Importance of Business Ethics and Ethical Theories in Business

This report discusses the importance of business ethics within an organization and the role of ethical theories in business decision-making. It explores the issues of business ethics in a case study and provides recommendations for improvement. The report also examines the impact of business on stakeholders and the role of business in society.

Business ethics and
Responsible
Management

Table of Contents
INTRODUCTION ..........................................................................................................................1
PART 1 ...........................................................................................................................................1
Importance of business ethics within the organisation...........................................................1
Issues of business ethics in the organisation given in case study...........................................1
Role of business within society .............................................................................................2
Effect of business on stakeholders ........................................................................................2
Recommendations .................................................................................................................3
REFERENCES ...............................................................................................................................3
PART 2 ...........................................................................................................................................4
Discussion of two Ethical theories ........................................................................................4
Pros and cons of using these Two Ethical theories in the organisation.................................5
Recommendations to improve issue on the basis of theory ..................................................6
REFERENCES ...............................................................................................................................6
PART 3 ...........................................................................................................................................6
Reflective essay of ethical Leader .........................................................................................6
References .............................................................................................................................8
CONCLUSION ...............................................................................................................................9

INTRODUCTION
Business ethics is known as study of practices and policies adopted in business which are
associated with controversial subjects like corporate social responsibility, fiduciary
responsibilities, corporate governance, discrimination, bribery, insider trading ,etc. According to
this law, business ethics is essential for smooth functioning of the company. Ethics in business
provides guidelines for gaining public approval (Lange, and Bundy, 2018). The following report
consists of three parts. The first part includes value and importance of business ethics in the
organisation. In second part, there is discussion of two ethical theories that are followed within
the company. Recommendations are made for company to use theories for doing business in
right manner. Advantages and disadvantages of these theories is also discussed. This report
discusses about case of Tuna companies as they are not following policies and harming marine
fishes.
PART 1
Importance of business ethics within the organisation
The presence of ethical and moral beliefs provide guidance to beliefs, values and
decisions of business and individuals of the company. There are few ethical requirements for
business are codified into environmental rules, law, collusion, etc. all businesses must follow
code of business ethics as it helps in smooth running of all business operations. Any business
must not violate any legal provision and if there is unfair or unjust ice, there should be change by
employing democratic devices. Organisations are able to make more money and profits when
they are following ethics and all regulations while conducting business activities. Business ethics
is defined as form of professional ethics which examines and moral problems and principles
which develops within business surroundings. This is applied to all business aspects for
conducting operations on the behalf of whole company (Stary, 2016). There are basically three
types of business ethics discipline which are professional, personal and corporate. This is
necessary to distinguish them for resetting different sets of assumptions and focusing on profit
maximisation.
Issues of business ethics in the organisation given in case study
Pacific is home of the largest Tuna fisheries of the world. This provides approximately
60% of tuna catch in industry that costs US$ 22 billion with increasing demand (Out of Sight:
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Modern Slavery in Pacific Supply Chains of Canned Tuna, 2018). In the given case, it is seen
that there is severe human rights abuse that consist of slavery, forced labour, child labour, human
trafficking and reports of migrant workers were bought and sold as slaves. Sometimes they were
tossed overboard if they complaint or get hurt or injured (Lange, and Bundy, 2018). Tuna
companies are failing to enforce human rights standards in their supply chain.
Role of business within society
The main role of business is production and distribution of services and goods for
satisfying demands and needs. Business is a practise which includes participating in various
initiatives which are beneficial for society. Business is performed in ethical manner for
maximising profits and good image of the company. Business is performed in ethical manner and
no harm to society is done while conducting business activities and operations. According to the
case of Tuna companies, it is seen that they were not conducting their business operations
correctly. They were harming fisheries and also these organisations were involved in human
trafficking, animal trafficking, etc.
Effect of business on stakeholders
Stakeholders are defined as group of individuals or people who are directly affected by
the operations of company. Shareholders are part of stakeholder group and if organisations
understand stakeholders effectively then it can enhance long term success and viability of the
company. The various stakeholders of an organisation are given below -
Customers and Community – The key for success of any organisation is to meet the
needs of customers and community. All consumers provide revenue and cash flow which is
needed for operating and earning profit. Organisations must understand customer's wants and
needs. If companies do not take part in community activities and provide to charities, this could
have negative impact on public sentiments.
Employees of ever rank – Employees working in the organisation must provide effective
services so that it is easy to provide quality products and services (ÇİNİ, GÜLEŞ, and
ARICIOĞLU, 2018). When companies operates in a service based business, employees provide
consistent service that attracts and retains customers. Empowerment of employees at different
organisational level is helpful in making decisions and taking more responsibilities and making
them feel valued.
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Business partners – Suppliers and business partners influence business activities.
Partners collaborate and share investment opportunities and joint ventures. Suppliers are the
companies on which organisations rely (Park, and Campbell, 2018). In context of tuna
companies, it is seen that the business partners or franchising organisation are affected when they
were involved in case of harming marine life.
Recommendations
From the above case, it is stated that all business organisations must perform business
effectively. They should follow rules and regulations of business while conducting operations
and activities. Also, it is concluded that when companies do not follow ethical norms and
regulations while doing business, then it may provide profit for shorter period (Taneja, Griffin,
and Taneja, 2016). But this can create loss to company for longer period. Ethical standards of
business are set for maintaining and performing business effectively. It is recommended to tuna
companies that they should empower ethics by applying change in structure of the company.
Organisations must develop and empower every employee for understanding and adhering to
ethical standards. Intrinsic as well as extrinsic motivation is provided to employees so that they
can meet organisational goals effectively. Also rewards can be provided to employees for
motivating them and in this way they will not choose any wrong path for conducting business
operations (Vitell, 2015). On the other hand, this will help in developing individual as well as
business performance.
REFERENCES
Books and Journals
Lange, D. and Bundy, J., 2018. The Association between Ethics and Stakeholder Theory.
In Sustainability, Stakeholder Governance, and Corporate Social Responsibility (pp.
365-387). Emerald Publishing Limited.
Stary, C., 2016. Open organizational learning: Stakeholder knowledge for process
development. Knowledge Management & E-Learning, 8(1), p.86.
Lange, D. and Bundy, J., 2018. The Association between Ethics and Stakeholder Theory',
Sustainability, Stakeholder Governance, and Corporate Social Responsibility
(Advances in Strategic Management, Volume 38) (pp. 365-387). Emerald Publishing
Limited.
ÇİNİ, M.A., GÜLEŞ, H.K. and ARICIOĞLU, M.A., 2018. Effect of the Stakeholder Salience
Theory on Family Businesses Performance. Gaziantep University Journal of Social
Sciences, 17(4).
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Park, J. and Campbell, J.M., 2018. US small business’s philanthropic contribution to local
community: Stakeholder salience and social identity perspectives. Journal of Nonprofit
& Public Sector Marketing, 30(3), pp.317-342.
Taneja, S.S., Griffin, J.J. and Taneja, P.K., 2016. Using a stakeholder approach to understand
success: empirical tests in Indian business. In Corporate Behavior and
Sustainability(pp. 39-59). Gower.
Online
Out of Sight: Modern Slavery in Pacific Supply Chains of Canned Tuna, 2018. [Online].
Available through:<https://www.business-humanrights.org/en/out-of-sight-modern-slavery-in-
pacific-supply-chains-of-canned-tuna-0>
PART 2
Discussion of two Ethical theories
Business ethics is plays an important role in managing and handling work effectively.
This aspect helps in minimising corporate scandals. The main purpose of business ethics depends
upon professional conduct and illegal practices within workplace. Ethics cover different aspects
of business. There are many consumers who select product or service on the basis of ethical
consideration. Consumers believe that companies with which business is conducted are moral
and responsible (Lucas, K., Van Wee, B. and Maat, K., 2016). Ethical conduct is defined as
integral component how leadership is done. Many people expect that leaders of every
organisation must be models of ethical leaders. Government must formulate ethical standards.
There are various theories that are followed in business environment for avoiding any frauds or
societal harms by business operations. The two different theories of business ethics are utilitarian
theory and Rawls theory. Both of these are described below -
Rawls theory of justice – John Rawl's theory of justice as fairness is defined as an
attempt for bringing different ideas together in a comprehensive manner (Peters, 2015). As per
this theory, there are benefits of distribution and burdens in a society are there when every
employee is given equal rights to the most extensive liberties which are compatible with equal
liberties. Also economic and social inequalities are arranged so that they are greatest benefit of
least advantage. Also they provide offices and positions open fairly and equally to all. According
to Rawls, there are two principles i.e. principle 1 and Principle 2. the principle 1 is known as
principle of equal liberty. According to this principle, each and every individual's liberties are
protected from invasion and these must be equal to those of others (Allan, 2015). According to
Principle 2 which is known as difference principle. It states that steps are taken for improving
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position of needy people of the society. According to Rawls, principle is moral when it is
accepted in group of self interested and rational individuals (Filip, Saheba Wick, and Amir
Radfar, 2016). This incorporates Kantanian principles of reversibility. There are basically two
types of justice – retributive justice and compensatory justice. In earlier time, individuals held
that an individual has a moral obligation for compensating the injured party if there are different
conditions.
The principles and steps of Rawl assume that they way in which redistribution of goods
and services occurs is agreed by individuals for avoiding any type of fairness issue.
The original position and veil of ignorance
There are reasonable people who sometimes disagree about the way of living. There is a
need of structure in society so that reasonable members of society are accepted. People are trying
to collectively agree on basic regulations (. Hall, W., Gartner, C. and Forlini, C., 2015).
Deliberators are not ignorant regarding anything. These are self interested and these want are
known as primary goods by Rawl. This person belonged to social contract tradition and he
takes a different view from thinkers of previous years. Veil is defined as those blind people who
do not know about facts so they tailor principles on their own benefit.
Utilitarian theory – Utilitarianism is defined as one of the most persuasive and powerful
approaches for normative ethics. According to utilitarianism, moral action is that action which
produces the most good. There are various ways of this general claim. This theory is form of
consequentialism which is right action according to consequentialism. Utilitarianism is defined
as family of consequentialist ethical theories which promotes actions for increasing happiness
and well being for people. There are different varieties of utilitarianism admit different
characterisations (Dörr, and Hollnbuchner, 2017). The main aim behind all over this is
maximum utilisation of utility. Utility is defined as the property in any object which ends by
producing advantage, benefits, happiness, good and pleasure.
Pros and cons of using these Two Ethical theories in the organisation
The benefits of utilitarian theory is that it follows democratic principles while making
decisions. The fair way of making decisions in Tuna companies will be more effective decisions
if they are taken by different people (Kovac, 2018.). On the other hand, Rawls theory states that
fairness is defined as an attempt for bringing different ideas together in a comprehensive manner.
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Thus, there must be proper justification for harming Tuna fisheries just for using them. This is
against policies and rules given by government (Etkin Feldmann-Jensen, Smith, and Jensen,
2016). As per the policies and regulations, no animal can be harmed while doing business.
Recommendations to improve issue on the basis of theory
It is recommended to the tuna companies that they must do business in an effective
manner. They must adopt all regulations and rules for conducting business activities and
operations. All operations and activities in business must be done by following regulations and
rules given by governance.
REFERENCES
Books and Journals
Lucas, K., Van Wee, B. and Maat, K., 2016. A method to evaluate equitable accessibility:
combining ethical theories and accessibility-based approaches. Transportation, 43(3),
pp.473-490.
Peters, R.S., 2015. Psychology and Ethical Development (Routledge Revivals): A Collection of
Articles on Psychological Theories, Ethical Development and Human Understanding.
Routledge.
Allan, L., 2015. A Taxonomy of Meta-ethical Theories. URL=< http://www. rationalrealm.
com/philosophy/ethics/taxonomy-meta-ethical-theories. Html.
Filip, I., Saheba, N., Wick, B. and Amir Radfar, M.D., 2016. Morality and ethical theories in the
context of human behavior. Ethics & Medicine, 32(2), p.83.
Hall, W., Gartner, C. and Forlini, C., 2015. Ethical issues raised by a ban on the sale of electronic
nicotine devices. Addiction, 110(7), pp.1061-1067.
Dörr, K.N. and Hollnbuchner, K., 2017. Ethical challenges of algorithmic journalism. Digital
journalism, 5(4), pp.404-419.
Etkin, D., Feldmann-Jensen, S., Smith, S. and Jensen, S., 2016. Toward a substantive dialogue:
The case for an ethical framework in emergency management, Part 2. Australasian
Journal of Disaster and Trauma Studies, 20(1), p.49.
Kovac, J., 2018. The ethical chemist: Professionalism and ethics in science. Oxford University
Press.
PART 3
Reflective essay of ethical Leader
What is an ethical leadership management in an unethical organisational culture?
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Ethical leadership management is defined as leadership form when individuals want to
demonstrate for good that is acceptable in various parts of life. As an ethical leader, I think , to
be successful I have to motivate employees in doing their work effectively and attain
organisational goals within time (.Lee Choi, Youn, and Chun, 2017). By adopting ethical
leadership, I can manage and control operations of business in appropriate manner. I am keeping
efforts in becoming a good and strong leader by adopting all rules and regulations in conducting
business operations and activities. If I am doing extraordinary work, employees and workers will
automatically follow them. The main thing I focus on is to provide all rights to employees
working in the organisation. I give respect to all my workers and employees as it creates
positivity among us and creates good relationship (Den Hartog, D.N., 2015). When there is
mutual respect among employees, there is development of value for opinions of other people. I
have adopted the four V model while taking my decisions at workplace. These V stand for
Vision, Values, Virtue and Voice. By adopting all these I can develop in myself a strong leader.
The main goal of mine as ethical leader is to develop bright and positive future. This must allow
potential for all employees to pursue fulfil the demands and needs and meeting the highest
potential (Bedi, A., Alpaslan, C.M. and Green, S., 2016). Ethical leadership is defined as
developing in a way that moral of leaders are guided by for feeling of other individuals. As per
my opinion, ethical leaders are those who own with integrity and manage employees in
appropriate manner. The model which I follow includes models of 4 V i.e. values, voice, vision
and virtue. It is helpful for developing positive environment within the organisation. Whenever
there is need for developing business ethics, I make sure that workers work with mutual respect
with each other. Workplace is place where employees are motivated for growing personally and
build friendship and contribute in overall organisational goal. Values – Ethical leadership starts with analysing of commitment to core values of leaders
(Schwepker, and Schultz, 2015). I am able to discover values which will develop core of
motivators and identities. It consists of process of integration of unique values with
different choices that is associated with professional and personal life. Vision – Ethical leadership require capability for doing actions in picture of things that
can be performed in correct manner and services are provided to others (Wright, Hassan,
and Park,, 2016).
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 Voice – As an ethical leader, I am articulating organisational vision to employees in an
authentic way which is enlivening into action.
 Virtue – I must work according to right manner and know what is bad and what is good. I
am involved in virtuous behaviour by asking my employees about vision, values and
voice in alignment with and supporting the common good.
If I was the leader operating in Tuna companies I make sure that all employees are doing work
ethically. Also the business operations are checked over time that they are done in right manner
(Lin, Ma, and Johnson, 2016). Any unethical activity at workplace or business operations is
complained immediately to senior executives. The management will take quick decisions for
such scenarios.
References
Books and Journals
Bedi, A., Alpaslan, C.M. and Green, S., 2016. A meta-analytic review of ethical leadership
outcomes and moderators. Journal of Business Ethics, 139(3), pp.517-536.
Lee, D., Choi, Y., Youn, S. and Chun, J.U., 2017. Ethical leadership and employee moral voice:
The mediating role of moral efficacy and the moderating role of leader–follower value
congruence. Journal of Business Ethics, 141(1), pp.47-57.
Den Hartog, D.N., 2015. Ethical leadership. Annu. Rev. Organ. Psychol. Organ. Behav., 2(1),
pp.409-434.
Neves, P. and Story, J., 2015. Ethical leadership and reputation: Combined indirect effects on
organizational deviance. Journal of Business Ethics, 127(1), pp.165-176.
Schwepker, C.H. and Schultz, R.J., 2015. Influence of the ethical servant leader and ethical
climate on customer value enhancing sales performance. Journal of Personal Selling &
Sales Management, 35(2), pp.93-107.
Wright, B.E., Hassan, S. and Park, J., 2016. Does a public service ethic encourage ethical
behaviour? Public service motivation, ethical leadership and the willingness to report
ethical problems. Public Administration, 94(3), pp.647-663.
Lin, S.H.J., Ma, J. and Johnson, R.E., 2016. When ethical leader behavior breaks bad: How
ethical leader behavior can turn abusive via ego depletion and moral licensing. Journal
of Applied Psychology, 101(6), p.815.
Hoch, J.E., Bommer, W.H., Dulebohn, J.H. and Wu, D., 2018. Do ethical, authentic, and servant
leadership explain variance above and beyond transformational leadership? A meta-
analysis. Journal of Management, 44(2), pp.501-529.
Online
The Importance of Ethical Leadership,2019.[Online]. Available
through:<https://www.theworkplacecoach.com/the-importance-of-ethical-leadership/>
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CONCLUSION
It can be concluded from the above discussion that business operations must be done by
following regulations and rules which result in smooth functioning of the organisation. The
operating of business in necessary for maximising profits and money earned by a company. An
ethical leader is one who has the motive to provide positive workplace. This creates goodwill of
the organisation in business environment. When business operations are conducted, it is ensured
that they are not harming any individual. This is responsibility of organisations to do activities
for societal welfare.
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