When Business are not just Business

Nelson Pizarro Corrales

Human Resource Mgmt

2Fall 2010

Marcie Cudmore
 Introduction

Since a time to now, have proliferated publications, seminars and other

forums of discussion on ethics in business. Perhaps much of this sudden and

renewed interest in good corporate act has to do with the many financial

scandals that have occurred since early 2001, starting with Enron, the United

States, and culminating in Inverlink group in Chile.

Fortunately, the public debate has not focused exclusively on executives

and accountants responsible for these financial turmoil, but in the ethical

standards prevailing in the business world in general. What kind of training

they are receiving future entrepreneurs? Is private conduct should be geared

solely to generating profit? What limits should govern the competition? These

are just some of the questions that have crossed the business forums.

From these discussions, many have argued that unethical behavior is

inevitable in an economic system based on free competition and profit

maximization. Thus, there are employers to justify questionable actions under

the pretext that "business is just business." But this is not true, because

"business is part of human activity and therefore is inherently moral. When

acting as a person and makes a decision about what advertising campaign

launch or what kind of product do, whether to deceive or not the consumer

with communication, whether to accept or not the practice of bribery to obtain

sales and business, when you take all these decisions cannot separate the

technical from the moral.

The free market right next to an act of business is possible. In addition,

multiple studies show that investing in ethics is perhaps one of the most

profitable for businesses.

 Means and ends

Business ethics is about how a company integrates a set of moral goods

such as honesty, trust, respect and justice in their own policies and practices as

well as in decision making at all levels. And although there is no proper

business ethics, several principles and exercise of certain virtues which fit

under this heading. From a theoretical point of view, proper ethical conduct in

business has to do with the means chosen to attain the good of the company

(its consolidation through the generation of profits) with the aim of effectively

contributing to the members of the corporation (workers and employers) and

society (consumers) reach their fullest. The unethical behavior in an economic

system based on free competition and profit maximization. Thus, there are

employers to justify questionable actions under the pretext that "business is

just business." But this is not true, because "business is part of human activity

and therefore are inherently moral.

 When acting as a person and makes a decision about what advertising

campaign launch or what kind of product do, whether to deceive or not the

consumer with communication, whether to accept or not the practice of

bribery to obtain sales and business, when you take all these decisions can not

separate the technical from the moral.

The free market right next to an act of business is possible. In addition,

multiple studies show that investing in ethics is perhaps one of the most

profitable for businesses.

However, there are those who fight the ethical considerations related to

the business. Some characterize the corporate world as a jungle where all

forms of competition are valid: "In business to be fought like a war.

And as in any good war, it fought with courage, bravery and without

morality. “Others have a more nuanced position and argue that the best

companies are those that are prepared to fight another breaking a rule: "The

ethical standards governing companies are like the rules governing a game of

poker".

Such statements derive most of the time, a vision that attaches only to

companies seeking profit.

In fact, the father of neoliberalism, Milton Friedman, is a faithful

exponent of this thesis:

"There is one and only one social responsibility of business: using its

resources and engage in activities designed to increase profits while respecting

the rules of the game, namely free and open competition without falling into

fraud or deceit".

But is not the profit motive as bad thing itself. Quite the contrary.

Profitable firms are precisely those that endure over time, since they use their

resources properly and produce goods and services the market demands. But

the profit motive is not, nor can be, the essential mission of the company. In

fact, profit-making is only the means by which business helps women achieve

happiness, fulfillment and development, for work is one of the occupations

most dignified human beings.

The beauty of being ethical

 Contrary to what one might think, empirical evidence shows that firms with a

strong ethical culture obtained in the long run, better results than those who do

not. As maintained by an entity dedicated to corporate social responsibility:

 "Be kind to workers, the environment and the community in which we live,

makes the company more attractive in the eyes of the public, shareholders and

tax law. So, everything is cheaper, because of strikes, environmental costs and

demand loss may be catastrophic situations.

 Indeed, business ethics creates the following effects:

a) Improved financial performance.

 A 1999 study conducted by DePaul University (USA) at 300 large companies

found that the market value of the firms that made an explicit commitment to

adhere to its code of ethics was twice the value of those companies that do not

did.

b) Go up the sales and enhance corporate image.

 A recent survey conducted in 25 countries by Environics International found

that nearly 50% of consumers thought punishing a fruit company that

considers negative social actions, and that nearly 30% have avoided buying

products from a company for this very reason. In the United Kingdom, two in
three consumers have boycotted at least one brand to fall into unethical

behavior, according to public relations firm Quentin Bell Organization.

c) Strengthen the loyalty and employee engagement.

 A survey made in America by Walker Information found that only 6% of

employees think their leaders do not behave correctly prefers to stay at your

company, while 40% of those who believe that their superiors are ethical

wishes continue in his current job. Another U.S. survey, this time the Hudson

Institute, found a positive correlation between high ethical standards, job

commitment and loyalty, and concluded that employees who feel engaged in

ethical environments are six times more loyal than those who believe that their

organizations are not .

d) Increase the up regulation of the markets.

 If companies and their workers do not act with honesty, commit fraud and do

not fulfill their commitments, there is a risk that the public machinery and

implements stringent audit provisions unreasonable, which, although not be

effective in their work, considerably raise the costs of private activity. In fact,
the financial scandals of recent years have created laws that reduced the scope

for action by U.S. companies.

Today, the Sarbanes-Oxley Act tightly regulates audits, business analysis and

other services related to the financial market.

 e) Avoid losing business. Large companies extend their own ethical practices

to their suppliers as well as supplying firms without such habits can see

canceled their contracts and / or lose future business. For example, in

1998 Shell canceled contracts with 69 companies that had failed in its

adherence to its policies on health, safety and environment.

 Similarly, there are precedents that show that governments are willing to

suspend agreements or penalize companies that are perceived as frivolous. In

1999, the Japanese government revoked the license to conduct business at a

European bank for improper financial accounting practices.

 f) Provides greater access to financing. The confidence and assurance that a

company will meet its commitments directly impacts the easy availability of

other resources to develop their projects. A bad corporate reputation can be

closed altogether or excessively expensive the possibility of taking bank loans

or issue bonds in the capital market.

 Conclusion

The global financial scandals, especially those that occurred in Chile,

shook the business community because it hit the base of the free and

competitive economy: trust.

  This provides an excellent opportunity to highlight and promote a

greater concern for corporate ethics. While some believe that moral concerns

have no place in the world of business, or have an almost negligible or very

indirectly, the fact is that both theory and corroborating evidence that full

respect certain principles and virtues have a very positive impact on enterprise

development.
 References:

1- Álvaro Pezoa. “Ética y Negocios”en revista Intus Legere n° 1. Anuario de

Filosofia, Historia y Letras de la Facultad de Humanidades de la Universidad

Adolfo Ibáñez. 1998. pp. 135-144

2. Business for Social Responsibility. “Overview of Business Ethics” en Issue

Briefs, published in internet: http://www.bsr.org/BSRResources/ Issue Brief

Detail.cfm?Document ID=48815.

3. Rafael Mies. “Ética y mercado: ¿son compatibles?”.Lecture dictated at

Duoc UC.

4. Theodore Levitt. “The dangers of social responsibility” in Harvard

Business Review n° 58507. 1958.

5. Albert Z. Carr. “Is business bluffing ethical?” in Harvard Business Review

n° 68102. 1968.

6. Milton Friedman. “The social responsibility of business is to increase its

profits” en The New York Times Magazine. September 13 of 1970.