There is no doubt that today businesses are expected to behave ethically, over and above running their

operations in the most cost-effective, efficient and effective manner to increase their performance.
Every company must have a code of conduct that applies to their stakeholders, i.e. employees,
customers, service providers and, in some cases, to their shareholders. Companies frequently adopt
corporate ethics principles voluntarily, but those principles can also be imposed by law. A company's
business ethics can influence how the public, its business partners, and customers perceive it, making
them crucial to success.

The literature covers a far larger and more varied range of principles. However, for this particular
assignment, the following chosen 7 Principles of Business Ethics will be critically analysed:

Figure 1: Principles of Business Ethics

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Compliance

7 2
Caring Accountability

Principles of
Business Ethics
6 3
Fairness Honesty

5 4
Integrity Loyalty

Source: Own Editing

Nowadays, customers are becoming more and more informed about how companies operate. To that
effect, businesses that operate with a strong moral foundation win the trust and respect of their
customers, employees, and other stakeholders. Having a solid reputation helps a company attract
repeat business. Long-term success can be attained more sustainably and steadily by succeeding
legally and morally through enforcing principles of business ethics.
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The background literature research on ethical business practices was carried out to identify the
elements of business ethics, the importance of business ethics to businesses, the ethical issues and
dilemmas faced by organizations, and the suggested solutions to these challenges and dilemmas.

What is Business Ethics?

Kumar and Baker (2020) explain that ethics, in general, are principles and values that define what is
right and wrong behaviour. Kiss (2019) defines Business Ethics as a set of moral rules that govern
how businesses operate, how they make decisions and how they treat people. These moral principles
guide a company's conduct. “Business ethics ensures that a certain basic level of trust exists between
consumers and various forms of market participants with different businesses” (Kumar and Baker,
2020). Business ethics governs business malpractice and unethical business practices.

Table 1: Business Ethics Operational Definition and Indicators

Source: Kesuma, Mubarok, and Marisa: 2020

Effective corporate leadership requires a high degree of commitment to business ethics. As Kiss
(2019) explains, “In recent years the term, business ethics has risen up the agenda of business as
professionals are required to demonstrate the highest ethical standards”.

According to Sroka and Lőrinczy (2015), If a company wants to be perceived as a trustworthy

business partner, it should implement business ethics principles. Business has evolved from
irresponsibility to more ethical responsibility in the twenty-first century. However, a number of
scandals involving fraud, deception, bribery, corruption and money laundering have altered the
public's perception of businesses worldwide, including our country, South Africa.

Gheraia, Saadaoui, and Abdelli (2019) imply that the primary goal of business ethics is to lead
business owners to follow codes of conduct that will help them secure public trust in the services and
products they provide to the concerned stakeholders.

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Why Is Business Ethics Important?
Ugoani (2019) argues that, Business organizations are significant not only for themselves but also for
their contributions to the expansion of the economic system and the advantages they provide to the
people who utilize their products and services, making business ethics essential for organizational
longevity.

Chan, Fung, and Yau (2009) found that a company must exhibit a high level of institutionalization of
business ethics principles and excellent ethical behaviour, that’s if it wants to be seen as a trustworthy
business partner and respected member of the business community.

Sroka and Szántó (2018) suggest that, ethical behaviour can provide a business with substantial
advantages and benefits, such as attracting customers to their offerings, and increase sales and profits
as a result; ensuring that employees stay with the business, reducing staff turnover and thereby
boosting output, attracting more prospective employees keen to join the company, allowing the
business to source the best talent available in the market, and attracting investors.

In contrast, reiterates Sroka and Szántó, a company's reputation will almost certainly be harmed by
unethical behaviour, which will make it less acceptable to investors and reduce earnings.

In a nutshell, it is critical that every business has a set of basic principles of business ethics in place
to ensure that the company follows all applicable laws and thrive in today’s highly competitive
business environment.

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Below is an analysis of fundamental Principles of Business Ethics with relevant examples:

3.1 The COMPLIANCE Principle

Compliance with any business-related laws is the most fundamental level of ethical business
practices. Corporate laws safeguard the rights of all members of society. Discrimination of any kind
is unethical. Individuals' personal biases should not influence leaders' decision-making. Corporate
laws, rules, and regulations governing business practices must be respected and followed, as any
violation is considered unethical. Compliance with ethical laws and standards appears to be a simple
task for a business, but scandals do occur from time to time.

As an example: South Africa’s President Ramaphosa is currently at the centre of an international

scandal involving the theft of $4m which was said to have been hidden inside furniture from his game
farm. This matter is a typical example of a scenario where corporate laws have been allegedly
extremely violated. First, it has been reported that the theft was not immediately reported to relevant
law enforcement authorities, thus concealing the crime. Second, the SARB administers the country's
exchange control laws and looks into violations. All foreign currency transactions must be disclosed
to the bank within 30 days as per the rules. As required by law, the foreign exchange transaction that
provided the US dollars taken from the President's farm was not disclosed to the SA Reserve Bank.
The SARB administers SA's exchange control regulations and investigates contraventions. Under the
regulations, all foreign currency transactions must be reported to the bank within 30 days. The
president has denied any wrongdoing. As it stands, the “Phala Phala farmgate saga” bears the
hallmarks of an entity that has failed to comply with the most basic fundamental corporate laws.

3.2 The ACCOUNTABILITY Principle

According to Melo, Martins, and Pereira (2020), accountability is a crucial component of all human
civilizations as well as the organizations that make up our society. The authors associate corporate
scandals with failures to account, and further argue that leaders of business are being pushed harder
than ever to take responsibility. Accountability entails a company accepting full responsibility for its
actions or practices. This includes any poor business decisions or unethical business practices
implemented during the course of business operations. The public can also hold a company
accountable for its actions. With so many ways to communicate with businesses nowadays, customers
can easily express their support or opposition to a company's actions. This type of accountability does
encourage businesses to operate in an ethical manner.
As an example: Eskom has caused power outages throughout the nation since the first loadshedding
program was implemented in 2008 to prevent the grid from completely collapsing. Allegations of
overpaying for coal and receiving coal of poor quality were revealed before the Judicial Commission
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of Inquiry into Allegations of State Capture, the Zondo Commission, and this was connected to a deal
with the formerly Gupta-owned Tegeta mine. Additionally, during the construction of the Kusile and
Medupi power plants, there were subcontractors who were also accused of having been involved
in corruption, and these are some of unethical business practices reported to have been the order of
the day at the utility. Moreover, and most importantly, there seems to be no one taking responsibility
for this injustice to the people of South Africa. The current and former executives have denied any
wrong-doing from their ends, including poor decisions that may have been taken to mitigate the power
outages facing the country today, and a source of disruptions for businesses and communities alike.

3.3 The HONESTY Principle

According to Kesuma, Mubarok, and Marisa (2020), in a highly competitive climate, maintaining a
company over the long run requires owners to be honest. According to the authors, keeping one's
word is very important for upholding the conditions of agreements and contracts. Offering goods and
services with comparable quality and cost requires being honest. Businesses are always expected to
conduct themselves honestly and fairly at all times. Honesty is said to be the best policy. Running a
company ethically depends on having full honesty as one of its core values. Without putting honesty
first, a firm runs the risk of misleading all its stakeholder, including customers and partners. Large-
scale commercial scandals that continue to tarnish the image of the business fraternity frequently
result from dishonesty.

As an example: Advocate Terry Motau released a report titled The Great Bank Heist in 2018, detailing
fraud and corruption at the VBS Mutual Bank. According to the report, nearly R2 billion was stolen
from the bank, and more than 50 people, including some prominent politicians, are believed to have
benefited handsomely from the bank through fraudulent means such as home loans and other bank
payments. The report further revealed that VBS Mutual Bank executives lacked honesty in carrying
out their duties, as they looted the organization for many years by, among other things, creating
fictitious deposits and convincing municipalities to invest in the bank. Furthermore, KPMG's
representative Audit Partner Sipho Malaba, had committed fraud in signing off on the bank's 2017
financial statements and regulatory reports to the SARB. It is disappointing that both the VBS Mutual
Bank executives and the bank’s auditors jointly destroyed South Africa’s only black-owned bank by
not putting honesty first.

3.4 The LOYALTY Principle

It must be emphasized that, employees and businesses are required to act loyally at all times.
Employees ought to be devoted to their co-workers, supervisors, and the business. On the other hand,
the company should also be loyal to its employees.
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As an example: In 2020, Bonakude (BNKD), headquartered in Morningside, Durban, a national
professional services accounting firm that has been in business for 12 years, won the Best Employer
Award in the 2020 Black Business Quarterly (BBQ) Awards. This was not a coincidence as BNKD,
among many traits, is very loyal and committed to its employees’ professional development. The
company encourages employee potential through initiatives associated with its skills development
programme, such as Study support bursaries; 20 days study leave per annum; and Study loans.
Moreover, the company is also committed to Employee Personal Care. BNKD offer its employees,
affectionately known as BonaPEOPLE, competitive compensation, and is one of a few black-owned
and managed companies that pay salaries consistently, on time and in full.

3.5 The INTEGRITY Principle

Businesspeople must adhere to the moral integrity principle in order to conduct themselves
professionally and uphold the company's reputation at all times. According to Ugoani (2019),
integrity is a characteristic of business ethics that is essential to minimizing some of the issues that a
company can face as a result of poor and ineffective corporate governance procedures and putting
more emphasis on growth-maximizing tactics. The freedom to display integrity should be extended
to executives and other employees. The corporation should stay within the recognized boundaries of
right and wrong. Companies too frequently compromise their morality in favour of quick gains.

As an example: In recent years, KPMG has been fighting for its existence as clients such as Absa,
Sasfin, and DRDGold have left the company. This was in response to information regarding its
connections to scandal-riddled Gupta businesses, its participation in a debunked investigation into a
purported rogue SA Revenue Service unit, and the allegations of wrongdoing at the VBS Mutual
Bank, which it audited. The KPMG scandals had wide-ranging repercussions. At some point, after
clients like Absa Group, the third-largest bank in the country, the Auditor-General of South Africa,
and clothing retailer The Foschini Group cut ties with KPMG as their auditors, the company's
headcount fell by nearly 1,000 over the course of two years to about 2,000 workers. KPMG suffered
some serious reputational damage as a result of these scandals, simply because they failed to uphold
their integrity in all their business dealings.

3.6 The FAIRNESS Principle

“The principle of fairness requires that everyone is treated equally according to rules that are fair and
following criteria that are rationally objective and accountable. The most basic principle of fairness
is the principle of not harming others, especially not harming the rights and interests of others.”

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Kesuma, Mubarok, and Marisa (2020). The business must treat other businesses equally, resisting the
urge to give one an unfair advantage over another in exchange for a secret benefit.

As an example: In 2003, a supply chain system was established by the South African government in
an effort to use the procurement procedures to correct historical economic inequalities. While the
current tender system is celebrated, it is imperative to note that it has both successes and failures, and
one of its prominent failures is the rampant uncontrollable unfairness in the awarding of tenders to
qualifying enterprises. A case in point is the Bosasa saga. As revealed before the Zondo Commission,
Bosasa is accused of extensive corruption and having undue influence over the Government. It is
estimated that between 2003 and 2018, it earned Government contracts worth R12 billion, and that
those contracts were secured using its contacts with state officials and politicians, giving the company
an unfair advantage over its competitors.

3.7 The CARING Principle

According to Adhariani, and Siregar (2018), building strong relationships with stakeholders,
including in dispute resolution, is emphasized by the caring principles. Caring about others is
indispensable ethically. The emphasis on relationships, which is shown in the willingness to care for
customers and nurture employees and the environment, is just one of the elements that motivate firms
to care. Caring entails being concerned for both the welfare of customers and that of employees.

As an example, during the COVID-19 Lockdown, some companies that did their utmost best to take
care of their employees during the same period. BNKD is a case in point. As part of its Employee
Care and Personal Development, since the lockdown started, a COVID-19-ready Workplace Plan was
developed to outline internal regulations applicable during the Lockdown period. One of the key
regulations was pertaining to Working from home. The company encouraged all its employees to
work from home, and allowed them to go to the office only if it was extremely necessary and
unavoidable. Moreover, the company made available all reasonable necessary working tools and
equipment for all employees that will be working from home to ensure a seamless remote work
environment. These will include, but not limited to, Wi-Fi devices, data bundles, and airtime. This
demonstrated a caring company that has the best interest of its employees at heart.

From the above critical analysis, it is clear that businesses cannot afford to disregard business ethics.
Previous studies have shown that there is a strong correlation between persistent business failures and
unethical behaviour, particularly that of employees and top executives.

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Our analysis of findings from researchers on the subject matter confirm that business ethics is
regarded as a significant factor which has an influence on the success and corporate image of a
business. A number of corporate scandals, particularly corruption in South Africa, continue to ravage
the reputation of the business fraternity. However, it is encouraging that more and more businesses
have transformed from irresponsibility to more ethical responsibility.

In closing, it is difficult to anticipate that morally sound business practices will be carried out without
the foundational tenets of business ethics. It is highly recommended that, the implementation and
adherence to the principles of business ethics must be done right, right from the onset, not just for
compliance purposes.

Adhariani, D. and Siregar, S.V., 2018. How deep is your care? Analysis of corporations’ “caring
level” and impact on earnings volatility from the ethics of care perspective. Australasian
Accounting, Business and Finance Journal, 12(4), pp.43-59. Available:
doi:10.14453/aabfj.v12i4.4 (Accessed 10 September 2022).

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Chan, K.C., Fung, H.G, Yau, J., 2009. Business ethics research: A global perspective. Journal of
Business Ethics, 95(1), 39–53. Available: DOI:10.1007/s10551-009-0346-z (Accessed 06
September 2022).

Gheraia, Z., Saadaoui, S., and Abdelli, H.A., 2019. Business Ethics and Corporate Social
Responsibility: Bridging the Concepts. Open Journal of Business and Management, 7, 2020-
2029. Available: 10.4236/ojbm.2019.74139 (Accessed 06 September 2022).

Kesuma, S.A., Mubarok, M.H. and Marisa, C., 2020. Does Business Ethics Affect Good Corporate
Governance? Experience from Indonesian State-Owned Enterprise. Romanian Economic
Journal, (76). Available: https://www.researchgate.net/publication/343670529 (Accessed 09
September 2022).

Kiss, L.B., 2019. Examination of the Role of Business Ethics with Google Trends. Available:
http://essuir.sumdu.edu.ua/handle/123456789/75309 (Accessed 09 September 2022).

Kumar, A. and Baker, S., 2020. The basic principles and components of Business ethics. Available:
https://www.researchgate.net/publication/342672976 (Accessed 06 September 2022).

Melo, P.N., Martins, A. and Pereira, M., 2020. The relationship between Leadership and
Accountability: A review and synthesis of the research. Available:
http://hdl.handle.net/11328/3251 (Accessed 09 September 2022).

Sroka, W. and Lőrinczy, M., 2015. The perception of ethics in business: Analysis of research
results. Procedia Economics and Finance, 34, pp.156-163. Available:
https://doi.org/10.1016/S2212-5671(15)01614-7 (Accessed 09 September 2022).

Sroka, W., and Szántó, R., 2018. Corporate Social Responsibility and Business Ethics in
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Ugoani, J., 2019. Business ethics and its effect on organizational sustainability. Global Journal of
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(Accessed 09 September 2022).