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Business ethics and corporate social responsibility

Business ethics and corporate social responsibility

by Ingrida Andrijauskaite

Business-Ethics

Every year the watchdog of ethics focuses on ethical values in business. The desire to have an ethical and responsible business is developing a colaboration between small and large corporations. Ethical organisations, such as the Institute of Business Ethics, are seeking to unite all companies to join and share knowledge concerning the best ethical practices, activities and solutions.

The ethics of a business depends on the company’s culture. The decision to do activities ethically is an example of  moral behaviour. All corporations have to decide what to do and how to do it in order to align their behaviour with their ethical values.

A Cadbury Schweppes – Business Case Studies[1] presents some examples of the positive impact that ethical behaviour and corporate social responsibility has on a business:

  • Attracts customers to the firm’s products, thereby boosting sales and profits.
  • Makes employees want to stay with the business, reducing labour turnover and therefore increase productivity.
  • Increases the number of employees wanting to work for the business, reducing recruitment costs and enabling the company to obtain the most talented employees.
  • Attracts investors and keeps the company’s share price high, thereby protecting the business from takeover.

So, ethical behaviour and social responsibility in business is considered the key to success for a company. Also, it is a way for businesses to gain the publics’ trust.

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Attitudes of the British Public on Business Ethics

Every years Ipsos MORI, a market research company, conducts a survey about the British publics’ view on ethical behaviour of British business and the issues that most need solving. The survey results revealed that in 2014 the majority of the British public considered that the general behaviour of British enterprises is fairly or very ethical. 58 % of the respondents thought that British business was more ethical than unethical. However, 40 % of the respondents thought that the behaviour of British businesses was “not very” or “not at all” ethical.

This survey also asked the British public to compare the behaviour of British businesses to how it was 10 years ago. The data of Ipsos MORI showed that 36% of the British public thought that businesses were behaving “less ethically” than 10 years ago. Just 25 % of the respondents believed businesses were more ethical. 36 % thought that businesses looked the “same”.[2]

We can assume that, although the majority of the British trust and think positively about the behaviour of businesses, there is a large percentage of the public who acknowledge the lack of ethical behaviour in business. It is very important for businesses to incorporate social responsibility, integrity, and honesty.

The main issues mentioned by the British public were corporate tax avoidance ( 35%) and executive pay (34%). However, the data of the survey revealed that bribery and corruption has also increased one place (19%).

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Also, this information shows us that the British public wants to see more honesty from the business community, especially from employers who could inform companies about unethical behaviour or wrongdoing.

Perhaps, we can hope that this data could encourage the business community to focus more on forging reliable and honest connections with society. Also, it is vital not to forget to emphasize the practical applications of a company’s ethics in the public arena so that people can find out about a corporation’s social responsibility and their efforts to incorporate ethics into their business strategies.

HSBC tax scandal – an example of unethical behaviour

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The HSBC tax scandal, is a clear example of corporate unethical behaviour. HSBC has been shaken by leaked financial documents, most from around 2005-2007, that reveal that it helped wealthy customers evade taxes. The documents were leaked by Hervé Falciani, a former systems engineer from HSBC’s Geneva branch.

This secret data revealed that the bank not only helped rich customers evade taxes but also provided accounts for international criminals, corrupt businessmen and other high-risk individuals. HSBC presented a general letter to the public, in which they apologized for this tax dodging scandal and emphasized that they have made changes since the period which is covered by the documents, and that it’s Swiss private bank had been “completely overhauled.”

Such scandles are the reason for why corporate tax avoidance is a public concern. This is one of the biggest problems in businesses. How did HSBC manage their reputation crisis? They sent a public notice in which they sincerely apologized about the tax scandal. Also, they tried to emphasize how now everything has changed and improved.

What about HSBC’s current culture? As HSBC’s group Chief Executive, Stuart Gulliver said: HSBC has been working tirelessly and with great dedication to build a stronger bank with fully global businesses and functions, rigorous controls and the highest global standards, all underpinned by a clear strategy to serve our millions of loyal customers. We can try to believe it, but now HSBC have to prove their integrity and focus on ethical standards.

The unethical financial situation of HSBC has showed us how employees are able to speak up about companies’ wrongdoing. Hervé Falciani’s behaviour could be considered criminal, as he secretely stole private company financial data. Nevertheless, this is evidence that large corporations do not always respect the ethical standards or even the law, and do not focus on their compliance.

The advantages of Ethical behaviour in business

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In summary, all companies should not forget the advantages of ethical behavior in business. It is very important to build and improve customer loyalty – consumers have to know that a company appreciates and respects them. Also, a company’s reputation built around it’s ethical behaviour can help to create a more positive image in the marketplace and allows them to reach a greater number of potential clients.

On the contrary,  if a company has an unethical reputation, the chances of obtaining new customers decreases, especially in this era of innovative social networks, where all customers are able to quickly find negative information about a company’s  activities.

The improvement of internal communications. It is significant to share information within an organization so that all employees are aware of the values of a company. Focusing on the improvement of professional skills is important to employees, as talented individuals want to  improve their skills and knowledge, in order to advance in their career.

In addition, every employee wants to be part of an organisation where they know the truth about whats is going on, particularly in crisis situations. Those companies which are responsible and open with their employees have a better chance of attracting and retaining more talented staff.

Avoid Legal Problems  a company has to respect and abide by the law. Also,  companies must focus on environmental regulations and labour laws, and also not ignore workers’ safety. If these factors are not taken into account, a company’s reputation can be damaged. Those companies which focus on the highest ethical standards can build a strong protection of their fundamental values.

 

[1]Business Case Studies: http://businesscasestudies.co.uk/cadbury-schweppes/ethical-business-practices/the-importance-of-ethics-in-business.html#axzz3Ru3WMJWB

[2]The survey results of the Institute of Business Ethics: http://www.ibe.org.uk/userassets/surveys/attitudes2014.pdf