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Table of Contents
The fact that many people have been disputing the vital component of ethics in management does not change the fact, given that they have the ability to enhance the overall corporate health of the business in various dimensions.
One of these is that it helps increase the organization's productivity. It is achievable when an organization makes decisions that enhance the welfare of its stakeholders and employees (Heald 2005). A business organization can make decisions that improve the welfare of employees, such as giving fair wages and salaries, establishing employee advisory programs to assist their employees with legal issues, and other incentives. These actions and decisions are a good way to improve the productivity of the employees in the organization.
Business ethics improve organizational health as they create and improve a good image of the business in the eyes of the stakeholders such as customers and other key stakeholders (David 2007). The public image of any organization is important because it can advertise and attract more customers or chase them away from the business.
If a business organization engages in unethical activities, it will likely attract regulation by the government. Likewise, very few customers would be willing to transact with such businesses and no investors can freely put in such an organization since they can lose their money when the government closes down the organizations. Two widely known views relate to the social responsibility of an organization (Sarkar 2005). These include the classical view, which suggests that a business only wants to maximize its profits while the social-economic view highlights that every business has a great social responsibility for the community.
TERMS OF REFERENCE
1.1 Background Information
Ethics in business refers to the concerns of organizations about carrying out their operations responsibly or in good behavior. This is because every business should be willing to reflect on its values as it makes key decisions that govern its operations. Some argue that social responsibility is concerned with the ability to ensure that business firms and organizations navigate their actions by improving the welfare of society. Likewise, social responsibility means that all business organizations have an obligation to ensure that society is protected and that its actions do not negatively affect society.
1.2 Business Overview
Ethics is very important in the business world since they act as catalysts that help managers and other business operators to act in a socially responsible manner. Ethics has been categorized as an essential element of business management (Trevino & Nelson 2010). This is because any step that a business organization does not only affect the business alone but influences other stakeholders. Therefore, there is a great need for managers to consider and establish how they can use these ethics in day-to-day business operations to improve their organizations. For any organization to remain competitive in this 21st century its managers and authority must strive to ensure fairness and justice in their management operations.
Milton Friedman claims that the social responsibility of the business is not just the society's welfare but the way to increase its profits. This has some truth in it, although it seems so simple and straightforward. He argues that the social responsibility of the business cannot be the societal needs but rather the intention as to why the organization entered the business. Furthermore, he suggests that there is one and the only social responsibility of the business, which is to use its resources and engage in activities that are designed to increase its profit as long as it stays within the rules of the game. He emphasized that as long as the business engages in open and free competition without corrupting or exploiting the public that should be its social responsibility.
Friedman strongly criticizes the view that a business exists to serve while, in fact, it ventures into business with the aim of profit maximization. He suggests that no business organization can become a part of any business field without calculating the profits it will possibly reap after investing its resources in any given field of operation. Also, he highlights that there exists a difference between a profit-making organization and a non-governmental organization, whose business objective is to serve and improve people's living standards. According to this theory, it is necessary to look at corporate social responsibility from the nonprofit side since companies tend to do good when their actions increase their profits. This is because the firm cannot continue to offer services to the public when it is not making profits while in such an instance the firm will have to close down. This scholar emphasizes that it is not necessary to care about what motivates a business organization as long as its actions are ethical. Moreover, it does not indulge in deception and fraud as in the course of its operations. This American economist argues that profit is quite essential since it guarantees an organization's growth while social responsibility is secondary in elevating society's welfare and cannot be left out.
On the other hand, John Taft, the chief executive officer of RBC wealth management- U.S, suggests that great businesses usually aim at honoring and enriching the people since the business depends on people in its ability to survive and thrive. He disputes Friedman's theory saying that the business of any corporation is not about business but the people in business (Sethi 1998). He further disagrees by arguing that the business central responsibility that should become a priority in every organization is ethics for the reason that either way, an organization will greatly benefit from its social responsibility. Actually, when a business prioritizes social responsibility, it is likely to increase its profits since this creates a better public image and attracts more customers and potential investors into a business (Ferell 2012).
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Every business organization must have a code of ethics, which is a formal statement that serves as a guiding manual in its operations. This describes how managers in an organization should act and make decisions in an ethical way that does not negatively affect the community. Most of the firms that have understood their corporate social responsibility have codes of ethics that address the issues such as conflict of interest, treatment of competitors, and employee relations (David 2000). According to a recent survey, a code of ethics within an organization is an effective and efficient method of ensuring that organizations uphold ethical practices. Similarly, the development and distribution of a code of conduct are not enough because not all the decisions in an organization can be addressed in a code of ethics, and thus careful monitoring to increase efficiency is essential. This is because other means, such as starting a department that is concerned with the responsibility of implementing the ethical code and providing the workforce with the necessary training, are important. Organizations do this by conducting training programs that aim at encouraging ethical practices within their organization. Furthermore, social responsibility is not a forced issue, and therefore, no one can make organizations adhere to social responsibility, but being socially responsible is beneficial to them (Seth 1975). Large organizations can make a great difference by helping and giving priority to society, providing or injecting part of their profits and revenues into community development and charity work.