentally friendly way.

Businesses now have to be wary of using sweat shop labour in the third world especially if they treat them badly. Everybody realises that third world country wages are lower but they expect Western companies to treat their employees with some respect and dignity. Businesses that employ children are now frowned upon even though child labour is the norm in these countries.

Many “watch dogs” now exist that “police” most large companies and report any blatant abuse of ethics. Most of these have only been set up in the last twenty years. Most large media organisations also have special reporters whose sole purpose is to identify where breaches are taking place and publicise them.

The top brands in the world need to be extremely careful now. The value of a brand might have taken decades to build but can be destroyed in a matter of weeks. An example of this is when Gerald Ratner made a speech to the Institute of Directors and in humour referred to a cheap necklace that “everyone knows is crap”. These comments served to wipe out over a half a billion dollars of the companies value and played a major part in the downfall of a once thriving jewellery retailer in the United Kingdom.

There are now funds that specialise in only investing in ethical businesses. They refuse to invest in companies that produce weapons or manufacture cigarettes as an example. These funds have taken of spectacularly and have billions of dollars to invest in the stock markets. Before they invest in a business they send their fund managers in to investigate the business fully to see if they comply with their guidelines. If the company is not willing to answer all their questions fully then they might not get approved for investment.

When properly managed and executed the use of business ethics can actually serve to enhance the profitability of the company concerned. The business can proudly declare their values in brochures, newspapers, internet and television marketing campaigns. Reputation is the strongest asset that a company has and maintaining this and the value of their brands is essential to the long term future of the business.

Introduction To Business Ethics

Jonathon Hardcastle asked:

Is it possible for an individual with strong moral values to make ethically questionable decisions in a business setting? What affects a person’s inclination to make either ethical or unethical decisions in a business organization? Although the answers to that question are not entirely clear, there appear to be three general sets of factors that influence the standards of behavior in an organization; individual factors, social factors and opportunity.

Several individual factors influence the level of ethical behavior in an organization. An individual’s knowledge level regarding an issue can help to determine ethical behavior. A decision maker with a greater amount of knowledge regarding an object or situation may take steps to avoid ethical problems, whereas a less-informed person may unknowingly take action that leads to an ethical conflict. One’s moral values and central, value-related attitudes clearly influence his or her business behavior. Most people join organizations to accomplish personal goals. The types of personal goals an individual aspires to and the manner in which these goals are pursued have significant impact on that individual’s behavior in an organization.

A person’s behavior in the workplace is, to some degree, determined by cultural norms, and these social factors vary from one culture to another. For example, in some countries it is acceptable and ethical for customs agents to receive gratuities for performing ordinary, legal tasks that are a part of jobs, whereas in other countries these practices would be viewed as unethical and perhaps illegal. The actions and decisions of coworkers is another social factor believed to shape a person’s sense of business ethics. For example, if your coworkers make long-distance telephone calls on company time and at company expense, you might view that behavior as acceptable and ethical because everyone does it. Significant others are persons to whom someone is emotionally attached-spouses, friends, and relatives, for instance. Their moral values and attitudes can also affect an employee’s perception of what is ethical and unethical in the workplace.

Opportunity refers to the amount of freedom an organization gives an employee to behave ethically if he or she makes that choice. In some organizations, certain company policies and procedures reduce the opportunity to be unethical. For example, at some fast-food restaurants, one person takes your order and receives your payment and another person fills the order. This procedure reduces the opportunity to be unethical because the person handling the money is not dispensing the product, and the person giving out the product is not handling the money. The existence of an ethical code and the importance management places on this code are other determinants of opportunity. The degree of enforcement of company policies, procedures, and ethical codes is a major force affecting opportunity. When violations are dealt with consistently and firmly, the opportunity to be unethical is reduced.

Business Ethics: Making it Big the Right Way

Akhil Shahani asked:

Most businesses have a mission statement, centered round qualities and values they swear to uphold. How many manage to observe the protocol is questionable, however. Do business ethics matter? Is it sensible to hold on to values when you can have an upper hand in business by casually ignoring them? Contrary to popular assumptions about corporate setups, many businesses today are coming around to stressing on the importance of ethical practices at work. The reasons are obvious. Take for instance the rising charges of fraud against employees by employers. Management cannot expect employees to be champions of ethics but not practice them as a firm.

There is immense value in adhering to business ethics in every undertaking. Being true to the values you preach alone can leave a lasting impression on the minds of your customers. “Business Ethics” by Milton Snoeyenbos, Robert Almeder and James M. Humber, could tell you more about the same, but here’s a small selection.

Fulfilling your duties: Honor every commitment to the best of your abilities. At the same time, be upfront with your customers, if something is not going according to plan – not doing so will not only show you as being less competent, but worse, it will also give you an image of not being trustworthy. If you cannot meet the obligations for some reason, make the requisite amends. But as far as possible, make it your second nature to meet commitments on time.

Concealing information: It isn’t uncommon to hear people say “read the fine print” especially when it comes to business dealings! Many a time brochures and catalogues, in an attempt to sell their products, land up misleading their customers. Remember, they are not likely to return, if faced with rude shocks like that!

Transparency: Financial discrepancies top the list of fraudulent cases in business. Maintain proper accounts and have a proper policy on the disclosure of financial statements.

Code of conduct: Make patience and dignity your key personality traits. Respecting everyone you deal with, including those you do not like too much, is reflective of the business ethics that your firm practices. Manage tricky situations with diplomacy.

Supporting a cause: Get involved with a social cause like a community project, or make contributions towards charity. Doing so will not only elevate the status of your business to that of a responsible and respected organization but also give you a greater sense of satisfaction.

Honesty: Adhering to the age old adage “honesty is the best policy” is sure to take you places. Do not evade taxes; and be fair in your dealings. While this has been reiterated time and again, many organizations still manage to be tripped up by dishonest actions. “Contemporary Issues in Business Ethics” by Joseph R. DesJardins, John J. McCall,

also could help you find answers to some difficult questions.

Open mindedness: A broad minded approach towards growth oriented strategies, new ideas and continuous improvement is essential to the well being of any business environment. Take criticism in your stride without holding petty grudges, acknowledge hard work and have well defined policies for dealing with employees, vendors and customers.

Business ethics make up the moral foundation of your firm. Exercising high standards conveys a strong message about the quality of your firm and the people behind it.

Business Ethics: Managing Your Relationship With Competitors

Nazeer Daud asked:

ness, your competitors are just that: competitors. However, the way you treat your competitors may affect how your customers and the media perceive your business, your ethics, and your friendliness. For those reasons, and more, it’s important that you carefully consider how you act with your competitors. In this article we provide guidance on how you can have a good relationship with competing businesses while limiting the impact this will have on your business success. When customers see you have strong ethics in how you deal with your competitors, they will know for sure that you’ll treat them right.

Congratulate Their Success

When a competing business does something well, you should be prepared to say so. If for example, a competing business has managed to gain greater traction than you, then you should point out that they have done really well, and are a good business, while also pointing out the advantages your business is able to offer that your competitors cannot. This is a good demonstration of the strong ethics within your business, and will certainly leave a positive impression.

Recommend Business Their Way

If you and your competitors are able to cater for different categories of customers, then why not recommend them when you can’t offer a service to a certain customer? This will make you look good, and they might also be able to do the same for you in return. In the end, both of you will end up with more business as a result.

Sales & Marketing Strategies

When it comes to sales and marketing, it can be tempting to point out the negative aspects of your competitors. And, in some cases, it may be an essential part of closing the sale. However, rather than criticising your competitor, why not mention both positive and negative points of their service? Such as: “yes, you are correct, Company A is able to offer lower pricing than we can. For customers that are more price sensitive, and that 100% up-time isn’t essential, they can be a great solution. We cater for more IT-dependant organisations and employ 3 times as many engineers per customer. Company A also use an overseas call-centre, which is a great way to keep costs down, and provide a more efficient service, but we prefer to assign each customer a dedicated account manager.”

However, on some occasions your competitors may not provide a good service. In this case, you should be as polite and tactful about your competitors as possible. You should also cite sources, such as articles and media coverage that supplement your point. After pointing out any negative issues, you might also wish to explain how the company responds to the issues you raised. This will show a certain level of objectivity on your part and will demonstrate that your business has strong ethics and is willing to appreciate your competitors’ problems.

Don’t Bite

When a competitor speaks negatively about your business, it can be hard to know what to do. Especially when you want to ensure your business appears to be friendly and considerate of business ethics. Although it’s important to respond to any issues in an articulate way, you should avoid getting involved in any tit-for-tat. This will help your business to keep its reputation intact.

Business Ethics of Capital Distribution and Creation of Investment

Prof Viswanathan asked:

  Business ethics of Capital Distribution   

By PROF VISWANATHAN 

Director,

International Socio-Economic Research Bureau,   

Chennai,India (E Mail: economist@dataone.in)                             

 

 “Man  is  born  free,  and  everywhere  he  is  in  chains.  Many  a  one  believes  himself  the  master  of  others,  and  yet  he  is  a  greater  slave  than  they. How  has  this change come  about? I  do  not  know…”   

* Rousseau, Jean Jacques – ‘The  Social  Contract’ (p: 100)

 

  Economic  Slavery  and  Ownership  of  Capital:                                              

Rousseau  reserves  no  hesitation  to  admit  his  inability  because  of  the  reality  that  he  witnessed  the  complications  that  deeply  rooted  in  the  premature  socio-economic  order existing  during  his  time.  But  in  the  midst  of  knowledge  explosion  at  present  I  can  deduce  the  reason  for  the  socio-economic  slavery  of  the  people.   I  know  the  answer  for  the  slavery.  It  is  both  very  simple  and  highly  complicated  to  explain  in  the  present  context  of  permutations  and  combinations  of  socio-economic  orders.  The  answer  is  very  simple  on  the  fact  that  as  soon  as  the  man  surrenders  his  capital  to  a  few  capitalists  in  the  name  of  capitalism  or  to  the  ‘State’  in  the  name  of  ‘Socialism’  especially  after  industrial  revolution  man  has  become  slave  to  the  capitalists  or  the  ‘State’.  On  the  other  hand  the  answer  is  very  complicated   that  requires  deep  acumen  to  find  out  exact  faults  and  defects  that  have  deeply  anchored  in  each  and  every  segments  of  socio-economic  order  like  religion,  customs  and  conventions,  education,  law,  politics,  and  psychological  behavior  of  man;  these  socio-economic  segments  have  still  been  propelling  the  views  and  visions  of  man  to  surrender  his  capital  to  the  capitalists  or  to  the  ‘State’  instead  of  retaining  it  with  himself  to  regain  ‘the  economic  power  of  capital’  to  get  rid  of  any  kind  of  slavery.  The  surrender  of  capital  is  the  utter  ignorance  of  man  that  has  ever  been  witnessed  in  the  long  stretch  of  the  history  of  mankind.

                                                                                                                    

A  new  kind  of  slavery  extensively  known  as  ‘Economic  Slavery’ came  to  surface  over  the  social  fabrication  during  the  Industrial  Revolution.  During  this  period  of  Industrial  Revolution  huge  machines  came  to  play  a  vital  role  in  the  production  of  goods  and  services.  The  owners  of  such  huge  machines  i.e. capital  emerged  as  the  masters  of  the  society  and  the  rest  of  members  of  society,  a  vast  majority  of  workers,  turned  into  ‘economic  slaves’  in  all  the  capitalist  societies.

 

After  the  Industrial  Revolution  when  these  huge  machines  were  directly  owned  by  the  ‘State’  the  same  workers  in  the  name  of  ‘Socialism’    in  all  socialist  states.

 

This  is  the  process  of  slavery  what  Rousseau  says  that  man  is  born free  and  everywhere  he  is  in  chains.  How  do  we  have  to  shiver  into  pieces  these  ‘chains  of  slavery’  which  are  still  binding  the  workers  physically  and  mentally   even  in  all  democratic  societies.  The  answer  perches  on  the   elucidation  of  the  people  to  understand  ‘What  is  Capital  Justice? or Business Ethic?’  and  on  the  finding  out  an  ‘economic  technique’  of  ‘how  to  entrust  the  capital  directly  to  the  people  which  is  solely  created  by  them?’

 

                     ‘What  is  Capital  Justice?’

 

I  venture  to  state  the  only  reasonable  approach  to  solve  any  problem  is  first  and  foremost  to  understand  the  problem;  and  to  understand  such  a  problem  we  have  to  stand  under  the  problem   with  perfect  view  and  vision  of  justice  and  without  being  a  traitor  to  our  own  conscience.  So  it  commands  me  to  keep  my  thought  perpetually  in  a  balanced    attitude  without  taking  even  a  least  privilege  neither  towards  capitalism  nor  towards  socialism.  I  believe  myself  I  can  settle  with  this  pre-requisite  condition  before  writing  my  concepts  in  the  interest  of  justice  and  welfare  of  mankind.  And  now  let  me  define  the  idea  of  ‘Capital  Justice and Business Ethic”

 

 “‘The  Constitution  of  Natural  laws’  codifies  the  ‘Economic  Justice’  being  the  basic  structure  of  economic  system  on  which  the  beautiful  elements  of  the  super-structure  of  a  well – ordered  society  are  constructed”

 

Having  the  liberty  of  reason  I  wish  to  state  that  according  to  Economic  Justice of business ethic,  the  capital  of  a  country  is  created  by  the  people  and  for  the  people  and  hence  it  should  be  directly  owned  by  the  people’.  Once  the  capital, which is now  owned  by  a  few  or  by  the  State  or  by  the  both,  comes  under  ‘People’s  Direct  Ownership’,  consequently  each  worker  is  assured  a  direct  share  of  national  stock  of  capital.  It  leads  to  ‘Each  Industry  for  All  and  All  Industries  for  Each’.  This  is  the  crux  of  ‘Economic  Justice’.

 

On  the  direct  ownership  of  capital  by  the  people  in  conformity  with  ‘Economic  Justice’ ,  a  new  economic  system  known  as  ‘DEMOCRISM’  will  emerge  on  the  basis  of  ‘Economic  Democracy’  demolishing  all  the  socio-economic  evils  that  are  futilely  pervading  in  every  economy  due  to  its  faulty  formulation.  For  the  sake  of  simplicity,  I  am  assuming  the  Capitalism  and  Communism  as  First  and  Second  theories  and  introducing   my  ‘Democrism’  as  ‘Third  Theory’  to  differentiate  it  with  present  theories”.   

                    Right  To  Own  One’s  Due  Capital according to Business Ethic:

The  “Declaration  of  Independence”  of  United 
States  of  America  proclaimed  on  4th  July, 1776  states  as  follows:

 

“We  hold  these  truths  to  be  self-evident  that  all  men  are  created  equal,  that  they  are  endowed  by  their  creator  with  certain  unalienable  Rights,  that  among  these  are  Life,  Liberty  and  the  pursuit  of  Happiness”.

 

With all  its  mighty  force  the  ‘Declaration’  emphasizes  that  among  all  human  rights,  one’s  ‘Right  to  Live’  is  supreme,  beyond  the  zenith,  that  cannot  be  forfeited  by  any  one  or  by  any  force  without  the  consent  and  confirmation of  Justice.  In  the  name  of  war  or  in  the  name  of  patriotism  or  in  the  name  of  religion  or  in  the  name  of  law  or  in  the  name  of  caste,  creed  and  conventions  no  one  has  any  divine  or  earthly  authority  to  forfeit  one’s  ‘Right  to  Live’  on  the  earth.  Even  if  a  man  dies  due  to  appalling  poverty  it  implies  that  the  man’s  ‘Right  to  Live’  has  been  forfeited  and  the  whole  society  in  which  he  is  a  member  should  take  collective  responsibility.

In  the  modern  economic  systems  no  one  can  produce  whatever  he  wants  without  the  help  of  others.  On  the  introduction  of  division  of  labor  in  the  factory  system  of  production,  one  can  produce  only  a  particular  part  of  a  commodity  and  he  has  trained  and  educated  only  to  do  the  particular  job.  Under  these   economic  conditions  one’s  ‘Right  to  Live’  exclusively  depends  on  one’s  ‘permanent  job  opportunity’ or  one’s  “Right  to  work”.  In  turn  one’s  job  opportunity  always  remains  as  a  dependent  factor  of  volume  of  capital  or  investment  flow.  If  the  volume  of  capital  becomes  insufficient,  one’s  job  opportunity  will  be  worst  affected  and  consequently  his  ‘Right  to  Live’  will  be  confiscated.  Since  the  supreme  duty  of  every  civilized  society  is  to  provide  ‘Right  to  Live’  to each  and  every  member  of  it  and  moreover  the  ‘Right  to  Live’  is  exclusively  depending  on  the  volume  of  capital,  the  society  should  honestly  and  justifiably  provide  and  allocate  a  due  volume  of  capital  to  uphold  all  its  members  the  unalienable  ‘Right  To  Own  Due  Capital’  as  a  Fundamental  Right  to  ensure  one’s  ‘Right  to Live’.  This  is  basic  concept  of  “Capital  Justice”. (Upholding  equally  ‘people’s  Direct  Ownership  of  Capital’  to  ensure  one’s  ‘Right  to  Live’  with  dignity  and  security  is  the  basis  of  Capital  Justice’)

 

Generally  in  economics  we  classify  the  goods  produced  as  ‘Consumption  goods  and  Capital  goods’  depending  of  their  usage  by  the  final  consumers.  If  the  goods  like  ‘cars’  are  used    for  personal  usage  by  the  consumers  they  car  called  consumption  goods  whereas  if  the  came  cars  are  used  for ‘hiring  purposes,  as  taxis,  to  earn  income  they  are  called  capital  goods.  I  am  not  erroneous  to  say  that  both  the  consumption  and  capital  goods  are  produced  by  the  workers  as  a  whole.  No  one  dare  enough  to  advocate  that  the  consumption  goods  are  produced  by  the  ‘consumer-workers’  and  the  capital  goods  are  produced  by  the  ‘capitalists’  or  by  the  ‘State’,  in  capitalism  and  socialism  respectively.  Both  kind  of  goods  are  produced  by  the  workers  and  only  by  their  workers  according  to  their  ability  as  per  ‘Work  Justice’ (i.e. work  according  to  ability).

 

The  Wage  Justice  declares  ‘Wage  according  to  Work’.  The  work  includes  the  production  of  both  consumption  and  capital  goods  as  a  whole.  But  the  workers  are  not  paid  wages   to  equivalent  value  of   the  volume  of  capital  and  consumption  goods  that  they  produced. Both  the  capitalists  and  communists  pay  wages  to  workers  equivalent  to  the  value  of  consumption  goods  only.  They  have  been  nakedly  exploiting  a  huge  volume  of  workers  wages  in  name  of  profit  by  which  they  purchase  capital  goods  which  are  solely  produced  by  the  workers.  No  one  has  derived  neither  ‘divine  authority’  nor  ‘temporal  authority’  to  forfeit  a  part  of  workers’  wages  in  the name  of  ‘capital’  without  the  ‘General  Will’  of  workers  or  legal  approval  of  working  class.

 

The  capital  not  only  possesses  huge  productive  capacity  to  produce  goods  and  services  but  also  possesses  enormous  ‘economic  power’  like  nuclear  of  an  atom.  With  the  economic  power  both  the  capitalists  and  the  State  can  control  all  the  socio-economic-political  activities  of  the  working  class  and  subjugate  them  as  ‘economic  slaves’  and  always  threaten  their  ‘right  to  live’.

I  find  no  words  to  register  my  mental  agony  that a  great  ‘distributive  injustice’  has  been  enforced  on  working  class  by  negating  distribution   of  capital  against  legal  and  moral  grounds.  This  ‘distributive  injustice’  exhibits  the  inherent  defects  that  have  been  deeply  rooted  in  our  economic  systems.  Invariably  all  the  economic  and  social  thinkers  have  fiercely  demonstrated   such  defects  and  distributive  injustice.  For  instance  John  Maynard   Keynes,  who  is  still  considered  to  be  the  most  intelligent  among  the  economic  thinkers, writes  in  his  revolutionary  book,  “The  General  Theory”  as  follows:

 

 “The  outstanding  faults  of  economic  society  in  which  we  live  are  its  failure  to  provide  for  full  employment  and  its  arbitrary  and  inequitable  distribution   of   wealth  and  income”

 

Keynes  has  established  thought  in  his  words  and  justifiable  views  in  his  vision  that  the  capital  too  should  be  equally  distributed  among  the  people  to  rectify  the  grave  faults  of  our  economic  systems.  I  dare  to  say  if  both  the  consumption  and  capital  goods  are  distributed  among  the  people  in  satisfaction  of  justifiable  views  and  visions  of  Keynes,  it  would  beyond  all  doubts,  lead  the  society  for  the  establishment  of  ‘Democratic  Economy’  or  ‘DEMOCRISM’,  a  new  economic  system  which  I  advocate  for  the  establishment  of  an  ‘Ideal  Society’.

 

It  will  be  the  ultimate  fact  that  when  the  capital  is  distributed  among  the  people  in  coordination  with  ‘Distributive  Justice’  “All  Industries  will  be  owned  by  Each  Worker  and  Each  Industry  will  be  owned?
? by All  Workers”.  In  the  establishment  of  such  industries  neither  the  capitalists  nor  the  state  would  be  allowed  to  claim  any  capital  ownership.  The  creation  of  all  the  industries  would  be   “by  the  people,  for  the  people  and  of  the  people”  This  would  be  called  as  ‘Democratic  Economy’  or  “DEMOCRISM”  –  The  Third  Theory –  assuming  Capitalism  and  communism  are  first  and  second  theories.                                                                

 Understanding  of  Capital  Justice  or  Democrism i.e Business Ethic:                 

The  crux  of  the  problem  of  understanding  “DEMOCRISM” i.e business ethic, rests  on  the  two  theoretical  pillars :   Firstly  the  process  of  distribution  of  national  Capital  (i.e. Capital  Stock  of  a  nation)  to  the  people  and  secondly  the  creation  of  ‘new  investment’  of  the  people,  by  the  people  and  for  the  people. 

 

The  distribution  of  national  capital  will  ensure  the  people  the  ‘Economic  Justice’  of  ‘Each  industry  for  all  and  all  industries  for  each’  and  the  ‘creation  of  new  industry’  will  enable  the  working  class  to  contribute  a  share  of  their  wage  in  the  form  of  ‘share’  for the  establishment  of  new  industries  in  which  a  worker  will  have  a  share  in  all  industries  and  all  the  workers  will  have  a  share  in  every  industry  to  uphold  ‘Investment  Justice’.  I  will  explain  the  ‘Investment  Justice’  in  forth  coming  chapters.

 

First  let  me  explain  the  distribution  of  national  capital  to  the  people  for  the  establishment  of  “Democracy  in  Economy”  i.e.  the  “Economic  System  of  Democrism” (The  Third  Theory)  with  an  hypothetical  example.

Capital – Output  Ratio:  Suppose  the  national  capital  of  country  amounts  to  $ 3,000  billion  with  the  help  of  this  capital  stock  the  country  produces  $ 1,000  billion  worth  goods  and  services.  It  indicates  the  Capital : Output Ratio  of  the  country  is  3 : 1. In  other  words  in  order  to  produce  $ 1 dollar  of  goods  the  country  requires  $ 3  dollar  worth  of  capital.                                         

Again  let  me  assume  the  annual  income  of  a  ‘hypothetical  worker’  is  $100,000  and  he  spends  all  his  income  for  the  purchase  of  consumption  goods.  Since  the  capital : output  ratio  is    3 : 1   for  the  production  of  $ 100,000  worth  of  consumption  goods,  $ 300,000  worth  of  capital  goods  would  have  been  used.  Similarly  according  to  the   total  income  of  all  the  workers  a  capital  stock    should  have  been  used  three  time  of  income.  Generally  speaking  for  the  production  of  a  particular  amount  National  Income,  a  particular  volume  of  Capital  stock  would  have  been  used  and  it  determines  Capital  :  Output  Ratio.  This  Capital  Stock  is  legally  entitled  to  the  workers  only  but  it  has  been  fallaciously  handed  over  to  a  few  capitalists  or  the  State.  This  is  fallible  of  infallible  justice.  In  order  to  uphold  ‘Economic  Justice’  the  capital  stock  also  should  be  distributed  to  all  the  workers  according  to  capital  :  output  ratio.  This  mode  of  proportional  distribution  of  national  capital  to  all  the  workers  will  guarantee  and  ensure  an  active  powerful   ‘Economic  Democracy’  among  the  people  than  the  passive  and  week  ‘political  democracy’  to  protect  one’s  liberty. 

 

In  the  modern  production  system  since   ‘the  capital’  has  occupied  the   position  of  hub  in  the  production  process  of  consumption  goods  and  services  and  moreover  it  determines  one’s  ‘right  to  work’  and  ‘right  to  live’  no  worker  is  entitled  to  merchandise  his   capital  to  other  workers.  No  worker  is  permitted  to  hold  a  share  of  capital  more  than  his  country’s  ‘capital : output  ratio’.  Marketing  of  capital  share  in  democratic  economy  is  forfeited  because  of  the  fact  it  will  lead  to  sell  one’s  ‘right  to  live’  ‘right  to  work’   ‘economic  security’  and  ‘economic  equality’.  Justice  warns  man  not  to  sell  economic  liberty  even  if  he  sells  political  liberty.

 

Distribution  of  Capital and Business Ethic:  Capital  is  inseparable  block.  It  cannot  be  divided  into  convenient  parts  to  distribute  to  the  workers  according  to  their  wage-income.  It  forms  huge  industries.  The  workers  can  only  claim  a  ‘capital  right’  in  the  national  capital   stock  and   a   ‘dividend-income’  according  to  their  share  of  capital.  The  capital  goods  cannot  be  distributed  to  the  workers  as  consumption  goods.  But  every  worker  can  claim  a  certain  value  in  the  national  capital  to  ensure  their  capital  right.  The  value  of  capital  would  be  distributed  to  the  workers  equally  or  according  to  their  income.  The  distribution  of  capital  is  just  a  ‘book-keeping  entry’  to  assure  every  worker  that  they  have  a  capital  right  in  the  national  capital.

 

Every  worker  will  have  a  ‘Capital  Account’  in  his  bank  and  a  ‘capital – share-value’  according  to  his  annual  income  will  be  credited.  The  workers  will  be  strictly  restricted   to  bargain  his  ‘share  of  capital’  to  other  workers  as  it  is  now  practiced  in  the  ‘share-market’. The  ‘share-gambling’  involved  in  the  share  market  would  be  completely  abolished.  On  the  other  hand  there  will  be  only  ‘commodity  market’.  Since  one’s  share  of  capital  represents  one’s  ‘right  to  live’, ‘right  to  work’  and  economic  liberty  and  security  the  sale  of  capital  will  not  be  permitted  at  any  cost  in  the  ‘People’s  Direct  Ownership  of  Capital’  i.e. ‘Economic  Democracy’.            

In  the  distribution  of  national  capital  to  the  people  the  ‘capital : output  ratio’  would  be  taken  as  guideline  to  ensure  ‘capital  to  each  worker  according   to  his  wage’.  Right  from  ordinary  village  workers  to  the  top-most  managing  director  of  a  huge  company  the  ratio  would   be  strictly  followed  in  the  capital  distribution  as  it  preserves  ‘distributive  justice’.  No  one  would  be  afford  undue  advantage  to  claim  more  capital – share  than  the  one’s  income  ratio.  The  aggregate  national  capital  would  be  distributed  to  all  the  people  without  any  d
iscrimination  of  one’s  labor.  This  is  the  idea  of  ‘Democrism’  i.e.  ‘Economic  Democracy’.  I  wish  to  take  liberty  to  express  such  kind  of  distribution  would  uphold  the  noble  concept  of  ‘Capital  Justice’.

 

Mahatma  Gandhi  emphasizes  this  capital  justice  in  his  own  fashion  of  spiritual  style  as  follows:

 

“We  should  aim  at  getting  only  what  the  rest  of  the  world  gets.  Thus,  if  the  whole  world  gets  milk,  we  may  also  have  it.  We  may  pray  to  God  and  say : “O  God, if  you wish  me  to  have  milk, give  it  first  to  the  rest of  the world”*

-*Gandhi. M _ “Speeches  and  Writings  of  M. Gandhi” (p:384)

 

If  any  one  wishes  to  portray  his  argument  that  the  above  example  presented  by  Gandhiji  in  the  distribution  of  milk  can  only  be  coordinated  to  the  ‘distribution  of  income’  but  not  the  ‘distribution  of  capital – wealth’,  Gandhiji   replies  them  as  follows:

 

“Earn  your  crores  by  all  means.  But  understand  that  your  wealth  is  not  yours;  it  belongs  to  the  poor.  Take  what  you  require  for  your  legitimate  needs,  and  use  the  remainder  for  society ……But  I  have  visions  that  the  end  of  this  war  will  mean  also  the  end  of  the  rule  of  capital.  I  see  coming  the  day  of  the  rule  of  the  poor,  whether  that  the  rule  be  through  force  of  arms  or  of  non-violence”. **

         **- Gandhi. M : “Harijan”, Feb. 1, 1942

 

The  views  and  visions  of  Gandhiji  are  placidly  warning  the  capitalistic  society  that  the  capital – wealth  should  be  honestly  handed  over  to  the  people  within  the  frame  of  supreme  justice;  otherwise,  he  cautions,  that  the  poor  would  take  even  the  deadly  arms  to  uphold  their  legitimate  right  to  own  their  capital  through  non-violence  as  the  ‘rule  of  poor  through  bullet’  instead  of  ‘rule  of  poor  through  ballot’  that  could  be  the  only  solution  for  all  evils  suppressing  the  poor.

 

Now  I  explain  the  basic  concept  of  Democrism  in  ordinary  terms.  In  Democrism  In  Democrism  in  order  to  ensure  a  sense  of  security  regarding  the  ‘capital  ownership’  in  the  minds  of  every  worker,  ‘a  capital  account’  would  be  opened  in  his  name  and  his  legitimate  due  capital  would  be  credited  in  his  capital  account. 

 

The  capital  in  the  view  of  a  common  man  may  look  like  a  commodity  as  machines  and  factory  buildings.  But  it  is  not  so  in  real  sense.  The  capital  contains  in  its  core  an  enormous  ‘Economic  Power’  only  by  which  one  can  save  and  ensure  one’s  ‘right  to  live’  in  the  world,  which  is  valued  as  supreme  right  of  all  the  socio-economic-political  rights.  No  worker,  therefore,  would  be  permitted  to  sell  or  buy  one’s  share  of  due  capital.  Capital  is  not  a  marketable  commodity  because  if  the  sale  of  capital  ‘in  the  form  of  share’  is  allowed  among  the  workers,  it  is  nothing  but  allowing  the  workers  to  sell  their  ‘right  to  live’,  ‘economic  liberty’,   ‘economic  equality’,  ‘economic  security’  and  so  on.  The  sale  of  capital  would  lead  the  workers  towards  their  economic  slavery;  no  political  revolution  can  uplift  them.  That  is  why  Rousseau  says  in  his  Social  Contract ;  “Man  is  born  free  and  everywhere  he  is  in  chains”

 

It  is  Universal  law  that  the  natural  force  of  all  evolutions  is  to  lead  all  imperfect  systems  towards  their  perfection  overcoming  one  hindrance  after  another  hindrance  in  its  process.  If  the  hindrances  are  many  and  powerful  the  natural  force  of  evolution  will  consume  more  span  of  time  to  overcome  them.  “Perfection”  is  the  law  of  nature;  and  “Evolution”  is  its  mechanism.  As  per  the  ‘natural  force  of  evolution,  the  capital  should  be  owned  by  all  the  workers  to  attain  its  perfection  and  to  uphold  capital  justice.  In  this  context  we  know  that  our  economic  systems  are  crippled  with  imperfection  and  struggle  hard  to  move  towards  perfection  and  therefore  we  have  no  other  alternative  except  to  wipe  them  out  not  to  plunge  the  world  into  destruction.

As  a  matter  of  fact  if  both  the  imperfect  capitalism  and  socialism  want  to  move  towards  their  ‘perfection’  as  a  rule  of  nature  they  have  to  restore  the  ‘capital’  to  people  and  to  ensure  ‘People’s  Direct  Ownership  of  Capital’  the  ultimate  end  product  of  perfection  in  the  formation  of  economic  systems.  The  People’s  Direct  Ownership  of  Capital  would  be  out  of  all  theoretical  and  moral  contradictions  and  constitute  a  perfect  economic  system  known  as  ‘DEMOCRISM’.  On  the  establishment  of  Democrism  the  capital  will  be  owned  neither  by  a  few  capitalists  as  in  Capitalism  nor  by  the  State  as  in  Socialism  but  the  people  of  all  the  countries.  This  “People’s  Ownership  of  Capital”  will  be  the  rule  of  the  nature  and  the  natural  force  of  evolution  of any economic  system. Nobody  or  no  power  in  the  world will  oppose  it.                                                                                                                                                                                        

                                                                                       

                        

Business Ethics: Three Tips to Stay in Integrity with Yourself

Sally Rhys asked:

Wow — every day seems to bring us a new story about business ethics wrongdoing! Is America headed to hell in a hand basket because of a serious lack of ethics at the highest level in American business? Or, it is just that ethical transgressions are more visible now? Or is it that the media reports more? Whichever it is, I urge you to be concerned about business ethics, even if simply for yourself.

A few facts will raise your awareness about the current state of ethics in American business. The Ethics Resource Center notes that the number of ethics programs is on the rise in corporate America. Unfortunately, the center also notes that ethical misconduct is high. (Google “The National Business Ethics Survey” for more details.) Other research shows that a majority of people in America have quit a job due to an ethical concern at sometime in their lives. (Google “lrn” for more details.)

You may believe there isn’t much you can do about ethics in American business. But, you can choose to follow a high standard of ethics for yourself.

Here are three simple tips to stay in Integrity with Yourself:

1. Listen to your gut. If it doesn’t smell right, it probably isn’t. Don’t risk your reputation by going along with something that is fishy. Sometimes in the work place, what the policy says to do and what people are doing are two different things.

For instance, if you go to lunch with a co-worker to discuss business and you each spend $11.95, which is all you can claim on your business expense forms. But, your coworker may encourage you to submit a claim for $23.95 (since the policy says you don’t have to submit a receipt until the amount is over $25.00, per IRS rules.) Your coworker may even say everyone pads their expense report. This action would be a quick way to double your cash back, but you know it isn’t right. Don’t cave-in to the peer pressure or temptation. Just don’t do it!

2. Ask questions. Sometimes what you know is not the whole story. Ask questions to fill in the gap. Don’t assume. Something you don’t know may make what looks wrong actually be a good thing. As the former Director, Ethics and Compliance for a $1.5B company, I learned to ask questions before forming a judgment.

For instance, I know of a case where a manager became aware that his employee had lied about his whereabouts during the work day. One appropriate action would have been to discipline the employee or maybe even fire him. Another appropriate action would have been to extend a little compassion for the employee, who was under some external stresses, and work more closely with the employee to help him manage his time better. Asking a few simple questions revealed the external stresses, which opened doors to alternative resolution of the problem.

3. Keep an open mind. There is rarely an unequivocal right or wrong answer in any ethical issue.

For instance, an employee reported to me that he believed a co-worker was falsely claiming an important professional certification. I asked him why he thought that, and he said that the person didn’t seem to demonstrate the knowledge base required for certification. He also said he had checked the certifying agency’s website to find the co-workers name without success. Since falsification of job qualifications is a serious offense, I went to the website to check for the name too, and asked an internal recruiter to verbally check with the certifying agency.

As it turned out, the person under suspicion had registered at the website with his formal name, not the nickname he used at work; as a result his name wasn’t recognizable at the website. Only by triple checking the website and making a phone call to the certifying agency were we able to get the whole story.

Stay in integrity — do what YOU think is right and stay in good conscience.

Business Ethics and Unethical Practices

Verena Veneeva asked:

The study of business ethics and its implications for different stakeholders have seen tremendous growth in the past few decades. There has also been a rise in the use and development of codes of ethics and announcements for ethical practices by many firms; however companies are still criticized for their unethical practices at different levels (Papers4you.com, 2006). Business ethics, according to the literature has been entrenched with the philosophical details of Ethics (Trevino & Nelson, 1999). Ethics has been defined as ‘the activity of examining the moral standards of a society, and asking how these standards apply to ones life and whether these standards are reasonable’ (Velasquez, 1998; p. 11).

The literature on business ethics is divided on its views about the motivation and reason for businesses to have an ethical dimension. Drawing upon Harrison (2001), there are two major schools of thoughts, firstly those who suggest that firms are profit generating institutions and therefore business ethics is yet another way to attract customers, secondly those who support corporate conscience and intrinsic motivation for the adoption of business ethics.

Business ethics has been considered very subjective in nature and according to Paul (2001) is considered a function of time and culture. It has been established that with the passage of time business ethics have evolved and also that the cultural values and norms drive business ethics within national and regional boundaries. One of the major studies regarding the national values has been conducted by Hofstede (1983). According to this research, which was only based on four indicators i.e. individualism, power distance, uncertainty avoidance and masculinity, there is a great deal of differences among values across different nations and consequently the business ethics. Globalization combined with standardization has made businesses financially efficient but at the same time poses questions regarding the standardized codes of business ethics across national boundaries.

Vinten (1991) has divided the business ethical issues at different levels i.e. international business, domestic business and professional ethics. At the international level ethical issues include free-masonry and socialism versus capitalism; at domestic level these include religious dimensions, social marketing and ethical education; and lastly at the individual level these include bribery, corruption and data protection (Papers4you.com, 2006).

There are many reasons and criticisms for the failure of adoption of ethics in the business world. Firstly, the concept is considered to be overly theoretical and it also negates the basic purpose of any business i.e. to create shareholder’s wealth. Secondly, it has lack of direction and unanimity across different cultures and academic groups. Lastly, it has many inherent unresolved dichotomies that according to Sternberg (1994) make it a case of rejected relativism.

References:

Harrison, J. (2001), Ethics for Australian Business, Prentice-Hall, French’s Forest

Hofstede, G. (1983), The Cultural Relativity of Organizational Practices and Theories, Journal of International Business Studies, Vol. 14, No. 2, pp.75-89

Papers For You (2006) “S/B/92. What distinguishes ethical from unethical business activity and how significant are the principles of business ethics in modern business?”, Available from http://www.coursework4you.co.uk/sprtbus21.htm [17/06/2006]

Papers For You (2006) “S/B/49. ‘Should businesses strive to be ethical?’ Critically Discuss”, Available from Papers4you.com [18/06/2006]

Paul, S. (2001), Cultural and Business Ethics, Cross Cultural Management: An international Journal, Volume 8 No. 1, pp 22-35

Sternberg, E. (1994), Relativism rejected: the possibility of transnational business ethics, in Hoffman, W.M., Kamm, J.B., Frederick, R.E., Petry, E.S. Jr (Eds), National Conference on Business Ethics. Proceedings from the 9th Conference on Business Ethics Sponsored by the Centre for Business Ethics at Bentley College, Quorum Books, New York, NY, pp.143-50

Trevino, L.K., Nelson, K.A. (1999), Managing Business Ethics: Straight Talk about How to Do It Right, 2nd ed., J. Wiley & Sons, New York, NY

Velasquez, M.G. (1998), Business Ethics: Concepts and Cases, 4th ed., Prentice-Hall, Englewood Cliffs, NJ

Vinten, G. (1991), Business Ethics: Busybody or Corporate Conscience?, Managerial Auditing Journal, Volume 5, Number 2, pp. 123-144

What are Business Ethics and What is Their Importance?

William King asked:

Business ethics are a matter of much debate. Every MBA entrant is taught the meaning of them, and yet many will never follow these guidelines in their real life careers. It has become a vast and complex field, and is the subject of much research. Business ethics encompass a large and significant portion of what it takes to do business today. Under the umbrella of business ethics comes:

• The social responsibility that a business is supposed to have towards the community in general, particularly the one in which it operates or has any interests. An example of this would be the Exxon Mobil oil spill. It is the responsibility of a business to protect the interests of the people, animals and environment where it uses resources. Due to improper handling of the issue, it became a public relations nightmare for the company. Exxon has now been ordered to clean up the area which it should have taken care not to damage in the first place. Indifference to business ethics in this case, caused a negative public image for the company and a huge lawsuit.

• Issues regarding a company’s responsibility towards its shareholders. This is a heavily regulated area but one that requires a lot of government intervention due to certain unethical practices adopted by many companies in the past. The concept of increasing shareholder value is part of the fundamental principles of a company and if business ethics are not brought into play here, the business can collapse due to the pressure exerted by shareholders.

• Inter-company dealings and negotiations. Often rivalries in business can turn ugly due to the amount of money and ego riding on them. Hostile takeovers and business espionage are some of the examples of unethical behavior within the business world. If discovered, these deeds can be punishable by law or simply public opinion. To allow for fair play and keeping the best interests of the consumers in mind, the government regulates a great deal of what goes on in company dealings. Microsoft has been the target of much abuse and outrage due to its allegedly monopolistic techniques of doing business. While this has not sunk the IT giant, many say that it may have long term repercussions. The government has also stepped in to make sure that other businesses and consumers are not harmed.

• Stakeholder protection. Every business has stakeholders other than its owners – the employees, the stockholders and the general public. The business has to ensure that the rights and interests of all of these groups are adequately protected in the course of its operations. The recent outcry about the harassment and bad working conditions of employees in Wal-Mart led to the generation of a lot of negative press about the outsized department store. This gives the competition the lead and rivals take the opportunity to get ahead while the company is busy trying to do some damage control.

• Fundamental business practices of a company. Underhanded dealings, the use of substandard products, spreading misinformation about the product, hiring illegal workers at lower than minimum wage, etc. prove that a business is run in an unethical way and that it is not a high quality work place or service provider. For instance, cigarette companies that spent most of the seventies telling people that it was not unhealthy to smoke, though they knew this to be untrue. In a recent judgment, one such company was forced to pay out $28 billion.

Blue Collar Business Ethics For Your Small Business Will Provide Global Oppurtunities

Nick Bauer asked:

I started FCP Groton in 2001 with a simple goal, to sell auto parts on EBay and our website. I had no business plan, no direction, no employees only the sources to obtain the parts and the knowledge of where to sell them. I had been selling some auto parts via my parent’s local store on the side and it was starting to take off. I knew with a lot of hard work and some imagination that it would become bigger. The first employee was hired followed by the second, third, fourth, and fifth. In the blink of an eye, 7 years passed and revenue went from 250k to 7M a year, yet we were still doing the same thing each day, only on a grander scale as when this was first established.

My parents and grandparents were old school business people, blue collar workers. I saw that work ethic growing up and that became instilled in me and then my employees for the first 7 years. I mean we worked, worked hard on selling auto parts as that the only goal. Most of the close minded thought process was due to our environment; small leaky building, ancient computer system, and lack of employees (due to the space). We never stopped for a second to step back and see what we needed to do different to get to the next level.

Our whole mentality changed in April 2008. We moved to a larger facility and went on a new software platform. The space enabled more employees and the software freed up time. We had time to think and analyze what the business was for the first time ever. We drafted a business plan, gave ourselves a little direction. We saw that we were no longer a company that could just sell auto parts, we would need to be more than that if we were to expand and survive in the new age of business.

We needed to offer a free service to our customers to compliment the physical products. We needed to become more active in the online community. We needed to communicate directly with our customers in an open manner. We needed to become better listeners when problems arose. We needed this all to be transparent to everyone. The more and more information you provide about your company, the more and more trust you will gain from your customers. There are thousands of places to buy auto parts online; this was our niche as to how we were going to differentiate ourselves from the rest.

We made our first venture into this transparent society last summer when we sponsored a few forums to communicate to offer our knowledge and support in their communities. From there we created this blog and our social networking pages to communicate and interact with the day to day lives of our customers who in turn became part of our community. Not only did this have a profound effect on customers, our employees were actually excited about the buzz and wanted to participate, and added side effect. They felt and realized for the first time that they were part of something special.

There are thousands of companies selling auto parts on the Internet fighting for your business. Having the lowest price or the best customer service can only get you so far if they don\’t compliment each another. If you can\’t back up your great price with a speedy shipping service or a customer service team when there is a problem, you will not get the reviews and support in the online community that you need to survive. Our goal is to touch our customers and their lives so they come back to us the next time. We try to do our job so well that they have no choice but to tell their friends and social networks about us. Word of mouth in the today\’s society is your most valuable advertising asset yet is something that you can\’t pay for, you have to earn it, the blue collar way.

For more information please visit FCP Groton

Business Ethics: Why They Are Important For a Company and Its Success

Martha Vasquez asked:

Business ethics is an interesting branch of business theory, primarily because of the fact that they are inherently interesting in a market economy. People tend to be extremely distrustful of corporations in market economies and the bigger they are, the worse that problem of trust usually gets. Business ethics therefore are politically charged in many different circumstances and that in turn serves to make them interesting. Aside from this academic interest however, business ethics are also important for a company and its success. Here are some ways in which this is true.

Public Image

It is impossible to discuss business ethics as a branch of academia without taking a look at the relationship between business ethics and public image. Each corporation has a particular public image, which represents the way in which the public views the corporation. Wal-Mart, for example, has a terrible public image. Toyota, on the other hand, has a very positive one. These public images are the result of a number of different things, but they are primarily the result of the way in which a corporation acts with respect to the different things around it.

A corporation’s environmental policy, the way they treat their employees and the way they treat the communities they exist in are all part of their overall behavior and this in turn is the principle factor in determining their public image. As proof of this, you will notice that even though Wal-Mart makes products that have a decent quality and an extremely low price, they still have a negative public image.

Since public image is largely a result of company behavior, business ethics play a large role in determining public image since they determine behavior. And public image is important to success in most cases, which is one of the reasons as to why business ethics are important to a company’s overall success.

Investment

Another reason that business ethics are important is the relationship they have to investment. When a person or an entity is considering investment in a particular stock, there are a number of things they take into account. Aside from the quantitative factors surrounding a company’s profit margin a future prospects, consideration is also given to a particular company from the point of view of the qualitative aspects such as their public image and the products that they happen to sell. All of these things are taken into account before the final investment is made.

Therefore, a company that would like to encourage extra investment is a company that has a strong sense of business ethics. Part of business ethics is responsibility to the investor and for that reason companies with strong reputations in the field of ethical business behavior are also companies that tend to attract more investment from people that are new into the market. Investment is most definitely important to success.

Partnerships

In the business world, joint ventures happen all the time. They happen all the time because they are ultimately of great importance to the bottom lines of businesses. A business can be made or broken on just one joint venture and part of the reason that joint ventures are successful is that they combine the forces of two extremely powerful companies on occasion.

If you want your company to do well in joint ventures, then you need to have good partners. The only way to get good partners is to have a good reputation both in terms of a track record and in terms of your business overall. And of course, the best way to get a good reputation is to ensure that your company has a strong tradition of ethical business behavior.

Business, Ethics, And The Law

Joseph Brochin asked:

The primary objective of a business is to make money. Why would an individual or group of people start a business if he did not want to make money? An argument that is generated by some is: “Should profits be the only function of a business?”

The desire for businesses to make money can sometimes lead to what is considered unethical business practices. Keep in mind the words unethical and unlawful are two separate terms with two separate meanings. One side of the argument states that ethics should not play a part in business as long as the business abides by the law of the land then they should not concern themselves with ethical behavior, but they should act in the best interest of the organization. The other side of the argument states that for an economy to function in a capitalist fashion that businesses must act in an ethical fashion regardless if their actions are legal under law.

Milton Friedman contends that the sole responsibility of business is to increase its profits. Robert Almeder maintains that if capitalism is to survive, it must act in a socially responsible ways that go beyond profit making. The views of these two individuals go to the heart of the argument. This author believes that after reading their material that the views of both are exaggerated. I do believe that a business’s responsibilities do go beyond what is legal. A business has a responsibility not only to the owners or stockholders, but also to the consumer who trust the business is acting not only in a legal manner but a safe and ethical manner as well. If a business goes out of its way to act in an unethical fashion then the business has broken their trust with the consumer. Once a business loses the trust of their consumers then profits will plummet. Seeing that profits are the primary function of a business then it is in the businesses best interest to maintain a trusting relationship with the consumers and continue to act in safe and ethical manner.

Keeping in mind that it is not the purpose of a business to propose or to dictate legislature nor ethical behavior to the individual, a business should not be held accountable for what a small population of consumers consider unethical. If the practice of the business is out in the open and hazards of their products are readily published and do not present the possibility of death involuntarily to the consumer then legislature should not dictate ethical behavior to business nor individuals for that matter.

Business Ethics And Purpose

Naz Daud asked:

The purpose of business is to generate maximum returns for its owners and shareholders. So therefore should the business pursue all activities that enhance profitability and increase the value of the business for the owners and / or shareholders?

I also believe that a business should behave ethically in achieving the above purpose. It is not right just to operate within the letter of the law. Businesses should also try and serve their local community and help its employees lead better lives. They should examine every decision they make based on profitability, long term business value and social responsibility.

By having real policies in place that take care of your employees and the local community it might be argued that long term this will enhance your business brand and over time lead to higher profitability.

By constantly training members of staff and wherever possible promoting from within the organisation will lead to employees that feel empowered to work harder and make better decisions. Having regards to the true well being of your employees will lead to a healthier and therefore happier workforce.

By reducing waste and promoting recycling at every opportunity, overheads will be reduced and in the longer term lead to better shareholder value. It is staggering how much resources including energy are wasted by larger companies. Having a regular energy audit and investing long term to reduce demand can only serve to make the business more efficient.

Many businesses try to serve their community by supporting local charities and sponsoring local people to better their lives. There are many ways to do this including education, sports and the environment. In the short term there will be very few perceivable benefits in terms of profitability but these actions will serve to enhance the business brand and increase profitability over the longer term.

Greed is no longer good and focusing purely on profits is unacceptable to your existing and potential customers. By embracing business ethics and social responsibility the business can benefit from increased goodwill.

Business Ethics: A Quiz with Many Right Answers

Sally Rhys asked:

You can find various business ethics quizzes around thPick the one answer you think is wrong. This one is different. Each question has only one WRONG answer, doesn’t analyze your answers and tell you where you went wrong. Rather, it is simply intended to raise your ethical consciousness, maybe even stimulate a little discussion between you and your peers or family.

In this quiz, try to pick the answer that is wrong. I hope the “wrong” answers are obvious if you care about business ethics.

Enjoy!

1. My reputation

a. Is only as good as my word

b. Precedes me

c. Once lost is hard to regain

d. Is the legacy I’ll leave behind

e. Doesn’t matter to me.

2. Following my employer’s Code of Ethics

a. Could be important to my success

b. Requires interpretation to get it right

c. Will make me a better leader

d. Is a waste of time

e. Requires a certain level of consciousness and some attention to detail

3. Pointing out ethical transgressions at work

a. Can be awkward

b. Helps raise awareness for us all

c. Is a career ending move

d. Can backfire

e. Could be educational all the way around

4. Keeping the workplace ethical

a. Makes it a better place to work

b. Is hopeless

c. Requires clarity around ethical standards

d. Means top management has to do it

e. Leads to a more profitable company

5. My employer’s ethical reputation

a. Is in the dumps and dropping

b. Reflects on me

c. Is partially set by how I behave

d. Makes a difference in the bottom line

e. To some extent determines whether people will buy our products

6. Accepting gifts from vendors

a. May be fine within limits

b. Should under no conditions affect my willingness to buy from them

c. Has stricter rules in the US than is some other countries

d. Is a great idea to get as much as you can!

e. Should probably be disclosed to the ethics office, particularly if it is valued at over a certain amount

7. I care about business ethics because

a. America’s reputation has suffered recently

b. Good business ethics can restore better profits

c. I don’t want to work somewhere slimy

d. Good business ethics creates a more just workplace

e. They substitute for my complete lack of business ethics.

The wrong answers would likely come from someone who is apathetic and/or cynical. Sometimes, we do feel either of those feelings. However, life is short and the well-lived life is a life of integrity. Living a life of integrity means caring about business ethics.

If you enjoyed taking this quiz, share it with your friends. If you work in an office that cares about ethics, share it at the next staff meeting. Leave it in the lunch room. Pick the one question that you like most and talk about it over beers this weekend. On your commute home, think about what you want to do differently going forward. Send the quiz anonymously to your boss. Keep the discussion going about the importance of ethics in business!

Copyright by Sally Rhys of Coaching for Perspective, July 2008

Implementing Business Ethics

Tim Bryce asked:

“The ethics of a business are whatever the top-dog says they are.”

– Bryce’s Law

INTRODUCTION

We hear a lot these days about the deterioration of ethics in business, e.g., graft,

corruption, cheating, favoritism, skimming money, etc. This has resulted in a public

relations nightmare for business. If consumers do not trust a company, its a matter

of time before it goes out of business. This is supported by recent studies that give

evidence there is a correlation between business performance and ethical practices

(see the Institute of Business Ethics).

Basically, the Institute’s study suggests there are long-term benefits associated with

enacting an ethics programs. Such studies and recent corporate snafus (e.g., Enron)

are impetus for companies coming to grips with ethics in the workplace.

There are essentially two considerations for devising an ethics program in

business; first, knowing what your ethics are, and, second; implementing them

in a consistent manner.

INTERPRETING ETHICS

There is little point in my telling you what is ethically right or wrong. You already

have an interpretation of this. But let us understand what influences our interpretation

of ethics; our interpersonal relations with others, such as our family, friends, neighbors,

fellow workers, as well as the media. Ethics is learned more than it is taught. It is based

on observations of the conduct of others, people we like and respect as opposed to those

we do not. It is then up to each of us to interpret these perceptions from which we will

base our conduct and behavior. The point is, we act on our perceptions, however accurate

or inaccurate they may be. Another influential factor are our own human frailties of

competitiveness, love, greed and ambition. But then again, this goes back to

interpersonal relations.

Let us recognize that ethical behavior is interpreted differently from person to person. What

one person may consider right or wrong may be different for the next person. The objective

in business is to implement a uniform form of behavior thereby instilling consumer

confidence in a company overall.

IMPLEMENTATION

Writing a corporate code of conduct is in vogue today as a means of articulating the

ethics of a business. Such codes are proudly displayed on web sites and in corporate

brochures more for public relations than anything else. True, they are useful for

disciplining an employee for an infraction of the rules, but I do not see them as an

effective way of implementing an ethics program. Understand this, regardless of what

the code of conduct states, the ethics of a business are whatever the top-dog says they

are. Too often I have seen companies say one thing, then act another, e.g.,

Enron.

Printed codes of conduct are nice, but we have to recognize that it is one thing to

enact legislation, quite another to enforce it. As stated earlier, ethical behavior

is based on observations. Regardless of what a code of conduct says in print, ethical

behavior is based on the relationship of superior and subordinate worker

relationships. If a subordinate observes an indiscretion by his superior, in all

likelihood it will be emulated by the subordinate. This phenomenon occurs

top-down in the whole corporate chain of command. If it breaks down anywhere

in the corporate hierarchy, it will become visible to the subordinate layers and

potentially create a “trickle-down” effect. This means the boss has to be a role

model for ethical behavior; they must “walk-the-walk” as well as “talk-the-talk.” If

they do not, it will not go unobserved by their subordinates. Managers, therefore,

should avoid the “do as I say, not do as I do” phenomenon. They must lead by

example. Anything less is sheer hypocrisy and will inevitably lead to changes

in behavior.

It is simply not sufficient to issue platitudes as to what is and what isn’t ethical

behavior. The manager must follow-up and assure ethical behavior is implemented

accordingly. In other words, we shouldn’t just “desire” truth and honesty, we

must “demand” it. If one person gets away with an indiscretion, others will surely

follow. As such, when writing out a code of conduct, be sure to stipulate the

penalties for its violation.

The success of a business ethics program is ultimately measured by how well it

becomes ingrained in the corporate culture. As we have discussed in the past,

corporate culture pertains to the identity and personality of the enterprise. All

companies have a culture; a way they behave and operate. They may be organized

and disciplined or chaotic and unstructured. Either way, this is the culture which

the enterprise has elected to adopt. What is important is that in order for an employee

to function and succeed, they must be able to recognize, accept and adapt to the

culture. If they do not, they will be rejected (people will not work with them).

The intuitive manager understands the corporate culture and how to manipulate

it. Changing the Corporate Culture involves influencing the three elements of the

culture: its Customs, Philosophy and Society. This is not a simple task. It must be

remembered that culture is learned. As such, it can be taught and enforced. For

example, a code of conduct is useful for teaching, as is a system of rewards and

penalties. Designating people to act as watchdogs of the culture can also be useful,

but be careful not to create a climate of paranoia. Ultimately, as a manager, you

want to create a culture that promotes the ethical behavior you desire.

For more information on “Corporate Culture,” see:

http://www.phmainstreet.com/mba/pride/eespcc.htm

CONCLUSION

We now live in strange socioeconomic times. 40-50 years ago we

normally had one parent staying home to raise the kids. Now it is commonplace

to find families where both the husband and wife are working and paying

less attention to their children, thereby relegating their parenting duties to

teachers and coaches. In other words, the family unit, which is the basic

building block for learning ethical behavior, is becoming severely hampered.

In business today we have a “fast-track” competitive mentality which does not

encourage a spirit of teamwork but, rather, more rugged individualism. Nor

does it promote employee loyalty. Further, we now live in a society that

encourages people to go into debt, thereby causing financial tensions.

Bottom-line, ethics is about people and trust. Consequently, we should be

sharpening our people skills as opposed to avoiding it. We don’t need more

maxims of how we should conduct our lives; we need to lead by example. As

such, we need more role-models and heroes than we do paperwork.

Let me close with one last thought on how ethics impacts business; there

is probably nothing worse in business than being caught in a lie, particularly

by a customer. Any trust that there may have been before disintegrates

immediately and business is lost. In this day and age, there is something

refreshingly honorable about a person where their word is their bond. Ethics

just makes g
ood business sense.

Business Ethics: Five Things You Need to Know

Sally Rhys asked:

You may think that business ethics pertains to OTHER people. You learned good ethics at your mother’s knee. Well, what did she tell you about conflicts of interest?

As a former Director, Ethics and Compliance for a $1.5B publicly traded organization, I learned a few important bits of information I would like to share with you.

1. A conflict of interest is when someone puts their own interest above those of the organization they work for. I found this to be the most commonly misunderstood concept in business ethics.

Here is an example: You sometimes buy lunch for your staff. As it turns out, your wife recently invested in a nearby sandwich shop which will deliver lunch. Isn’t it okay to throw your lunch business her way? Well, probably not. But no answer is absolute. It may be that she can bid on delivering lunches just like any other nearby sandwich shop, and she may get the business now and then like her competitors.

But, if she becomes your exclusive provider, thereby enriching your household income, you have just put your interest above that of the company’s. To avoid this situation, just ask yourself, “Will I personally profit from this decision, to the detriment of the company I work for?” If the answer is yes, it is probably best to just avoid the action you are considering.

2. Theft is when you take something that isn’t yours; that is obvious, right? Like taking some money from the company till.

Well, theft — of time — can also be taking time to do personal work on company time. This doesn’t mean making a phone call to arrange a dental appointment, it means picking up your laundry, getting your hair cut, and talking to a friend for a good long chat while being paid by the company. Theft is also taking a handful of pens or notepads home to your kids when school starts in the fall. Both of these examples constitute theft. Not outrageous, but theft all the same.

3. Gifts are a tricky matter. You’ve worked hard to get a contract signed and the vendor is appreciative so he offers you two tickets to the local professional football team game, worth about $350.00. Can you accept the gift?

Check your company’s Code of Ethics or Code of Conduct. There may be a limit or prohibition from accepting (or offering) gifts. Just check to be sure. It may simply be a matter of declaring receipt of the gift, or getting permission to accept it from your boss. It is also possible that you can not accept the gift.

4. Federal Sentencing Guidelines: What the heck are THOSE? The Federal Sentencing Guidelines were issued by the US Sentencing Commission, and encourage actions to help a company avoid fines and penalties for ethical wrongdoing.

Examples of actions to avoid fines and penalties include communicating standards and procedures around ethics and compliance, and requiring participation in related training programs. Your company may have some obligation to adhere to these guidelines or similar ones depending on whether your company is public or private sector. The part that applies to you is that the company should promote a culture of ethical behavior. Your obligation as an employee is to do your level best to behave in an ethical manner.

5. A Code of Ethics sets the tone for company regarding ethical behavior. Many companies have such a document. At the very least, the Securities and Exchange Commission requires a Code for officers of a publicly traded corporation.

If your company has a Code of Ethics (or Conduct), it is probably on your internal web, or may be housed in Human Resources or the Legal Department. Inform yourself about it and plan to live up to it. If you have questions, find out who to ask so you can stay on the right side of ethics.

As a final thought, why wouldn’t you want to be ethical? If you have a good reason for not being ethical, please write and let me know your thoughts.

Business Ethics and Ethnicity

Dana Smith asked:

Proverbs 24:27 ¶Prepare thy work without, and make it fit for thyself in the field and afterwards build thine house. Darby

Proverbs 18:9 ¶He also that is slothful in his work is brother to him that is a great waster.

The principles of right and wrong that are accepted by an individual or a social group..Ethics..Wordweb

America, for many fulfills these ideas for many who come here. America has been from the start a multi-cultural project. Groups of people from many nations such as Britain, France, Spain, Italy, and others made up this New World. The main idea was to find a quick route to Asia. Asia was the place for riches obtained in the trading and transporting goods. These goods were taken from the point of origin to the home country of the ship. As America, grew, the business people here wanted freedom from the tyrannical rule of the foreign powers who wanted to keep grip on this New World. Thus, the idea of Multi-culturalism was born. This idea being that several different cultures (rather than one national culture) can coexist peacefully and equally in one nation.

America has not only shown that this can exist. She has shown it to flourish, though business ethics have changed from the infant it was in the beginning. Once a Plantation owner could have slaves. Using them in business was considered fair and equal. However, even then some people hated slavery, people aside from the slaves themselves. . As the people of this nation grew in ethics, they realized such avenues such as slavery was wrong. Although, Abraham Lincoln did abolish slavery, it took many years for the full realization to take hold. Today, in the high rise of power and prestige you will find many whose roots date them to slaves.

Within the confines of many larger cities are conclaves of multi-culturalism. You have “little Italy”, “Chinatown”, and many others. All people from differing nations that bring them one desire. That is to make a better life for them and their families. When doing this, they all agree to one thing. That is the Ethics of America. To do and follow our laws. To live peaceable with each other and live freely. This Multi-culturalism is what makes America what it has become.

The problem we have in the midst of business ethics and ethnicity is when the total framework of America’s business’s is changed for one group or individual. This is seen by the legislation that is being hammered out for illegal aliens. Most of which we have seen on the news is Mexican, South American, and speak Spanish. This is not the case. For history proves that Chinese have been smuggled into America since the early goldrush and the building of the railroad. Also let us not forget the Cubans, and those boatloads of Vietnamese. All these wanted to migrate to our country. Live a free life and do business. The legislation and recent debates, however, focus on one group alone. This is wrong.

Ethics for many business’s are regulated first by what is legal and what is illegal. A quick search on Wikipedia with the word Ethics, will provide a glimpse into this world. Revealing the hidden dangers that have been in the news. From Martha Stewart to WorldCom, we have seen ethics in motion. The ethics of some in business have been seen as illegal by those in the legal area’s. Thus, the people in power who ran the business schemes under cloak and danger were held accountable. Thus ethics are related to legality in America. The enforcement of which cover all Ethnics and races who do business in this country.

Moreover, we find Ethics and Ethnicity relating to World issues as well. This is on the forefront of many discussions today. One example is found in Denmark where just this issue was pursued “Ethics and Ethnicity”. A forum by a major Denmark university conducted a seminar in 2005 on this. Their basis for doing this and reasoning stated:

Since moral decision making fundamentally has to do with how we should treat each other, a unifying goal of the seminar group will be to understand and critically evaluate how cultural and racial affiliations influence the reasonable and unreasonable expectations we have of each other.

This points to the need to discuss the distinctive obligations of students, faculty, administrators and other staff within academic institutions, in terms of their similarities and differences, regarding potential areas of conflict as well as social enrichment stemming from our encounters with people ethnically different from ourselves. The implications for our participation in the larger international community of which we are all inescapably members also will be explored, along with the recurring moral theme of the contribution to be made by institutions of higher learning to the improvement of relations among all peoples of the world. www.think.aau.dk/default.htm

Furthermore, the drive line that connects many nations today is commerce. Commerce is business, and business is propelled by people with ethics from all ethnic tribes in the world. As a result, nations, ethnic tribes, and peoples traverse the world doing business. The one avenue that all people have in common is business. That is the ability to do something to make money or barter. This translates in being able to provide for your family no matter whether you live in India, China, or America. Today, however, America still is the Grand Lady of this enterprise called Commerce. Within the Commerce you will find Multi-culturalism. The foundation of this commerce is also Ethics and Ethnicity. Without rules, regulations, and laws, the whole system would not work. It must work for all cultures, races, and Ethnic tribes.

As we look at this Ethnicity, we also find the threats. The first and paramount threat to the Ethics and Ethnicity is terrorism. Muslim’s who are totally against this kind of thing. For them, trade and commerce are the enemy. It’s paramount provider is always seen as the USA. Who is their enemy, of course. The ethnic tribes who are terrorist come from many different countries. The one link for all of them is their aberrant desire to follow Jihad against all enemies of Islam. As a result you can see this attack against the warlords of commerce and trade. No matter what Ethics you have, when you face a harsh enemy like death, life is seen as paramount. This is the reason terrorism targets the business sector. To shut down this pipeline of commerce will shut down America and the industrial nations for sure. The main target, however, seems always to be America. The USA is the leader in purveying commerce. Ethics or not, the ethnic terrorism will find a way to bend your will to his or destroy you. This is also seen in many of the oil producing countries, especially in Africa where Terrorists have shut down pipelines of oil. As well, it can be seen in Venezuela’s dictator and his hatred for the USA and its government. Within all these scenarios are ethics. Ethics that face society and declare I will destroy you if you do not bend to my wishes.

What happens if this Ethnicity and ethics come to America? What happens if groups pop up and cannot get along with each other? Will business end? It is true, that if we cannot live peaceable, then business is the first to go. America has enjoyed a long history of peace in its borders with the exception of the Civil War, the Indian Wars, and other clashes. When the Civil war was going, business was virtually stopped down south. After the war, the whole south was destroyed.

Today, America has her Ethics, but within this is the desire to keep the global business going. Facing this, are those who want to destroy this business climate and trade we know as commerce. It is kept alive by the ethics of ethnic tribes all over the world. Many of whom live in Amer
ica.

Ethnicity and Ethics. We see when good people say a bad thing is okay, such as Slavery, it is not morally ethical. Society accepted it, then decided it was wrong. We also see bad people who foment hatred and death through terrorism. Their ethnic backgrounds are from all over the world. These have ethics that declare destruction, war, and hatred against society in general. Business’s who come in contact with this later group will face a hardened foe willing to destroy to get their way. But for many in America, no matter the Ethnic background, ethics are the foundation of what they do. No matter the race, the tribe, religion, for the most part, they walk the path of ethics that American business has presented. To do things in a fair way, to do it well, to be honest, and follow all the laws of the land. The only people ‘who violate this’, are those who are greedy and dishonest. The ones who cling to power and prestige. These hold that money and fame are a higher goal than any moral ethic. For them ethics cannot get in the way of what they want. Just like terrorism, they destroy to obtain.

Encouraging Ethical Behavior

Jonathon Hardcastle asked:

Most authorities agree that there is room for improvement in business ethics. One of the most problematic questions raised in relation to business ethics is whether or not businesses can become more ethical in the real world. The majority opinion on this issue suggests that government, trade associations, and individual firms can indeed establish acceptable levels of ethical behavior.

The government can do so by legislating more stringent regulations. But, rules require enforcement and when in many cases there is evidence of lack of enforcement even the ethical businessperson will tend to “slip something by” without getting caught. Increased regulation may help, but it surely cannot solve the entire business ethics problems.

Trade associations can and often do provide ethical guidelines for their members. These organizations within particular industries are in an excellent position to exert pressures on members that stoop to questionable business practices. However, enforcement and authority vary from association to association. Moreover, exactly because trade associations exist for the benefit of their members, harsh measures may be self-defeating.

Employees can more easily determine and adopt acceptable behavior when companies provide them with a “code of ethics.” Such codes are perhaps the most effective way to encourage ethical behavior. A code of ethics is a written guide to acceptable and ethical behavior that outlines uniform policies, standards and punishments for violations. Because employees know what is expected of them and what will happen if they violate the rules, a code of ethics goes a long way towards encouraging ethical behavior. However, codes cannot possibly cover every situation. Companies must also create an environment in which employees recognize the importance of complying with the written code. Managers must provide direction by fostering communication, actively modeling and encouraging ethical decision making, apart from investing in training employees to make ethical decisions.

Sometimes, even employees who want to act ethically may find it difficult to do so. Unethical practices can become ingrained in an organization. Employees with high personal ethics may then take a controversial step called “whistle blowing.” Whistle blowing is informing the press or government officials about unethical practices in an organization. Whistle blowing could have averted disaster and prevented needless deaths in the Challenger space shuttle disaster, for example. How could employees have known about life-threatening problems and let them pass? Whistle blowing on the other hand, can have serious repercussions for employees; those who make waves sometimes lose their jobs.

Business Ethics

John Cargo asked:

A business of any kind, whether online or on-site (“real world”), can be like navigating a mine field, especially where ethics are concerned, so some knowledge of law and a certain degree of fair-mindedness are necessary to conduct business professionally and equitably.Ethics keep business practices well-grounded and focused on what is really important; that is, the customers’ needs and wants come first.

Entrepreneurs must keep themselves informed on the terms of service and the interests of the population. This will allow customers to make informed and therefore confident purchases. No one likes business ventures that are oblivious to what is going on around them or that are behind-in-the-times; shoppers are not likely to feel comfortable with the judgment of those who have absolutely no clue or are doubtful regarding what’s expected and required to satisfactorily answer shoppers’ questions. Deception, or “pulling stuff out of one’s butt,” will not suffice; businesses are likely to be more successful when they stay on top of the research so they can offer honest and current feedback to everyone who needs it. Business representatives who can’t assist shoppers are useless. Taking this extra effort shows shoppers that businesses really do care about the customers.

Fair prices are always the best way to go. Despite what many business owners might think, providing services and merchandise at higher rates will not necessarily guarantee a profit; on the contrary, such outrageous costs will only drive the shoppers to go elsewhere and the business will ultimately lose money. When businesses compare given products offered by various competitors and then set appropriate prices, customers see that said businesses are cognizant of what typical shoppers are able and willing to to pay. In the long run, operations will be consistent or gradually growing, and profits foreseeable.

Honesty is the best policy, as the saying goes. Many think that’s a crock, but, in actuality, it isn’t. Those who are open and straightforward about their intentions and offer quality services and merchandise will inevitably find themselves in a successful venture. Why? Simple: shoppers and returning customers will know that businesses that play honestly and fair value them, and the trust factor is increased exponentially. Customers are not stupid, and so they should not be treated as such. Eventually, all underhanded schemes are discovered one way or another, and the scarred reputation that businesses acquire from such bad dealings will eventually lead to a downfall.

There are many ethical situations that lead behavior in business every single day. Knowing what they are and letting them lead the way through every circumstance will make interactions easier and more fulfilling. Such honesty and integrity will always leave a pleasant, trusting and indelible impression on everyone involved.

Copyright © John Cargo

Rules of Self Employment – The Ethics & Morals of It

Abhishek Agarwal asked:

It can be said that there are primarily two rules to be followed for a self employed individual while framing rules. They may be, the rules regarding taxation and those regarding business ethics.

While considering the taxation for a self employed individual, there is not much he can do towards making any major changes in that area. As a person who is self employed you might see a hefty increase in the taxation sum as you would have to shell out for both Social Security as well as Medicare which would otherwise have been reduced by the employer paying half the amount.

But it is possible for you to change the rules of your organization, in relation to the tax bracket you would come under before the deductions as well as after it. Tax payers, submitting returns which are fully legal, the sum can reduce by up to half the tax amount which you would owe. This is due mainly to their individual approach to deductions as well as depreciations and also any legal advice they may give you regarding the same. But if you decide to file your tax returns by yourself, the golden rule is to pay the correct amount and note every deduction that you would make.

Ethics and morals are important and what one might consider perfectly ethical might not find resonance with another. You, as a self employed business man must run the company on a certain code drawn by your own views as well as those followed by other people in the field. It might be required that you draw up a set of rules and ethics which you would follow, with or without the help of the latter, this helps you in your interactions while working.

This relationship may range from those with your customers to even your future employees. Depending on the rules that you frame for your company, you will accordingly attract the right sort of business but also affect the way you conduct your work. By framing the goals and targets as well as the rules you create as a self employed individual, you can build the vision your company will strive to achieve.

There are basically two types of rules which you would have to follow. Those under the compulsion of law and those which you set for yourself based on your sense of righteousness. Irrespective of what you choose to follow or not, you are still under the law to the respective people with the authority whatever you are required to do so. The rules which you create on your own will determine how your contact with your customers and your suppliers will be. It will also create the framework on which you can gauge the actions of others.

Accounting Ethics Courses: Optional or Necessary

Justin Shomper asked:

Ethics and high morality are in high demand today especially among corporate America, and specifically within the accounting profession. After the ethical failures of Enron and WorldCom, a public outcry for future preventative measures resonated throughout the American Institute of Certified Public Accountants (AICPA), and the accounting community at large. Consequently, the Securities and Exchange Commission (SEC), the overseeing government board of the AICPA, released the Sarbanes-Oxley Act of 2002, otherwise known as SOX. The act requires a higher performance standard for accounting firms and the audits they perform to prevent future accounting scandals. SOX, which has been extremely beneficial, doesn’t change the ethical standards of an individual but instead takes away most of the opportunity to commit a scandalous act. The basic character of the fraudulent individual remains corrupt, even with legislation in place. The question is then posed: Can ethics be taught, and if so, what accounting or business ethics courses are available? The answer is not ironclad as the word ethics describes the morality of an individual, which is hard to measure. There are also very limited courses offered on ethics, however ethical education should be a required course in college and a prerequisite to new employment for all accounting firms.

Most higher education institutions, and some high school level institutions, are implementing brief ethical materials into their curriculum, but very few offer courses on the subject. The basic argument against incorporating a required accounting ethics course is that there isn’t any proof that individuals who take a course would be any more ethical than they already are. If this is truly the singular obstruction to imposing an accounting course in ethics, than why aren’t other courses in the curriculum subject to examination from proof. Many audits, specifically those at Enron and WorldCom, have failed because of poor functional accounting knowledge, not just ethical queries. Most other curricular accounting courses would fail a proof assessment required by those who oppose an accounting ethics course. It is necessary to have an accounting ethics course to properly prepare students for any future ethical temptation they may experience within the field. Without experience in fraud recognition or ethical righteousness, many new timid accountants are susceptible to fraud or ethical dilemmas. A recommendation would be to add not just one course on ethics into a curriculum, but possibly three or four. A course in ethical theory could tie into another ethics course involved in spotting frauds and ethical dilemmas while a third course could focus on answering these ethical uncertainties.

The need for an accounting ethics course is also very apparent in how much destructive attention financial catastrophes attract to the profession. The recent big company accounting scandals all brought negative publicity to the accounting field. The burden of the economic failures in today’s society must be placed somewhere, and many people look at accountants as an outlet to place that burden. All of these events from big companies provide a negative perception of the accounting field, and that’s not to mention the small business owners who have encountered other accounting mistakes or unethical occurrences. This is not to say that legitimate and honest mistakes will not be made by new students, but the ability to recognize the mistakes and evaluate ethical problems can be reduced with the addition of an ethics course. The more education and experience that new accountants have and acquire the fewer mistakes that will occur, and ultimately the less negative publicity the profession will receive. It is extremely important that in the accounting profession, clients feel secure and trusting of those who they employ.

Another need for an ethics course comes from a common stereotype of accountants. The stereotype is that accountants are known to simply follow the rules, or do just enough to meet the basic criteria. To correct ethical dilemmas, it is required to go above and beyond the norm to investigate and solve uncertainties. A class in the area of ethics could help prepare and motivate new accountants to become more proactive when evaluating a possible unethical or fraudulent scenario. Clients will feel a greater sense of security with a proactive accountant, and ultimately bring more profit to the profession.

Society can not function without ethical people. The business world and accounting profession can not function without ethical people. It is for this reason that an accounting ethics course or courses are imperative. The elimination of stereotypes, fewer mistakes, and a heightened sense of awareness is exactly what could be acquired from an accounting ethics course. It is important to add ethics courses immediately, and for employers to require that their new hire’s be educated in ethics knowledge. If an employee is not educated and courses are not offered, employers should take measures to offer a mandatory ethics course within their organization.