When Business are not just Business
Nelson Pizarro Corrales
Human Resource Mgmt
2Fall 2010
Marcie Cudmore
Introduction
Since a time to now, have proliferated publications, seminars and other
forums of discussion on ethics in business. Perhaps much of this sudden and
renewed interest in good corporate act has to do with the many financial
scandals that have occurred since early 2001, starting with Enron, the United
States, and culminating in Inverlink group in Chile.
Fortunately, the public debate has not focused exclusively on executives
and accountants responsible for these financial turmoil, but in the ethical
standards prevailing in the business world in general. What kind of training
they are receiving future entrepreneurs? Is private conduct should be geared
solely to generating profit? What limits should govern the competition? These
are just some of the questions that have crossed the business forums.
From these discussions, many have argued that unethical behavior is
inevitable in an economic system based on free competition and profit
maximization. Thus, there are employers to justify questionable actions under
the pretext that "business is just business." But this is not true, because
"business is part of human activity and therefore is inherently moral. When
acting as a person and makes a decision about what advertising campaign
launch or what kind of product do, whether to deceive or not the consumer
with communication, whether to accept or not the practice of bribery to obtain
sales and business, when you take all these decisions cannot separate the
technical from the moral.
The free market right next to an act of business is possible. In addition,
multiple studies show that investing in ethics is perhaps one of the most
profitable for businesses.
Means and ends
Business ethics is about how a company integrates a set of moral goods
such as honesty, trust, respect and justice in their own policies and practices as
well as in decision making at all levels. And although there is no proper
business ethics, several principles and exercise of certain virtues which fit
under this heading. From a theoretical point of view, proper ethical conduct in
business has to do with the means chosen to attain the good of the company
(its consolidation through the generation of profits) with the aim of effectively
contributing to the members of the corporation (workers and employers) and
society (consumers) reach their fullest. The unethical behavior in an economic
system based on free competition and profit maximization. Thus, there are
employers to justify questionable actions under the pretext that "business is
just business." But this is not true, because "business is part of human activity
and therefore are inherently moral.
When acting as a person and makes a decision about what advertising
campaign launch or what kind of product do, whether to deceive or not the
consumer with communication, whether to accept or not the practice of
bribery to obtain sales and business, when you take all these decisions can not
separate the technical from the moral.
The free market right next to an act of business is possible. In addition,
multiple studies show that investing in ethics is perhaps one of the most
profitable for businesses.
However, there are those who fight the ethical considerations related to
the business. Some characterize the corporate world as a jungle where all
forms of competition are valid: "In business to be fought like a war.
And as in any good war, it fought with courage, bravery and without
morality. “Others have a more nuanced position and argue that the best
companies are those that are prepared to fight another breaking a rule: "The
ethical standards governing companies are like the rules governing a game of
poker".
Such statements derive most of the time, a vision that attaches only to
companies seeking profit.
In fact, the father of neoliberalism, Milton Friedman, is a faithful
exponent of this thesis:
"There is one and only one social responsibility of business: using its
resources and engage in activities designed to increase profits while respecting
the rules of the game, namely free and open competition without falling into
fraud or deceit".
But is not the profit motive as bad thing itself. Quite the contrary.
Profitable firms are precisely those that endure over time, since they use their
resources properly and produce goods and services the market demands. But
the profit motive is not, nor can be, the essential mission of the company. In
fact, profit-making is only the means by which business helps women achieve
happiness, fulfillment and development, for work is one of the occupations
most dignified human beings.
The beauty of being ethical
Contrary to what one might think, empirical evidence shows that firms with a
strong ethical culture obtained in the long run, better results than those who do
not. As maintained by an entity dedicated to corporate social responsibility:
"Be kind to workers, the environment and the community in which we live,
makes the company more attractive in the eyes of the public, shareholders and
tax law. So, everything is cheaper, because of strikes, environmental costs and
demand loss may be catastrophic situations.
Indeed, business ethics creates the following effects:
a) Improved financial performance.
A 1999 study conducted by DePaul University (USA) at 300 large companies
found that the market value of the firms that made an explicit commitment to
adhere to its code of ethics was twice the value of those companies that do not
did.
b) Go up the sales and enhance corporate image.
A recent survey conducted in 25 countries by Environics International found
that nearly 50% of consumers thought punishing a fruit company that
considers negative social actions, and that nearly 30% have avoided buying
products from a company for this very reason. In the United Kingdom, two in
three consumers have boycotted at least one brand to fall into unethical
behavior, according to public relations firm Quentin Bell Organization.
c) Strengthen the loyalty and employee engagement.
A survey made in America by Walker Information found that only 6% of
employees think their leaders do not behave correctly prefers to stay at your
company, while 40% of those who believe that their superiors are ethical
wishes continue in his current job. Another U.S. survey, this time the Hudson
Institute, found a positive correlation between high ethical standards, job
commitment and loyalty, and concluded that employees who feel engaged in
ethical environments are six times more loyal than those who believe that their
organizations are not .
d) Increase the up regulation of the markets.
If companies and their workers do not act with honesty, commit fraud and do
not fulfill their commitments, there is a risk that the public machinery and
implements stringent audit provisions unreasonable, which, although not be
effective in their work, considerably raise the costs of private activity. In fact,
the financial scandals of recent years have created laws that reduced the scope
for action by U.S. companies.
Today, the Sarbanes-Oxley Act tightly regulates audits, business analysis and
other services related to the financial market.
e) Avoid losing business. Large companies extend their own ethical practices
to their suppliers as well as supplying firms without such habits can see
canceled their contracts and / or lose future business. For example, in
1998 Shell canceled contracts with 69 companies that had failed in its
adherence to its policies on health, safety and environment.
Similarly, there are precedents that show that governments are willing to
suspend agreements or penalize companies that are perceived as frivolous. In
1999, the Japanese government revoked the license to conduct business at a
European bank for improper financial accounting practices.
f) Provides greater access to financing. The confidence and assurance that a
company will meet its commitments directly impacts the easy availability of
other resources to develop their projects. A bad corporate reputation can be
closed altogether or excessively expensive the possibility of taking bank loans
or issue bonds in the capital market.
Conclusion
The global financial scandals, especially those that occurred in Chile,
shook the business community because it hit the base of the free and
competitive economy: trust.
This provides an excellent opportunity to highlight and promote a
greater concern for corporate ethics. While some believe that moral concerns
have no place in the world of business, or have an almost negligible or very
indirectly, the fact is that both theory and corroborating evidence that full
respect certain principles and virtues have a very positive impact on enterprise
development.
References:
1- Álvaro Pezoa. “Ética y Negocios”en revista Intus Legere n° 1. Anuario de
Filosofia, Historia y Letras de la Facultad de Humanidades de la Universidad
Adolfo Ibáñez. 1998. pp. 135-144
2. Business for Social Responsibility. “Overview of Business Ethics” en Issue
Briefs, published in internet: http://www.bsr.org/BSRResources/ Issue Brief
Detail.cfm?Document ID=48815.
3. Rafael Mies. “Ética y mercado: ¿son compatibles?”.Lecture dictated at
Duoc UC.
4. Theodore Levitt. “The dangers of social responsibility” in Harvard
Business Review n° 58507. 1958.
5. Albert Z. Carr. “Is business bluffing ethical?” in Harvard Business Review
n° 68102. 1968.
6. Milton Friedman. “The social responsibility of business is to increase its
profits” en The New York Times Magazine. September 13 of 1970.
