An organisation’s ethical policy will provide a code of professional conduct for managers when dealing with potentially controversial issues which arise in the business environment, such as human resource policies, trading practices, director’s responsibilities, industrial espionage and corporate social responsibility.
The actions of Businesses large and small can have a significant impact on their staff, suppliers, community and the planet .The management of organisations, who define their policies, can choose to act primarily in pursuit of profit or to adopt a more ethical approach. They often embody these policies in a corporate social responsibility policy (CSR).
An ethical approach aims to ensure the employees act responsibly in putting ethical considerations before profit, considering the implications of their actions on staff, suppliers, community and the planet. It encourages staff to be sensitive to their community, always do the right thing, and behave morally fairly and honestly. Such a policy will seep into the culture of the company and help staff select the correct course of action in any given situation.
Good business ethics are sometimes required by law, and will create trust and public acceptance in the market place for the company. They will reflects the culture and philosophy.
Why should businesses act ethically and risk their profits?
There are those who argue that the objective of any company is firstly to make a profit, and that many organisations have a stated aim off maximizing shareholder returns, in which case sacrificing profits to ethics may conflict with director’s fiduciary responsibilities.
Shareholders today will largely accept that ethical considerations must go at least hand in hand with profit requirements, and this should be embodied in the CSR policy, and allow directors to make socially responsible decisions.
This is a constant dilemma for managers, whether they are employed by a giant corporation or running their own business. Many owners and managers know that ethical policies will increase costs, and thereby reduce profits.
On the other hand companies who develop an ethical brand image such as Fairtrade or Body shop may be able to charge higher prices for their products and encourage loyalty from their customers. So in this case an ethical policy does not necessarily lead to reduced profits.
A company that behaves unethically , for example by paying staff low wages, may attract bad publicity and fail to appeal to potentially high flying staff , making it more difficult and expensive for them to attract new staff.
So sometimes ethical behaviour can pay off for an organisation even if they don’t put profit first.