This essay aims to analyze the essential of ethical business behaviour. This essay will focus on the business ethics on employees. After the introduction part, the definition of business ethic and corporate social responsibility will be given in Chapter 2. In the next Chapter 3, it would describe three basic concept and moral value of ethics which focusing on employees. Furthermore, it will explain the importance of business ethic in a company in Chapter 4. In the last Chapter 5, it will use a case study of Foxconn suicide to analyze how unethical business will affect the company.
Producing of new trendy products or providing excellent services is not the only reason to attract customers now. Business ethics is taking a significant position on it. Business people are the experts to maximize the profit of a company. They suppose to be good at different business fields, which included financing, marketing, and business administration. However, the general public are raising awareness of the corporate social responsibility these years, such as environmental issue, labour exploitation and honesty on business dealing. Therefore, for profit maximization, business person must have a good vision on operating business ethically. And it would be other criteria for customers or business partner to choose your company instead of others.
This essay will divide to three main parts: the first part will provide basic idea of business ethic and corporate social responsibility. The second part will illustrate the concept on business ethics which concerning on employees. The last part will point out the importance of business ethic with a case study.
2. What is Business ethic
2.1 Definition of business ethic
Business ethic has various meanings and it can be differ in different countries and from industry to industry. It is a set of moral value, standard, code of conduct in a business organization, for example honesty, fairness and responsibility, which stipulate as a guideline to a law, regulation in a business organization.
According to O.C Ferrell (2011), ‘Business ethics comprises the principles and standards that guide behaviour in the world of business. Investors, employees, customers, interest groups, the legal system, and the community often determine whether a specific action is right or wrong, ethical or unethical. Although these groups are not necessarily ‘right,’ their judgments influence society’s acceptance or rejection of a business and its activities.’ (Ferrell,2011). And Kirk O. Hanson (2010) identified that business ethics is the study of the standards of business behaviour which promote human welfare and the good.” (Kirk O. Hanson2010).Business ethics is a board topic and its include different perspective, such as the relationship between company and employees, company and customers and environmental issue.
Business ethics on relationship between business organization and employees
Will be focus on this essay.
2.2 What is Corporate Social Responsibility (CSR)
Corporate social responsibility is a common term which has a close relationship and links with the concept of business ethic. According to Lord Holme and Richard Watts (2000) , corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. ‘(Lord Holme and Richard Watts 2000)
‘CSR is not a function of business like accounting or marketing, it is a representation of the soul of a business, like values or principles. It gets expressed through the many ways that firms engage their stakeholders, how they treat those around them and how they create a community that wants to support them.’ , said Joe Lawless(2012). CSR also are reflected in a corporate policies and behaviours, for example how the company treats the stakeholders including employees, customer, supplier, community and environment ethically or in a responsible manner.
3. Business ethic on employees
3.1 Justice and Fairness
Every company must have encounter of problem that how to motivate their employees. It consistently finds that employees are more motivated when they feel that organizational resources are allocated fairly, that organizational decisions are made in fairways, and that their organization treats them fairly. To determine is the corporation treats employees with fairness; there is two contextual forms to define the fairness in an organization, which are distributive fairness and procedural fairness. Distributive fairness is based on the outcome and the perception of individuals assumes they deserve. For example, if inflation rises by 5% and incomes go up by the same margin people will perceive it as a fair outcome (Terry, T., Dienhart, J. & Thomas, T. ,2008). Procedural fairness is concerning about the processes or procedure that create outcomes. Take hiring employees as an example. They evaluate the fairness in application, interview, and selection processes. Are those processes consistent over time and the same among individuals and groups? Is it in neutral and transparent situation? Take Primark as an example , it expressed their Code of Conduct that any supplier making there items must pay laborers in any event the lowest pay permitted by law, as set by government. They deliberately vet each and every processing plant, checking wage and working hours records in point of interest and address specialists themselves, in certainty, to confirm the information. (2015)
3.2 Human rights & Labour rights
The United Nations, Office of the High Commissioner of Human Rights claimed that Human rights are rights inherent to all human beings, whatever our nationality, place of residence, sex, national or ethnic origin, colour, religion, language, or any other status. We are all equally entitled to our human rights without discrimination. These rights are all interrelated, interdependent and indivisible. Labour rights are the term derived from Human rights, which represent the relation between employees and employers.
It can be refer to the employers should respect the rights of all person to life, security of the person and privacy, respect the right of their employees to join trade unions and to bargain collectively and develop non discriminatory employees polices , and respect each person freedom of thought, religion, opinion and communication.( Joseph W.Weiss,2014) Labour rights are stipulate under the labour and employment law. Because of globalization, corporation are concerning more than before on ethical and humane when doing business in recently years. So the issues of Labour rights such as child labour, setting the minimum wages and labour abuse are raising public awareness on business ethics factors of employees.
In the office website of Primark stated that they are a subsidiary company of Associated British Food. They advocate that child labour should not be used and they sanction its supplier to deliver their item when the checking of the manufacturing plant to guarantee all the labourers are in a lawful working age. Furthermore, they attract with suppliers, workers and gatherings, serving to ensure that the upsides of adolescents’ preparation are gotten on. Besides, they advance program that on
raising public awareness of children rights. (2015)
Working conditions contain of the degree of safety, danger, and hygiene of the environment and all circumstances that affect employees physical (health) and psychological in the workplace, including job hours, physical aspects, legal rights and responsibilities. It also involved the implementation of safety training for employees and insurance schemes and safety guideline and policies to reduce the risk of employee might suffer. Working hours is the important factor of the productivity. However, in order to reach the highest productivity and efficiency, some companies abuse their workers with extremely long working hours. ‘[Companies should] provide a framework for regulated hours of work , daily and weekly rest periods, and annual holidays. These instruments ensure high productivity while safeguarding workers’ physical and mental health. Standards on part-time work have become increasingly important instruments for addressing such issues as job creation and promoting equality between men and women.’ claimed International labour organization (2014). Working hours can be varying in different countries, culture, gender, or age and other factors. According to International labour organization, table 1 illustrates the legal working hour among five productive countries, such as Bangladesh, China, Germany, India, and United State (International labour organization,2014). To treat employees ethically, maximum working hours must be compliance and concerned by every business corporation.
Primark has a strict Code of Conduct that meets universal guidelines. Suppliers must take after this Code to guarantee items are made in great working conditions, and the individuals making them are dealt with well and paid a reasonable pay. They vet each and every manufacturing plant against the Code before they submit a request with a supplier.(2015)
Table 1: Legal working hour in Bangladesh, China, Germany, India, United State (based on International Labour Organization, 2013)
Bangladesh China Germany India United State
Daily hours limit(hour) 11 8 8 9 No federal statutory limit on daily working hours identified
Weekly hours limit(hour) 48 40 48 48 40
Last update 4 March 2011 1 April 2011 2012 14 May 2011 July 2012
4. Importance of business ethic for a company
4.1 Save money for lawsuit, settlement, theft
‘Study from Joseph W.Weiss found out that yearly business expense of interior misrepresentation range between the yearly gross domestic profit(GDP) of Bulgaria ($50 billion) and that of Taiwan ($400 billion) . It has likewise been assessed that fraud costs organizations $600 billion USD every year, and that 79% of labourers concede or to consider taking from their employers.() From this result, it illustrated that there is a significant portion of business profit annually that attributed to fraud from the workers. Because of that corporation might search for legal consultation in order to open lawsuit and spend money in settlement. Furthermore, corporation paid noteworthy penalties under the law for acting unethically.
” A loss of public confident can be detrimental to the firm’s and to its investor.’, said Joseph W.Weiss (Operating with business ethics is essential when cooperating with crucial players with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behaviour is discovered. When a corporation was discovered that they do business unethically, usually they will do lot more advertising and promotion on their business than before in order to hide the problem and divert the public’s attention, instead of stand in front to apologize and to correct the problem. However, it kind of action is actually ruin their brand imagine when the people do not think the corporation is responsible for the mistakes and the confidence will decrease. Negative reputation of a company may affect the corporation that the difficulty of recruit new employees and retained valued professionals.
4.3 Investor loyalty
‘Business relationship based on mutual trust and ethical principle combined with regulation result in long term economic gains for organizations, shareholder, and stakeholders.’ , said Joseph W.Weiss (2014). Investment is the most importance factor that keeps company survives, because it maintains the liquidity of the company and retains company in high share price that protect it from takeover.
However, at the point when speculator certainty is lost, it can be a hard time for an organization to recover the trust of general society, its financial specialists and its important shareholders. Profitability may take years to develop once more.
4.4 Customer satisfaction
The business can remain on long-term benefits when it has good client connections. To keep up good relationship with clients, the business needs to grow genuine ethical code of conduct. The conduct of the representative towards the clients will have an effect on them. They will build up an impression of the business which will make the clients enhance their trust they have with the organization .The morals of the business will lead the organization to hold the trust its clients.
Joseph W.Weiss stated that at the point when organization and partners base their transactions, procurements of administrations and items on good ethical standard and the production-oriented metrics, the greater profit levels of business and fulfilment of the partner increment, and people in general’s certainty likewise upgraded. (Joseph W.Weiss ,2014) .It is clear that the profit of the company will definitely increase if all the stakeholders are supporting the business . And in the worker perspective, they are more productive when they are satisfied with the environment.
5. Case Study: Foxconn Suicide
Foxonn suicide was a tragedy of unethical business practise that happened in China. ‘Sweat factory ‘ Foxconn Technology Group is a Taiwanese multinational company with its main plant operating in Shenzhen, China. Foxconn is hands down the largest manufacturing of electronic, computer and computer components in the world. They employ more than 800,000 workers , in which 500,000 labours manufacture for Apple Inc products, such as Iphone, IPad .Between 2010 and 2013, there is a string of suicide at Foxconn. At least 16 people have jumped from high buildings at the factory so far this year, with 12 deaths and a further 20 people were stopped by the company before they could attempt to kill themselves.
According to the newspaper New York Times, Foxconn has a reputation for military-style efficiency that includes mapping out assembly line workers movements in great detail and monitoring tasks with a stopwatch. A typical worker shares a dormitory room with nine other workers, eats in the campus cafeteria and works 11 to 13 hour shifts. Often they do little more than work and sleep. Some have no friends on campus and do not even know the names of their roommates. Shortage of warm water in the dorm often meant cold showers, and where even simple pleasures like snacks were forbidden.(2010) . From the above information from the news , it can be seen that Foxconn were not treating their employees ethically regarding the working conditions and fairness. Many worker were working long hours for low pay under heavy pressure. Most of them work 40 extra hours of overtime each week and the monthly wage they got is only 950 RMB ($US140) that employees must work hours of overtime each day to make about 2,000 RMB to meet basic needs.
5.3 Effect on Apple Inc.
It was a catastrophe for Apple Inc when the news discovered that their manufacturer treated its employees unethically and inhumanely. Apple Inc share of stock dropped by 1.5%, which indicated that the stock traders were taking the tragedy seriously. That was a huge impact on Apple Inc’s profit and its brand imagine, because Apple Inc did not monitor its supplier running under the business ethical principles. Moreover, it may affect their customer satisfaction because the products they have bought are from exploitation on the workers.
This issue has raised the public awareness on ethical business. After that, Apple Inc. and Foxconn putted a lot of effort for the improvement to enhance their reputation and the trust from their stakeholders, including customers, shareholders and employees. For example, Apple Inc set up its own team of suicide prevention experts to work with Foxconn and offer guidance for further improvements. And Apple Inc worked with the Fair Labor Association to ensure its suppliers’ workers are trained in their rights and obligations. Furthermore, Foxconn has raised their pay to the workers. Foxconn suicide case is an example of unethical business to reveals that the importance of ethical practise on employees and its effect on the whole business operation.
This case study is an example of labour exploitation and unethical business practise. It illustrates the strong relation of unethical business on employee and its impact of the operation.
This paper has showed that the business ethic in perspective of employee, such as justice and fairness, human rights and working condition. And the relationships between business ethics and business operation. For example, save money for lawsuit and settlement, reputation, investor loyalty, customer satisfaction and profit. Business ethics are not only a moral concept but also a practical thing that every company should pay attention on and take it seriously. Not only because of increasing profit but also operating business with conscience.
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