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Social Responsibility and Organizational Ethics

makes good business sense for mangers to be ethical. A CODE OF ETHICS
Without being ethical, companies cannot be competitive A code of ethics is a formal statement that acts as a guide
at either the national or the international levels. While for how people within a particular organization should act
ethical management practices may not necessarily be and make decisions in an ethical fashion. Of the Fortune
linked to specific indicators of financial profitability, there 500 companies, 90 percent—and almost half of all other
is an inevitable conflict between ethical practices and a firms—have ethical codes. Codes of ethics commonly
address issues such as conflict of interest, behavior toward
firm’s emphasis on making a profit; the system of compe-
competitors, privacy of information, gift giving, and mak-
tition in the United States presumes underlying values of
ing and receiving political contributions. According to
truthfulness and fair dealing.
one survey, the development and distribution of a code of
ethics within an organization is perceived as an effective
ENHANCING CORPORATE HEALTH and efficient means of encouraging ethical practices
The employment of ethical business practices can enhance within organizations.
overall corporate health in three important areas. The first Business leaders cannot assume, however, that merely
area is productivity. The employees of a corporation are because they have developed and distributed a code of
stakeholders who are affected by management practices. ethics an organization’s members have all the guidelines
When management considers ethics in its actions toward needed to determine what is ethical and will act accord-
stakeholders, employees can be positively affected. For ingly. Not all situations that involve decision making in an
organization can be addressed in a code. Codes of ethics
example, a corporation may decide that business ethics
must be monitored continually to determine whether they
requires a special effort to ensure the health and welfare of
are comprehensive and usable guidelines for making ethi-
employees. Many corporations have established employee
cal business decisions. Managers should view codes of
assistance programs to help employees with family, work,
ethics as tools that must be evaluated and refined in order
financial, and legal problems, and with mental illness or
to more effectively encourage ethical practices.
chemical dependency. These programs can be a source of
enhanced productivity for a corporation.
CREATING AN ETHICAL
A second area in which ethical management practices
WORKPLACE
can enhance corporate health is in minimizing regulation
Business managers in most organizations commonly strive
from government agencies. Where companies are believed
to encourage ethical practices not only to ensure moral
to be acting unethically, the public is more likely to put conduct, but also to gain whatever business advantage
pressure on legislators and other government officials to there may be in having potential consumers and employ-
regulate those businesses or to enforce existing regula- ees regard the company as ethical. Creating, distributing,
tions. For example, in 1990s and the early years of the and continually improving a company’s code of ethics is
twenty-first century, hearings and criminal court cases one usual step managers can take to establish an ethical
were conducted regarding collusion, fraud, and inaccurate workplace.
reporting of financial data in a variety of organizations, Another step managers can take is to create a special
some of which were already mentioned. The outcomes of office or department with the responsibility of ensuring
these proceedings were of interest to the public because ethical practices within the organization. For example,
many people thought that these unethical leaders would management at a major supplier of missile systems and
be able to buy their way out of jail time or major fines and aircraft components has established a corporate ethics
restitution. In the end, most of the indicted were con- office. This ethics office is a tangible sign to all employees
that management is serious about encouraging ethical
victed, which showed that big, powerful business leaders
practices within the company.
could not get away with stealing without consequences.
Another way to promote ethics in the workplace is to
The third area in which ethical management practices
provide the workforce with appropriate training. Many
can enhance corporate health is by positively affecting companies conduct training programs aimed at encourag-
“outside” stakeholders, such as suppliers and customers. A
ing ethical practices within their organizations. Such pro-
positive public image can attract customers. For example, grams do not attempt to teach what is moral or ethical
a manufacturer of baby products carefully guards its pub- but, rather, to give business managers criteria they can use
lic image as a company that puts customer health and to help determine how ethical a certain action might be.
well-being ahead of corporate profits, as exemplified in its According to Saul Gellerman, managers can then feel con-
code of ethics. fident that the general public will consider a potential

676 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION