What is meant by corporate ethics?

Ethics refers to the moral values and principles that guide an individual. Corporate ethics refers to the moral behavior of a company and its employees while conducting business. Business ethics is another name for corporate ethics. Business ethics reflects the purpose of doing the business. Business ethics is the distinction between what is right and wrong in the workplace and the selection of the right set of actions. Every corporate entity follows business ethics to a large extent in order to survive and compete successfully in the market. Corporate entities that strictly adhere to business ethics gain the trust of their stakeholders and thus gain more customers. An organization follows compliance, i.e., following certain business policies, rules, procedures, and practices to deal with the problem arising from the business environment. Business ethics also ensures that they meet compliance requirements as it was connected with the activities of an organization.

Features of corporate ethics

• Choosing right over wrong: Business ethics allows one to distinguish between right and wrong business practices and then select the right set of ethical practices.
• Corporate image: Following business ethics in operations helps corporate entities build a positive corporate image, and vice versa. Ethical executives supervise every action of the organization to maintain a positive corporate image.
• Superior to law: Business ethics take superiority over the law of the jurisdiction in which the corporate entity operates. Insider trading, for example, is not illegal in some countries but is illegal in others. It is important to note, however, that insider trading is an unethical practice.
• Provides a framework: Business ethics provide a general legal and ethical framework within which corporate entities should conduct their business operations.
• Code of conduct: Business ethics is a code of conduct that enables corporate entities and their employees to contribute to the betterment of society.
• Subjective: An organization can expand its operations at a global level. The development of ethics must be in accordance with the expectations of the respective country.
• Maintains ethical responsibility: Business ethics always try to maintain the organization’s social responsibility towards society.

Corporate ethics guidelines

Corporate ethical guidelines of an organization are closely linked with a social group of consumers, employees, investors, and the local community. The following are some of the guidelines of corporate ethics:

• Avoid exploitations: Exploiting and cheating consumers should be avoided. The increasing price of the product purposefully to cheat the consumers must be avoided. Satisfying the needs of the consumers should be the main objective of the company. Activities of the business must be adjusted based on the needs and demands of the customer.
• Distribute qualified products and services: Selling harmful products, banned goods, and selling goods in the black market just to earn surplus profit must be avoided.
• Fair competition: Creating a healthy competitive environment for other organizations to attain benefits should be encouraged.
• Maintain quality and quantity: While selling goods, the product must be packed with the right weight and perfect quality with nice packaging. Such practice must be followed to maintain the quality of the product.
• Proper accounting procedure: Paying tax regularly to the government from the profit earned is necessary. Proper maintenance of accounts is necessary. Every transaction made in the organization should have a proper record. The accounts should be audited by authorized persons.
• Fair wage: An organization’s employees should be paid a fair salary or wage. An adequate facility must be given to an employee for a good workplace.
• Proper communication: An investor in the organization must be informed of all financial and other decisions taken at the organization as they are the owners of the company.
• Prohibition of Discrimination: Discriminating an employee based on their gender, race, religion, language, nationality, etc. should not be done in an organization.
• No malpractice: Giving bribes and costly gifts to influence the officer for doing illegal activity should not be done. These activities affect the business’s ethical conduct.
• Abide laws: Rules and regulations formulated by the governments must be followed perfectly.

Types of corporate ethics

An organizational culture, management philosophy, and corporate ethics create an impact on the performance of the company in the long run. Industry size, profitability level, and ethics are the most important factors for the success of an organization.

Leadership ethics

An organization’s management allots teams for running day-to-day business operations. Proper ethical practices are followed by the management, the leaders in the organization can direct the employees to make a decision that is beneficial to individuals and for the organization. A strong foundation in ethical behavior can retain talented individuals by maintaining a positive reputed community in the workplace. From top management to low management corporate ethics builds a strong relation between them.

Employee ethics

In an organization, when the management functions in ethical conduct then the employee will also follow the footsteps lead by the management. The employee takes decisions based on the principal guide i.e., corporate ethics. It leads the organization to increase productivity and morale among the employee. When an employee performs their assigned duty in the workplace with honesty, integrity, and loyalty the entire organization will be benefited from the conduct. Companies that have high standard business ethical behavior for business operation then employee under such roof also do their duties in high level in the workplace.

Production ethics

Corporate ethics ensures that organization products or services do not cause any harm to the public. The success of the organization depends on the products or services provided by them. Producing dangerous products can change the minds of the consumers which will affect the entire organization. Producing genetically modified foods, purposefully producing defective products, unhealthy products lead the company to face so much trouble from the public as well as the government. While producing products, the surrounding environment should not be polluted. Production ethics is much more important for the survival of the organization.

Marketing ethics

Marketing ethics usually deal with the principle that is hidden behind the business operation. A fair price should be fixed without discriminating and skimming. Even though a company’s ultimate goal is to earn a profit, corporate ethics ensure consumer protection without exploiting the consumer. Additionally, the price of the product must be fixed. A healthy competition between the competitor will increase the standard as well as the name and fame of an organization. While advertising the product content must be made related to the products. A misleading advertisement make discomfort among the consumer. A systemic approach is necessary to function the business practice in an ethical standard.

Context and Applications

This content will be helpful for the students who are pursuing undergraduate and postgraduate courses like

• Bachelors of Laws - Corporate Law, Commercial Law & Trade Concentration
• Bachelors of Law in Corporate Compliance
• Masters of Advanced Corporation Law
• Bachelors of Business Administration- Management
• Bachelors of Law in Corporate Law and Finance

Practice Problems

Question 1: ____________ is a moral principle that guides the organization to conduct its business and transaction in an ethical standard.

1. Social responsibility
2. Business ethics
3. Ethical decision

Answer: Option b is correct.

Explanation: Business ethics is a form of moral principles and values that guide the organization to conduct its business and transaction in a standard way. Ethics is a set of principles that examines the behavior of an organization.

Question 2: Business ethics is formed based on ____________, it offers rules and principles related to those value for business operation.

1. Social and moral values
2. Marketing
3. Leadership

Answer: Option a is correct.

Explanation: Business ethics are made by social and moral values. It guides the organization to follow a standard ethical behavior while functioning the business operation. It ensures that the business earns profit without affecting the individual or society.

Question 3: Business ethics must be formed in a way to protect its __________.

1. Customer only
2. Employee only
3. Customer, employee, shareholder, creditor, investor, and social community

Answer: Option c is correct.

Explanation: Business ethics protect from exploiting customer needs, employee contribution in the workplace, shareholders interest, creditors interest, government rules, investor, and social community around the organization.

Question 4: Business ethics ensure that products or services don’t cause any harm to the public comes under__________.

1. Production ethics
2. Marketing compliance ethics
3. Leadership ethics

Answer: Option a is correct.

Explanation: Corporate ethics ensures that organization products or services don’t cause any harm to the public. Producing dangerous products can change the minds of the consumers which will affect the entire organization.

Question 5: __________ deals with fair price should be fixed without discriminating and skimming.

1. Employee ethics
2. Production ethics
3. Market ethics

Answer: Option b is correct.

Explanation: Marketing ethics usually deal with the principle that is hidden behind the business operation. A fair price should be fixed without discriminating and skimming. Even though a company’s ultimate goal is to earn profit corporate ethics ensure consumer protection, without exploiting the consumer price of the product must be fixed.