According to Wikipedia, any form of professional or applied ethics which examines principles of ethics as well as the ethical or moral problems that floats in a business environment is called business ethics. It is the study of correct business strategies and practices about possibly debatable concerns, as like corporate governance, subornment, insider trading, corporate social responsibility, discrimination, and fiduciary accountabilities. Business ethics are habitually directed by regulations and laws, while sometimes deliver an elementary charter that businesses possibly will select to follow in order to gain public acceptance. Business without proper ethics cannot survive long in the market. The evidences has illustrated that proper business ethics are most after all the management related decisions related to core functional areas of organization.
The company that failed with poor ethics practice is case of Ford Pinto. The case here is abstracted from article by Max H. Bazerman and Ann E. Tenbrunsel in Harvard Business review (April 2011). Ford Pinto is a compact car produced by company of Henry Ford in 1970s. The car suffered from tendency in rear end collisions to leak fuel and explode in flames. The incidence killed two dozen people. On production, engineers discovered potential danger of ruptured fuel in pre-production crash test but they continued as the assembly line was ready to go. Many saw this decision as evidence of the callousness, greed, and mendacity of Ford’s Leaders. Later the business was taken to greatest failure even caused for the failure of Ford Motors.
The ultimate resolution for the situation for most of the businesses is to formulate and implement proper ethical practices in the business. Several examples illustrated that business without proper business ethics may have gained some in short run, but has always led to greatest failure in the future. Like the example of Ford Motors, the prepared assembly line for Ford Pinto may have provided business with short term ethics but has been a reason for the failure of business in its near future.
Proper business ethics must also be planted into the attitude of different stakeholders of the business. Those stakeholders can be investors, board of directors, management, and several others. Lack of ethics in investor may lead to several ethical crimes including some recognized by legal system. This becomes failure of business in the future. One of the major of such crimes is insider trading. Insider trading means the selling or buying of securities that possibly will be constructed upon admission to intimate or exclusive information which is not available to the general public.. Such incidence creates false impact upon market where the market fails to follow the pricing of the stock of particular company. Such may lead to a bubbling effect on price of the stock which later discovered may lead to several loss due to the actual valuation. Such incidence claims for a lot of money of many investors. Thus, ethical practice is must today for the investor’s resolution.
On the other hand, employee are the person who work on the behalf of company. Unethical practices in employees may lead to activities that are against the motive of the business. Any corporation used as per to favor personal benefit is against the law of governance. Thus, such practice may lead to the failure of business from legal, ethical, and moral aspects. Unfavorable ethics of business have led to failure of businesses in different senses. Thus proper employee resolution must be implanted in employees for the long term sustainability with proper ethical practices of the organization.
Ethics and economic activity seem to be uneasy companions. If economic activities centers on the intensification of efficacy in production, distribution, consumption, and allocations of assets, institutional economies offers a suggestion that among the institutions that stabilizes economies, lower transaction costs, and assure commitments, formally enacted rules of good behavior play a significant part.
The business with proper ethics has economic impact on two aspects: Long term aspects and short term aspects. Discussing about the short term aspects, ethical practices may reduce the economic impact on business as unethical practices come along with enormous short term benefits. Generally the misappropriation leads to short term benefit for either person or firm that may generate windfall profit for a economic period or more. On long term aspects, unethical practices have generally lead to failure of business. The discovery of such takes away the public confidence in the corporation that often leads to failure of business in long term. History has suggested that any business involved in such have been through the severe problematic phase that has led to failure in future. Some of the business houses lost faith of public whereas some got collapsed in the future. Thus, the total economic impact of unethical practice now has been on negative trend more than positive note. The short term benefits can never recover the long term failure of business.
There was a recent interview with former chairperson of a bank, who went through legal prosecution against being involved in the fraudulent case. The case almost dragged out 30 million cash out of the business. Later, he was interviewed about the case he had, and the earnings he made out of his. The person was very reluctant to face the interview. Later, in his interview he stated that, “all it happened because of greed of money”. He wanted to earn so much during his tenure that he can easily live his life afterwards of his retirement. The greed made him issue several loans under his command just for the commission amount he was receiving. Most of the loans between a periods went bad and later investigation discovered the fact of his involvement.
Later he said that, he lost all the name and fame he earned in his 40 years career in banking. He said that, the money he earned were taken by government. Now he was left with nothing within himself. He lost his name, fame, money, career everything. Even the employees in his bank treated him so bad that once he was kicked out of office when he went there to check his account. He said that the life has humiliated him because of his deeds. He said he would have been better off with least money rather being on piles of money and be left nowhere afterwards.
Bibliography
Bazeman, Max H. and Ann E. Tenbrunsel. "Ethical breakdowns." Harvard Business Review (2011).
Illinois. Insider Trading. 2008. 5 December 2013. <http://business.illinois.edu/broker/pdf/insider.pdf>.
Investopedia. 2013. 5 December 2013. <http://www.investopedia.com/terms/b/business-ethics.asp>.
wikipedia. 2013. 5 December 2013. <http://en.wikipedia.org/wiki/Business_Ethics>.
Zelizer, Viviana A. "Ethics in the Economy." Themenschwerpunkt (2007): 8-23.
