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Ethics in business and industrial operations is an essential factor for the prosperity of the society upon which all businesses ultimately depend. Ethical culture in business requires an environment in which employees at every level are confident that a firm is fully committed to moral conduct. A good place to start is to establish an ethics policy for an organization. The importance of ethics in business and its impact of the failure on the success of the firm have become so great in today’s consumer driven market.
Business leadership is described as the process of tactically and ethically managing and influencing market and non-market environments in order to accomplish the vision and mission of the company. Mandal (2010) noted that “the ethical issues of business in dealing with the market, consumers, the environment and ecology” (p. 113). Ethical behavior of an organization revolves around the external and integral aspects of business operations which are the most critical factors for its success (Mandal, 2010).
Kuratko & Hodgetts (2008) indicated that establishing ethical culture in business is a difficult task for the companies to complete. The process requires the business to analyze its ethical consciousness, devise its processes and structure to increase ethical performance and, what is more, review its attitude to institutionalize ethical objectives within the company. Mandal (2010) noted that “ethical culture in business can be best integrated with thoughts and actions of business executives through ethics education in all business programs” (p. 113). Ethics cannot be taught in the classroom alone. As the result, companies and organizations owe it to their stakeholders to create a culture of principled decision making.
The first step towards establishing ethical culture is encouraging ethical consciousness. Kuratko & Hodgetts (2008) says that “the development of ethical consciousness is the responsibility of the management because they come up with the vision of the company” (p. 95). The most fundamental issue is to implement the certain tone for behavior and ethical decision making within the business (Kuratko & Hodgetts, 2008). This step requires the business to focus on ensuring a strong tone at the top, establishing a meaningful code of conduct and educating employees about what it means for each of them (Longenecker et.al, 2011). During this step the management should give information about the laws that apply to particular work areas and employees (Mandal, 2010).
The second step involves establishing ethical process and structure. Kuratko & Hodgetts (2008) noted that ethical process and its structure comprises of the procedures, position statements, and specified ethical goals set that help to omit ambiguity. The key personnel in the business should be aware of the firm’s specific ethical goals only in this way it will be possible to achieve the highest results (Kuratko & Hodgetts, 2008). Training in general ethics should be conducted and reporting of wrongdoing should be done in an independent and proper way.
The third step involves institutionalization of the ethical culture within the business. Kuratko & Hodgetts (2008) articulated that “institutionalization is a deliberate step to incorporate the entrepreneur’s ethical objectives with the economic objectives of the company” (p. 95). The management of an organization is likely to change operations and policies that may have a negative impact on the ethics in a specific situation.
The process of establishing ethical culture in business is closely connected to the employment culture and attitude of the people in the company. Mandal (2010) says that responsibility for ethical behavior essentially rests when it comes to the company’s employees. The management, on the other hand, is responsible for promoting systems and culture of ethics in the work environment and not abetting or aggravating those immoral acts or wrongdoings that are present within its jurisdiction.
During the initial stage of establishing ethical culture in business, it is important to come up with an ethics statement which should be in line with its quality statement. Mandal (2010) says that “this statement must then be communicated to all employees and publicized widely so as to promote strict adherence by all without exception” (p. 113). The company should appoint an ethics counselor or ethics committee to promote ethics in the workplace and to monitor any violation of it during business practices. Mandal (2010) indicated that the main purpose of the ethics committee is not to punish people for violation of ethics, but to make them aware of its significance and to prevent any indulgence of unethical practices within the company.
In addition, firms should establish and make all employees aware of the acceptable standards of ethical behavior in different areas of operations. Longenecker et.al (2011) noted that companies should establish codes of ethics, appoint ethics compliance officers, and at the same time institute ethics training programs. Ethical culture in business should typically cover five elements which include responsibility, respect, fairness, honesty, and compassion (Longenecker et.al, 2011). Organizations should also come up with web-based programs and workshops that teach employees how to work with each other, as well as with the company’s staff, customers and business partners. Employees of large companies should sign a document assuring that they will comply with the company’s code of ethics.
The force behind establishing ethical culture in business should not be to punish people, but to avert violation of ethics through awareness building, training, and developing the ethical work culture. The rationale of the ethics in business is to endow its people with the moral authority to prevent any wrongdoing. It should be noted that like management processes, ethics and ethical principles in an organization have to be built into its work culture, promulgated by the leadership, and practiced by leading by example.