Ethical behavior in the company world and management refers to the practice of acting in ways that are acceptable and consistent with society’s best values. The values of society and the environment’s expectations of business organizations necessitate the need for a company to act ethically.
Adopting ethical behavior is thus essential in balancing a corporate image in society (Ferrell et al, 2014). While no business can be completely isolated from its surroundings, practicing ethical behavior is the best way to stay in line with societal expectations. This topic’s discussion will present the reasons why it is critical for a company to practice ethical behavior.
Benefits of Business Ethics and Ethical Behavior
One of the reasons for a company’s ethical behavior is to gain the trust of the internal environment players. A company’s internal environment should be built on the trust of its management, employees, and shareholders.
A company builds trust among its employees by acting ethically. Employees create a strong sense of commitment to the company as a result of this trust. According to Ferrell et al. (2014), this results in the advancement of company loyalty and adherence to organizational goals.
Simultaneously, the company gains the trust of its shareholders, who are assured that their investment is being used ethically and for the best reasons. This results in the achievement of organizational goals through the combined efforts of internal environment players such as employees and management.
Furthermore, in order to create and maintain a positive corporate image, a company should engage in ethical behavior. A good corporate image is formed by combining how a company interacts with society and the external environment (Tricker & Tricker, 2012).
A company’s corporate image is specifically formed through communicating with clients, suppliers, the government, and the general public. By acting ethically in its dealings, the company establishes a reputation among external stakeholders as a good company and an ethical organization (Ferrell et al, 2014).
For example, if a computer company respects its suppliers by paying them on time, the suppliers will promote the firm’s image to other players, such as other suppliers of electronics to which the firm sells.
Another important reason for a company to practice ethical behavior is to establish an ethical culture that guides the organization. The practices of management and employees have a large impact on the management of an organization.
According to Jones and Parker (2005), ethical behavior produces a good culture of honest, loyal, and performance-driven organizations. For example, if a manager leaves a company and a new one is hired, the new manager will adopt the organizational culture’s practices.
If the organization values ethical behavior, the new manager will undoubtedly fit in. The development of an ethical culture provides a compelling reason for a company to engage in ethical behavior at all times.
Profits and income generation are also important reasons for a company to practice ethical behavior. This is due to the fact that ethical behavior guides the company to do things that are important to the company’s financial performance (Ferrell et al, 2014).
For example, ethical behavior will guide management in deciding which employee to hire and which product to produce. As a result, unethical subjective decisions are eliminated, allowing the company to stay within its planned profitability guidelines.
Furthermore, ethical behavior is important because it saves a company from the financial impacts of unethical behavior. Ethical behavior protects a company from financial losses caused by unethical behavior by its employees or management (Tricker & Tricker, 2012).
In most cases, unethical practices result in financial losses as a result of lawsuits and damage settlements. For example, if Volkswagen had acted ethically, they would not have had to bear the financial cost of recalling the vehicles.
More importantly, ethical behavior instills confidence and trust in investors. This occurs when a company acts in the right way despite the fact that it has other options.
As a result, past, present, and potential investors have increased trust in the company’s operations, management, and plans. As a result, investors develop a sense of loyalty to the company. Investors’ trust is critical because they provide funding for the company’s products, projects, and expansion plans.
Evaluation of the Volkswagen Case Study in terms of Business Ethics
The recent Volkswagen crisis exemplifies the importance of ethical behavior and the consequences of unethical behavior. In short, Volkswagen violated both the ethical expectations and the Clean Air Act guidelines for producing environmentally friendly vehicles (DW, 2015).
Volkswagen acted illegally by improperly installing Engine Control Unit (ECU) software, which violated the Clean Air Act (DW, 2015). What was more unethical was allowing the sale of such cars since 2008 without informing buyers and portraying the engines as environmentally friendly.
This, in my opinion, was very unethical for the company, despite the fact that it had led the way in environmentally friendly car manufacturing. However, their action of recalling cars is a positive reaction that instills trust in the company’s users.
The recall of vehicles to correct potential flaws demonstrates that the company is responsible and willing to accept responsibility for its errors. According to Jones and Parker (2005), a company should be held accountable for its actions, regardless of whether they are unethical or damage the company’s reputation.
If I were the manager, the first thing I would do is admit the existence of unethical practices in car manufacturing. Because of this assertion, I believe the previous CEO of the company acted appropriately.
Admitting mistakes fosters a sense of accountability and responsibility for the company’s actions. While this is an acknowledgement of unethical behavior, it is still a courageous act demonstrating that the firm still believes in ethical behavior ideals.
In the coming days and months, I plan to organize organizational training for employees and engineers on ethical standards and global expectations for the cars that are produced. This will look after the internal environment. To make an impression on the outside world, I would organize events and forums that demonstrate the company’s commitment to ethical behavior.
The current messages to people informing them of the status of the Volkswagen diesel information are also good and will continue (Volkswagen Diesel Information, 2015). This, however, will benefit the company by demonstrating resentment for previous organizational mistakes.
Ethical behavior is an important aspect of organizational culture and management practice. A company should act ethically because it fosters trust and confidence among employees, investors, and shareholders, as well as the general public. Furthermore, ethical behavior is important for creating a good corporate image, creating a good culture, reducing losses, and thus promoting profits.
The Volkswagen case exemplifies the importance of ethical behavior by demonstrating the consequences of unethical behavior. To correct the company’s mistakes, responsibility, and accountability through honest actions that inspire the trust of all people. These reasons, as well as a review of the case, demonstrate why a company should practice ethical behavior.
DW, 2015, Auto expert: ‘A conscious breach of US law’, Retrieved From, <http://www.dw.com/en/auto-expert-a-conscious-breach-of-us-law/a-18728394> 01 November, 2015
Ferrell, O.C., Fraedrich, J., & Ferrell, L. (2014). Business Ethics: Ethical Decision Making & Cases. Stamford, CT: Cengage Learning
Jones, C., & Parker, M. (2005). For Business Ethics: A Critical Text. London: Routledge
Tricker, B., & Tricker R. I. (2012). Corporate Governance: Principles, Policies and Practices. Oxford: Oxford University Press Volkswagen Diesel Information, 2015, Volkswagen Diesel Information, Retrieved From, <https://www.vwdieselinfo.com> 01 November, 2015