Ethics is the subject of particular importance for business organisation as well as for the whole social community. In modern era, in order to survive in challenging conditions of market economy, enterprise should implement ethics into all aspects of its functioning. The hypothesis which will be discussed within the research is that successful implementation of the ethics into the functioning of business organisation contributes significantly to the enhancement of the organisation’s performance. Numerous of researchers have presented studies devoted to the determining the importance of ethics to business organisations. In terms of this paper a set of different authors’ approaches regarding the explanation of the concept of business ethics, clarification the meaning of ethical leadership for business organisations, and benefits of business ethics for the organisations will be discussed.
The Concept of Business Ethics
Jalil, Azam, and Rahman (2010, p. 147) offer their understanding of the phenomenon of business ethics claiming that it can guide executives and managers of the business in correct direction, increase organisation’s reputation, and ensure achieving satisfaction of customers with the company’s service. The authors provide a wide list of specific business ethics’ contents. These contents include, primarily, telling the customers exceptionally the truth about the product’s quality, ingredients, and quantity, avoiding cheating clients and concealing product’s defects. At the same time, ethical managers are supposed to demonstrate loyalty towards the subordinates by appreciating their sufficient performance, taking into consideration their suggestions, and making mutual consultations with them during the decision making. In addition, the company which is following the principles of business ethics is obliged to provide employees with reasonable salaries and remain socially responsible concerning a range of other aspects. The researchers claim that in case organisations chose ethics as its major priority, they are likely to build trustworthy relationships both with external and internal customers (Jalil, Azam & Rahman, 2010, pp. 147-150).
Role of Ethical Leadership in Business Organisations
It is remarkable that ethics in business organisation tends to begin with the ethical leadership; ethical behavioural patterns of the company’s leader usually become highly influential example for other members of the organisation. Alshammari, Almutairi, and Thuwaini (2015, p. 109) in their study make an attempt of determining the effects of ethical leadership on employees suggesting that ethical leaders “embody inward virtues that direct him in making ethical decisions for the benefit of the wider organization.” The researchers affirm that crucial role of ethical leadership in the quality of the employees’ performance is in providing three major pedestals: inspiration, behavioural motivation, and individualized consideration. Leaders need to build their relationships with the employees on the principles of respect, trust, and two way communications. In case of efficient coping with the attainment of mentioned goals, considerable advancement of the workers performance might be achieved (Alshammari, Almutairi & Thuwaini, 2015, p. 112).
Walumbwa et al. (2011, p. 204) offer another approach to the clarification of the correlation between ethical leadership and performance of the employees; the authors explored the mediating effect of leader-member exchange, organizational identification, and self-efficacy in relevance to the ethical leadership. Using the data collected from Chinese business organisations, the researchers analysed whether the supervisor violated ethical standards for the assessing ethical leadership, evaluated the effectiveness of working relationships between employees and supervisors in order to measure the quality of leader-management exchange within the organisation, assessed the self-efficacy of the leaders, and analysed the quality of organizational identification (Walumbwa et al., 2011, p. 208). After making specific calculations, it was proven by the authors that there is a significant and positive relation between ethical leadership and employee performance. Moreover, that correlation was completely mediated by the notions of leaders’ self-efficacy, leader-member exchange, and organizational identification (Walumbwa et al., 2011, p. 204).
Benefits of Business Ethics for the Organisations
It is most reasonable to explain the importance of ethics for business organisations by defining benefits which can be brought by business ethics for the company. Su (2014, p. 87) asserts that business ethics is able to contribute to the development of the intellectual capital within the organisation or, more concisely, within the organisational, social, and human capital which are parts of intellectual capital. First, in case ethical values are in core of business’ functioning, the more trustworthy relations become established between the business and its stakeholders such as customers, employees, and suppliers; as a result organisational culture of trustworthiness becomes achieved due to which knowledge sharing, open communication, creativity, cooperation, and efficient problem solving are being encouraged among employees. Second, ethical behaviour of the organisation leads to facilitating relationships and interactions between the stakeholders; obviously, it is equalled with the improvement of social capital within the company. Third, because employees might appreciate being a part of ethical business organisation, and because they tend to be influenced by the company’s ethical values, a higher quality of human capital can be attained (Su, 2014, p. 87).
McMurrian and Matulich (2006, pp. 15-16) describe advantages of business ethics for the organisations by claiming that ethical behaviour of the company might attract loyal customers which might be resulted in the organisation’s long-term profitability. The authors emphasize that loyal customers are likely to make large purchases over a certain period of time due to which greater revenue levels can be generated by the company. Besides, loyal customers tend to make purchases more frequently in comparison to other clients. Furthermore, loyal customers might most probably bring relatives, friends, and neighbours to the organisation. Thus, it is apparent that the business tends to benefit greatly due to the loyal customers; however, to achieve clients’ loyalty, the company needs to demonstrate that it is extraordinarily ethical McMurrian and Matulich (2006, p. 16).
Finally, Collins (2009, pp. 7-10) affirms that ethical organisations have a set of competitive advantages which contribute to being these organisations considerably more successful and profitable in the long term in comparison to unethical organisations. First, ethical organisations tend to attract employees, customers, and suppliers of higher quality as for these three categories of stakeholders it is more preferable to cooperate with the organisation conducting in accordance with the values of ethical behaviour in case of other conditions being equal; it might lead to the advancement of the performance’s quality of the company. Second, ethical organisations have a higher potential of retaining investors of higher quality; financial investments might contribute to the companies’ development. Third, ethical businesses tend to have friendly relationships with the governmental institutions. As a result, higher companies’ productivity, greater quality of decision making, and increased product quality can be achieved by ethical business (Collins, 2009, pp. 7-10).
Conclusions
Taking everything into account, ethics plays an extraordinarily significant role in modern market economy. The concept of business ethics incorporates numerous of components explaining the fundamentals of the standards of treatment interested parties by the companies. A special role belongs to the ethical leadership within the organisation as, to substantial extend, this is the leader who shows the example of ethical behaviour for its employees and make a great contribution from the perspective of providing customers with the service and products of sufficient quality. All in all, ethics in business organisations can bring numerous of benefits and opportunities for the development and advancement. In conclusion, it has to be noted that this is the mixed research method, the combination of qualitative and quantitative methods, which might be the most appropriate one for the investigation of the importance of ethics to business organisations. This suggestion can be supported by the fact that among seven resources which were chosen for the literature review presented above in four of them qualitative research methods were used, in two of them quantitative methods were used, and in one of them mixed method was used.
Bibliography
Alshammari, A., Almutairi, N. N., & Thuwaini, S. F. 2015. Ethical Leadership: The Effect on Employees. International Journal of Business and Management, 10(3), 108-116.
Jalil, A., Azam, F., & Rahman, M. K. 2010. Implementation Mechanism of Ethics in Business Organizations. International Business Research, 3(4), 145-155.
Collins, D. 2009. Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance. New Jersey, NJ: John Wiley & Sons.
Lewis, P. V. 1985. Defining 'Business Ethics': Like Nailing Jello to a Wall. Journal of Business Ethics, 4(5), 377-383.
McMurrian, R. C., & Matulich, E. 2006. Building Customer Value And Profitability With Business Ethics. Journal of Business & Economics Research, 4(11), 11-18.
Su, H.-Y. 2014. Business Ethics and the Development of Intellectual Capital. Journal of Business Ethics, 119(1), 87-98.
Walumbwa, F. O., Mayer, D. M., Wang, P., Wang, H., Workman, K., Christensen, A. L. 2011. Linking ethical leadership to employee performance: The roles of leader–member exchange, self-efficacy, and organizational identification. Organizational Behavior and Human Decision Processes, 115. 204-2013.
