Impact of Ethical Practices on Company Performance: A Detailed Report

This report delves into the realm of professional practice in accounting, focusing on the ethical dimensions of corporate behavior. It begins with an introduction to the importance of ethics and governance in the modern global corporate landscape. The report provides overviews of four companies: McDonald's and Nestle, which have faced ethical scrutiny, and IBM and Tata Steel, recognized for their ethical conduct. It then explores the ethical implications associated with each company, examining factors that motivate corporate behavior, such as individual moral values, leadership, and competitive pressures. The analysis includes a correlation between ethical approaches and company performance, supported by stock price graphs. The report concludes with a personal inference on the importance of leadership in shaping a company's ethical framework.

Professional practice in accounting

Contents
Introduction................................................................................................................................2
Overviews of the companies......................................................................................................2
Ethical Implications...................................................................................................................3
Motivating factors for corporate behaviour...............................................................................3
Correlation between company’s performance and ethical approaches......................................4
Personal Inference......................................................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................8

Introduction
A business organisation is an aggregation of several resources derived from the
society that are the capital, manpower and the other natural resources, for the purpose of
rendering of goods and services to the society itself. Therefore, it is vital for the businesses to
consider the interests and aspirations of such stakeholder groups while formulating the
business strategies and carrying out the business operations. The legal framework, ethical
principles and the various theories together assist the management of the organisations to
efficiently serve the society together with the achievement of the profit earning goals.
The objective of the following report is to study the various aspects of the ethics and
governance in the context of modern global corporate scenario. The said study would be
facilitated by the review of the corporate culture of four globally renowned entities. While the
entity IBM and Tata Steel are known for their ethical conducts, the entities McDonalds and
Nestle are majorly in news regarding some or the other ethical issues. A comparison and
contrast would be drawn between the various aspects of business of the above mentioned
entities.
Overviews of the companies
Unethical Companies:
McDonalds: The Company McDonald’s Corporation renowned global food chain
headquartered at United States, which was founded in year 1948. At presently the company’s
global operations are expanded in approximately 119 countries in various continents and a
whopping employee base of 210000 employees.
Nestle: The company Nestle is a Switzerland based multinational engaged in the
industry of food and beverages. The company is a renowned brand name to about 2000
brands that include local products as well as the global products. The foundation of the
company dates back to year 1866 under the name of founder Henri Nestle.
Ethical Companies:
IBM: The entity is also a multinational corporation based out of New York and
having global operations in around 170 countries. The entity is engaged in the industry of
data analytics, artificial intelligence, and cloud and other incidental products and services to
the mobile, information technology and computing sector.

Tata Steel: Tata Steel is yet another globally renowned organisation founded in India,
with operations in 26 countries and commercial presence in about 50 countries (Tata Steel,
2019). The company is engaged in the production of various steel and steel products globally.
Ethical Implications
The basis of listing of the companies as ethical or unethical has been elaborated as
follows. The company McDonalds remains in news for one or other news, mainly regarding
the food served by the company in light of the health concerns and the marketing tactics
adopted by the company. The company has been in news for the unhealthy marketing
strategy, one of the recent ones was in Canada where the food advertisements were attracting
children as young as thirteen years do are not aware of the health concerns associated
(Handley, 2018).
The company Nestle is yet another popularly regarded unethical companies of the
world with the inclusion in numerous scandals. The company was in limelight and faced
severe backlashed because of its extreme pushing of the infant formula in the less
economically developed countries, as purported as equally nutritious as mother’s milk. The
organisation is known to engage in aggressive marketing campaigns, and has known to
indulge in child labour and abuse, health threats from the products, pollution and other
societal concerns (Andrei, 2015).
The reason for the selection of the organisation IBM to be the ethical companies is
that the entity has been recently recognised as one by the Ethisphere Institute which is known
for the moral business researches (The Silicon Business, 2019). The organisation is known
for efficient balance between the information and innovation, upholding the regulations
across the globe, efficient work environments and contribution to the environment projects.
In addition to IBM, the company Tata Steel has also been recognised as one of the
most ethical companies by the Ethisphere Institute for the eighth time in row in the Metals,
Minerals and Mining’ category (Ethisphere, 2019). The company has been consistently in
news for the reasons of the improvement of the communities, empowering workforces with
efficient work culture and operating with high ethical standards.
Motivating factors for corporate behaviour
The following segment elaborates the analysis of the motivating factors behind the
different types of corporate conduct as described in previous parts. It is vital to note that there

are majorly two kinds of frames that lead to the definition of different business goals. The
business frame leads to the cognitive activation of the goals like competent market position
and success, the ethical frames lead to the triggering of other goals (Spiegel, 2012).
Numerous organisations when engage in achievement of business related goals, do not get
aware of their unethical conducts, as rest of the goals have completely become side-lined.
Thus, the business situations in context of competition, internal issues and others lead to the
unethical frames of mind. Numerous researches have been carried out to study the
motivations behind the ethical and unethical behaviours and certain contributing factors have
been identified in this regard, as stated follows. The factors are individual moral values and
standards, attitude and conduct of the leaders of the organisations, company environment, the
influence of the legal principles and the professional codes of ethics (Haron, Ishmail, &
Razak, 2011). Yet another chief factor for the unethical conducts is the intense competition in
the global business platform, such that the entities indulge in unhealthy marketing strategies
to attract the consumers and capture market shares. In contrast to this, the ethical business
entities recognise the value of stakeholder expectations, and relationship between sanctioning
and trust. Thus, it would be right to state that as opposed to a well-researched and
comprehensive strategy of the ethical businesses, the unethical entities are majorly focussed
on calculative cost-benefit processes.
Correlation between company’s performance and ethical approaches
The correlation between the conduct of the entities and the performances of the
companies has been presented as follows. The financial performance of the entities can be
analysed and compared with the help of the stock price performance graphs over the last few
years.

(Graph 1: IBM- Source: Yahoo Finance)
(Graph 2: Tata Steel - Source: Yahoo Finance)

(Graph 3: Nestle - Source: Yahoo Finance)
(Graph 4: McDonalds - Source: Yahoo Finance)
As per the study of the graphs presented in the previous parts in context of the
financial performances, it can be stated that while the shares of the companies Nestle and
McDonalds have recently improved after the companies have started taking slight note of the
ethical principles, the performances of Tata Steel and IBM have always been in upper half of
the graphical presentation with fluctuation as per external environment developments. Hence,
it is right to state that the ethical business practices and considerations also aid in value
maximisation of shareholders of the organisation apart from stakeholders.
Personal Inference
In context of the personal inference of the author, it can be stated that conduct of the
leaders of the organisation is of prime importance while analysing the conduct of the entity a
whole. This is because the leaders of the entities formulate the business policies at the top,
which trickles down further in the form of code of conduct and overall working culture of the
enterprise. Further, the business policies designed at the top level determine the direction of
the internal controls, marketing strategy, degree of compliance with the transparent reporting
principles and other ethical guidelines. Hence, the attitude and the conduct of the leaders is a
chief ingredient in the manner of functioning of the enterprise in the society.
Conclusion
The discussions conducted in previous parts aid to conclude that ethical principles are
an important consideration in the conduct of the businesses as the same leads to the particular
direction of business activities and the global corporate image of the entities. The report

includes the study of the conduct of the four various business organisations from different
industries and their global image in context of ethics. The report further stated the factors that
contribute to the certain conduct of the entities including the role and philosophy of the top
leaders. Hence, it can be concluded from the discussions conducted as above that business
success is not just limited to the earning of the revenues and achievement of other business
goals, rather it is an all inclusive contribution towards the community as a whole.

References
Andrei, M. (2015). Why Nestle is one of the most hated companies in the world. Retrieved
from: https://www.zmescience.com/other/offbeat-other/raining-spiders-angel-hair-
18052015/
Ethisphere (2019). The 2019 World’s Most Ethical Companies® Honoree
List. Retrieved from: https://www.worldsmostethicalcompanies.com/honorees/
Handley, L. (2018). McDonald’s is being sued by a father over ‘illegal’ marketing of Happy
Meals to children. Retrieved from: https://www.cnbc.com/2018/11/20/mcdonalds-is-
being-sued-over-illegal-marketing-of-happy-meals.html
Haron, H., Ismail, I., & Shaikh Hamzah, A. R. (2011). Factors influencing unethical behavior
of insurance agents. International Journal of Business and Social Science, 2(1).
Spiegel, A. (2012). Psychology of Fraud: Why Good People Do Bad Things. Retrieved from:
https://www.npr.org/2012/05/01/151764534/psychology-of-fraud-why-good-people-
do-bad-things
Tata Steel (2019). Company Profile. Retrieved from:
https://www.tatasteel.com/corporate/our-organisation/company-profile/
The Silicon Business (2019). World’s Most Ethical Companies 2019: IBM. Retrieved from:
https://thesiliconbusiness.com/worlds-most-ethical-companies-2019-ibm/