The strong bonds that link ethical culture to business growth

Businesspeople working at desk in office. PHOTO | FILE 

By PETER WERE

Can a corporation be held ethically responsible? Some schools of thought argue that only people are ethically responsible and that a corporation is not a moral agent.

Others argue that corporations are recognised under the law and so can be treated as moral agents for purposes of making them accountable. Also, the question of whether there is corporate social responsibility is subject of debate.

One of the early denouncers of this notion, Milton Friedman (1970), argued that the social responsibility of a business began and ended with the duty to increase profit, that it was shareholders who could then decide what their personal ethical stance was and that this right should not be subverted by management, nor should managers try to ‘second guess’ the ethical preferences of shareholders.

This view is challenged by those who stress the separation of ownership from control is an undeniable fact and that accountability of the modern firm is increasingly tenuous in terms of shareholders and nation-states.

The corporation is a structure of enormous power and, therefore, to maintain a social mandate, the managers need to act accordingly.

Ethical problems are part of business life and are getting more complex by the day.

The Bhopal disaster, the Exxon Valdez oil spill, the BCCI banking fraud, the collapse of Barings Bank, the Bre-X mining fraud, the collapse of Enron and consequently Arthur Andersen audit firm in tow, are all moral concerns.

Ordinary transactions could not be performed if certain moral norms did not prevail. For example the making of contracts, while legally enforceable, depends on truth telling, keeping promises and acting in good faith. In fact, it is impossible to think of an employment contract purely as a legal contract.

Ethical businesses are respected for various reasons.

Commitment to loyalty: In a public corporation, the commitment of the management to the shareholders, or the commitment of the business.

The commitment and trust of higher management towards staff and employee’s loyalty towards the management are to be well established through good communication and codes of ethics.

Absence of unethical relationships: If top level executives have underhand dealings, the very ethical framework will get a jolt. Such practices can greatly mar the image and trustworthiness in the eyes of stakeholders.

Employee welfare: Does the organisation consider and treat its employees as human assets and not like commodities?

Do the employees at different levels feel that they are treated like respectable individuals and not as herds of slaves? Should retrenchment be sought, how decently and courteously is the task carried out? These questions test ethical standards.

Ethics behind profit: Bulldozing one’s way to make huge profits and even become adorable to the stakeholders will mar the image of the organisation in the long run.