Unit VIII: Importance of Business Ethics

Importance of Business Ethics
Name
Institution
Importance of Business Ethics
Introduction
For many years now, the link between organizations and the society has evoked various financial, social and moral environmental challenges. Although the business has served the society in an ideal manner, the relationship between the two has become strained in recent days. This criticism is a clear sign that the organization has taken advantage of the numerous benefits that can be derived from having a working relationship with the society. The criticism in the manner in which the society deals with the community first came to light in 2001 and has continued to be in the spotlight up to the modern day although on a different capacity. The emergence of the strain between the community and the company first became evident when Enron filed for bankruptcy in 2001. What followed the filing for bankruptcy became a series of accusations that led to the implication of numerous people in to the Enron scandal. In the process, 30 states ended up siding with the Enron shareholders in demanding for compensation from the company's management (Silverstein, 2013). In 2009, the leading Enron investigator concluded that the rot in the company was enough evidence that the management was not attentive to what was happening in the company. One major conclusion he made was that the general managers did not have a keen interest in the things happening within the firm. After the Enron expose, numerous other companies across nations were found to have engaged in unethical practices that made investors to lose large sums of money. This expose led to a redefinition of the manner in which organizations relate with the society (Joseph, 2013). Despite the example set by the Enron debacle on the damage that the absence of practicing ethics can do to a business, many businesses still ignore ethics in their practice due to the downsides associated with the concept but this often comes with detrimental effects.
The general study of ethics highlights issues to do with justice and fairness while business ethics addresses the moral issues that crop up in a business enterprise (International Statistical Institute, 1986). While many people think that business ethics only dealt with the Enron saga, the truth is that even the Wall Street collapse that was witnessed in 2008 was a question of organizations not adhering to business ethics. Ideally, the major role of the management in a business is to ensure that they deal in an ethical manner with the shareholders, as well as to ensure that that they address the conflict that occurs between the company and its customers. At the center of this task rises the ethical dilemma that all businesses have to deal with in their day to day undertakings. On top of the challenge of ensuring that the customers are dealt with in an ethical manner, the management also has to ensure that all the employees act in a manner that is consistent with the organization's ethical principles. This is crucial as the manner in which the employees act affects not only the organization but the entire community as well (Dewey, & Tufts, 1932).
Social Responsibility and Responsiveness
One thing that has been at the center of business ethics is social responsibility. For many years now, organizations have been undergoing a close scrutiny of their affairs to establish whether they are consistent with the best interest of the society in which they operate. The major area of focus has been brought about by the view that the company does not care about the social welfare of the society under which they operate, as well as the belief that their focus is only on making money. These concerns have brought about a great need for corporate social responsibility in nearly all the organizations (Ferrell et al., 2010).
Upon its formation, corporate social responsibility was meant to look at the impact that the business has on the society. Many businesses believe that CSR is a way of demonstrating to the world around them that they are acting in a responsible way. Ideally, CSR was formed after the Adam Smith’s concept of the “invisible hand” which claimed that the society was capable of managing its needs and wants through the marketplace (Simon, 2008). What this implies is that if a business is rewarded on the basis of its effectiveness in addressing the needs of the community, the self-interested pursuit of that reward would give way to the society attaining what it wants. For that reason, the “invisible hand” of the market as proposed by Adam is what changes self-interest into social interest. Although the organization has fared well in the area of determining the manner of goods and services that the society requires, it is a pity that it has not been as effective in the area of ensuring that all their operations and practices are done ethically (Agbata, 2009).
Although many businesses have tried to act ethically, there have always been challenges towards this end. The main reason most businesses do not act ethically is that they are seen as profit enterprises and if they begin acting ethically towards the community, they end up abandoning their pr...