Ethics in Business Are an Optional Extra ?

Introduction

“The social responsibility of business is to increase its profits “(Friedman, 1970)

Ethics are of huge relevance to the world of work today and are becoming increasingly relevant to almost any business. However ethics are one of the most complicated aspects of business to study and who can say what really is right or wrong? To answer this question fully I intend to examine examples of good and bad ethical behaviour and the impact of that upon those companies. Is the above statement made by famous economist Milton Friedman still relevant in the context of business today? More specifically I am going to concentrate on the issue of diversity but first it’s important to have an overview of some of the key issues.

Ethics

An important aspect of the ethics debate is cultural relativism. Cultural relativism is where there are no governing universal standards of ethics. Ethics only become relevant within the culture that they are applied to. This thinking is adopted by many businesses as the norm (Wood, 1995). There are many examples of where this becomes relevant, for example Multinational organisations have been criticised for relocating their factories to third world countries to exploit the cheap labour resources. However the minimum wage that we would demand in this country and the style of living that we are used to would be dramatically different from those of a worker in an economically less privileged society than ours. This poses an ethical debate of what should the company pay that employee? In society today the spread of information is so readily available and the consumerist society that we live in means those companies can no longer afford to turn a blind eye to facts like this. This has lead to corporate social responsibility becoming an issue which is no longer optional for a business but one they must deal with to be successful. There are five main reasons for this which is customer pressure, a change in business procurement, government legislation and an increase in socially responsible investment as well as mindsets and expectations of employees changing (Pryce, 2002). There have been examples of companies such as Nike who have seen real damage done to the companies brand image when bad ethics have been exposed. This has even in some cases lead to a decrease in the company’s financial performance (Pryce, 2002). With this rise in awareness with regards to ethics that a company employee has results in most companies having a code of ethics drawn up that the employees are expected to follow. However as Wood says “… codes themselves do not produce ethical behaviour, partly because codes represent aspiration rather than actions. It is what is done, what behaviour is rewarded which will influence sales and purchasing people” (Wood, 1995). Another potential problem that can be faced by business especially in a sales environment is as Wotruba (1990) says the ease with which the results of the employees can be measured leading to immense pressure and thus possibly unethical behaviour. To meet the targets that are expected of them. Also does this approach lead to long term customer satisfaction? “Nearly all employees- in fact 99%- said that they care whether or not their employee acts responsibly” (Pryce, 2002).

Diversity as an ethical issue

Diversity within the workforce has been an issue within organisations for many years now and today many people believe that it’s no longer a problem for most businesses. But what is diversity Thomas (1991) defines diversity “as a mixture of differences, some of which are visible, such as race, gender, or age; while others are less visible like educational levels, sexual orientation, ways of thinking, or personal values and belief systems”. As Batstone (2004) says it can be difficult for workers in an organisation to recognise and face up to their own diversity problems. This tends to be the case more frequently when workers themselves are not members of a minority group. But companies don’t have to view diversity in this way. What they must do is carefully establish procedures in place that mean that two employees of similar abilities irrelevant of ethnicity or gender should have equal opportunities to progress Batstone (2004) also points out that “companies with comprehensive diversity programs face less worker conflict, far fewer grievances, and fewer expensive lawsuits”. However there are still problems that exist when it comes to diversity within business as Allen et al (2004) discuss “while many organisations have embraced diversity others still consider it as merely an issue of compliance with legal requirements”. As a result of this a lot of research