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Ethics Corporate Governance

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Ethics, Corporate Governance and Corporate Behaviour

Ethics is not new to organizations or people in organizations. The corporate world has always had rules, standards, norms and regulations that guide their operations and activities. However businesses have experienced a lot of changes due to the social and cultural – bases, which differ between countries though they are universally acceptable.

Ethics defines the way an organization behaves in a proper manner in carrying out their activities. However, it is common knowledge that a lot of organizations’ ethical issues are characterized by conflicts of interests. This is because many organizations try to achieve their profit maximization goal on one hand whilst dealing with issues relating to social responsibility and other social services on the other hand.

In summary, ethics is the values that form the basis of human relations, and the quality and essence of being morally good and/or bad, or right and/or wrong. Business Ethics means – Honesty, Confidence, Respect and Fair Dealings in all circumstances.  These values are rather general in concepts without clearly defined boundaries. Ethics can also be said to be the overall fundamental principles and practices for improving the wellbeing of humanity.

Based on the definition of ethics, it can be deduced that an organization that does not respect ethical criteria and which fails to improve them will disrupt its integrity and unity. It will distort its capacity to achieve its goals and will sooner or later lead to internal and/or external conflicts. 

However, it is important to note that ethical behaviour and ethical organizations have effects not only on stakeholders and shareholders but also on the economy as a whole. This is because when we act ethically in business decision making process, we ensure a more effective and/or productive utilization of economic resources.

Though business ethics is fundamental, it is also a problematic area. This is because there are no absolute agreements as to what constitutes ethical and/or unethical behaviour. For each organization, there is the need to consider their own ethical position as a starting point, because it will affect their own views of ethical behaviour.

Over the years, one issue which has dominated the world as it relates to organizations, governments and/or individuals is corruption. From a corporate point of view, the problem is that in certain countries it is necessary to offer payments in order to do business. The debate here is mainly concerned with the extent to which it is ethical to do such.

This write-up has no definite answer to this, however it is important to note that under most of the corporate governance codes and many ethical philosophies it is not reasonable to do is.

The essence of ethics for organizations is to provide a guide towards their corporate behaviour. Corporate behaviour is important to the success of the organization both financially and concerning the relationships between corporate and business interest.

Corporate behaviour involves the legal rules, ethical codes of conduct and social responsibility principles. The diagram below will shed more light.

It can be reasonably said that corporate behaviour is based on all of these components and involves law, ethics and CSR. It is important to recognize the fact this behaviour must be ethical and must also be seen to be ethical. This is because perceptions are extremely important.

 Corporate behaviour does not only affect the stakeholders and/or shareholders but also the entire economy. When organizations act ethically and socially responsible in its decision making and strategic planning, then such an organization and its business will be more sustainable. This is because socially responsible corporate behaviour is increasingly being seen as essential to the long term survival of organizations.

In view of this, it can be said that there is a huge interconnectivity between governance and CSR. As had been earlier described, the social responsibility of an organization encompasses the economic, legal, ethical and discretionary expectations that the society has of such an organization.

As such corporate behaviour by organizations towards stakeholders is becoming a much more important concept in practice and it has become an integral part of corporate governance. This concept is important because it takes into consideration the ethical, legal and responsible behaviour for organizations, stakeholders and society.

To be socially responsible, organizations must become more legally and ethically responsible. As it is today and with the growing trend in the global economic, CSR is no longer a legal necessity, it is increasingly becoming a constructive obligation. As such companies must continually move towards being socially responsible even though it is not a legal obligation.

We believe that when organizations act ethically in the business decision making process, then it will ensure more effective and productive utilization of the organization’s economic resources. It can be said that corporate behaviour affects responsible and proper economic and institutional improvements.

Thus corporate governance should be seen to have an effect outside of the organization itself as it will affect the broader society and the relationship between the organization and society, and as such all stakeholders.

In conclusion, we can say that sound ethics, corporate governance and corporate behaviour can bring about the following

  • Better organizations and more profound effect on the external environment and the global economic environment.
  • Enhancement of the organization’s reputation
  • Better mechanism for managing the relationship between organization and the society

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