The Role of Business Ethics in Decision Making Process in Large Business Organizations

Introduction

Business ethics is one of the most important issues in the contemporary management of large business organizations. The importance of this issue is connected with the increased complexity of multicultural business environment (Hassan & Agus, 2005). Today the issue of business ethics in decision making process has gained special attention among experts, researchers and managers who are interested in positive outcomes of any challenging situation. Contemporary scientific literature involves a variety of topics associated with business ethics. According to researchers, “ethical behavior has also been extensively discussed and accepted as an important component of managerial decision making”(Hassan & Agus, 2005, p. 187). In order to evaluate the significance of business ethics in the business environment, it is necessary to discuss the impact of ethics on decision making process in large corporations. In any business organization, decisions are made either by individuals, or by special committees. In other words, business ethics is closely connected with the ethics of the individuals involved in decision making process (Thiel et al., 2012; Hassan & Agus, 2005). The behavior of a decision maker reflects his/her ethics which plays a crucial role in solving various business problems that occur in the business environment. The behavior of individuals reflects personal attitudes towards the problems caused by some negative factors. According to De George (1995), business is a social activity that depends on certain moral principles. Moral analysis helps to evaluate business alternatives in terms of the effectiveness of ethical decision making. Business ethics plays a crucial role in decision making process in large business organizations, promoting financial and social performance and enhancing employee motivation and commitment.

The major goal of this paper is to discuss the role of business ethics in decision making process in large business organizations. Special attention will be paid to the important role of ethics in business organizations and the impact of ethics on decision making process in large business organizations. In addition, business ethics and corporate social responsibility in large organizations will be discussed in the paper, and some examples of ethical decision making practices in large organizations will be presented.

The important role of ethics in business organizations

Business is an essential part of human society. As a result, business organizations have become “part of the complex web of interaction among institutions and people” (Roa, 2007, p. 1). Undoubtedly, human behavior must be assessed from the perspective of ethics and morality. According to Floriano C. Roa (2007), “business without ethics threatens the survival of human society”(p. 1). Ethics plays a crucial role in business organizations.  Morality or moral values contribute to human activity. Ethics in business involves not only the study and application of certain written laws which help to regulate human actions and human behavior, but also business ethics involves application of unwritten laws, “written in the hearts of men that should govern out human conduct where positive laws may be absent, and in some cases, not very clear” (Roa, 2007, p. 6). Today researchers pay due attention to psychological, socio-psychological and sociological factors, which have a strong impact on human behavior that occurs in business organizations. Linda Klebe Treviño and Gary Richard Weaver (2003) state that “complex organizations have become the venue within which the bulk of business activity takes place, and those organizations can have many different influences on the ethics of their members” (p. 14).

Unethical behavior that occurs in large business organizations across the world can be represented in various forms. It is very important to understand the benefits of business ethics. Although serious and effective ethical programs are rather costly for corporations in terms of human resources and financial resources, there is a need for ethical actions (Treviño & Weaver, 2003). Business ethics helps corporations to build competitive advantage to make profits. Without sustaining profits, any business organizations will cease to exist (Sharma & Bhal, 2004).  Therefore, ethical organizations perform better in terms of profitability than unethical ones. Corporate social responsibility is an essential part of any business organization regarding the implementation and management of business ethics practices (Doh & Stampf, 2005). Ethics in business organizations represented through corporate social responsibility has many benefits for business. Effective corporate social responsibility programs and business ethics programs help to improve performance, including financial performance and social performance. Business ethics can help any business organization to become more competitive and more innovative (Treviño & Weaver, 2003).  At the same time, business ethics can have benefits for employees because ethical employees are motivated at work, demonstrate high level of commitment and high level of job performance.

The impact of ethics on decision making process in large business organizations

In large organizations, it is much easier to apply business ethics to managerial decision making process because “it may be easier for large organizations to reassign the responsibilities of an employee or employees” (Near & Miceli, 2012, p. 167). Large organizations or corporations respond to various ethical related problems through effective methods, which are based on institutionalization of ethics in decision making process: establishing codes of ethics, ethical committees, the positions of chief ethical officers and publishing newsletters (Doh & Stampf, 2005). According to researchers, these methods are used to encourage organizations to effectively maintain standard mechanisms aimed at prevention, detection and reporting of criminal behavior (Jose & Thibodeaux, 1999).

According to Chase E. Thiel and colleagues (2012), “organizational leaders face environmental challenges and pressures that put them under ethical risk”(p. 49). It is very important to effectively navigate any ethical risks connected with decision making process to provide the dynamics of contemporary large organizations and corporations. The researchers have found that traditional models of ethical decision-making can be viewed as “inadequate framework for understanding how leaders respond to ethical dilemmas under conditions of uncertainty and equivocality” (Thiel et al., 2012, p. 49). The researchers use sense-making models which help to better understand leader ethical decision making process, as well as some individual, social and environmental constraints. The impact of ethics on decision making process in large organizations/corporation is obvious. Any ethical dilemma is a serious problem that may have negative consequences in business environment (Thiel et al., 2012).  In large organizations, business ethics refers to the model of ethical decision making which is focused on three dimensions. First, ethical decision making includes “a regard for the welfare of others, including intentionally helping and respecting the rights of others” (Thiel et al., 2012, p. 50). Second, ethical decision making promoted the awareness of certain social obligations and duties, which include “respecting cultural norms and values and performing duties appropriate for a given social position” (Thiel et al., 2012, p. 50). Third, ethics in decision making process helps to recognize personal responsibility in the existing business environment.

In large business organization, the ethical decision making framework is used to improve ethical decisions. In fact, ethical decision making “does not rely strictly on the personal values and morals of individuals”(Ferrell & Fraedrich, 2009, p. 131). Any large business organization has a chance to develop its own organizational culture, which should be combined with the key mechanisms of corporate governance. In this case, business ethics will influence decision making process. Corporate culture helps to define and direct the values of the business organization and achieve the established goals (Treviño & Weaver, 2003).  Large organizations are more apt to be more bureaucratic and have adopted more rules and regulations to control employees’ conduct than smaller organizations.

Many researchers point out to the fact that the issue of managing ethics in large business organizations can be better understood through the concept of “ethical climate” that should be promoted in any business environment (Sharma & Bhal, 2004, p. 175). The term “ethical climate” is associated with the stable and psychologically healthy perception hold by employees of organization regarding ethical procedures, policies and programs that exist in business environment. Ethical climate has direct relation to ethical behavior of employees. Based on the research, “individuals develop a network of ethical norms and principles through the process of socialization”(Sharma & Bhal, 2004, p. 171). Undoubtedly, the ethical philosophy of the business organization affects ethical decision making in various situations in the business environment.  That is why all large business organizations have developed their corporate culture aimed at regulation of any interactions. Corporate culture of large organizations helps to establish ethical behavior in the business environment, and “enumerates normative recommendations for creating a culture that supports individual ethical behavior” (Sharma & Bhal, 2004, p. 174).

Business ethics and corporate social responsibility in large organizations

Business ethics and corporate social responsibility are two important notions that contribute to the overall success of large business organizations on the competitive market. The term “corporate social responsibility” can be defined as the commitment by business to ethical behavior and contribution to economic development, aimed at improving the quality of life of employees in the workplace, their families and the community and society in general (Roa, 2007).  The term “business ethics” can be defined as a set of values and moral principles applied to business environment (Ferrell & Fraedrich, 2009).

Ethical behavior inside any large business organization plays a vital role in the achievement of the established organizational goals and helps to maintain a successful business environment. Ethical behavior is important in ethical decision making. Today corporations should be interested in promoting corporate social responsibility. Good corporate social responsibility is supported by business ethics and effective value-driven management (Roa, 2007).  According to historical research, “in the 1970s, a broad public debate was held on the power of multinational corporations” (Jeurissen, 2007, p. 9). Considerable changes in the business world, including globalization, technological development, democratization of moral authority, and other factors influence ethical behavior of employees. Corporate social responsibility is a form of institutional governance, in which business ethics plays a crucial social role (Roa, 2007).

Today leaders of large organizations realize the necessity to promote business ethics and corporate social responsibility, because socially responsible employees and ethical decision making practices affect the overall behavior of stakeholders, incorporating them into the implementation of the organization’s strategic plans and initiatives. Many researchers point out to the fact that today large organizations should be focused on values, morals and ethical issues that emphasize the role of business ethics and social responsibility (Near & Miceli, 2012; Thiel, et al., 2012). As a result, large business organizations manage a wide range of ethical issues connected with stakeholders both inside and outside the organization. Today there are several levels that give an opportunity to evaluate the nature of ethical and moral issues in the business environment: individual level, organizational level, industry level, societal level and global level (Near & Miceli, 2012).  Business leader and managers at all organizational levels should lead and manage based on business ethics and corporate social responsibility, placing emphasis on their integrity. According to researchers, integrity should form the basis of any business organization regardless of its size (Near & Miceli, 2012). Integrity helps to shape and promote the values, ethical climate, organizational culture, interpersonal communications, employees’ commitment and many other concepts which contribute to the organization’s success on the competitive market.

Harvey S. James (2000)states that the constituent elements of the organizational structure of any business organization have a strong impact on employees’ ethical behavior. The researcher explores some formal characteristics of the organization, such as compensation practices, performance and evaluation systems, and decision making assignments. Harvey S. James (2000) argues that “the formal organizational structure, which is distinguished from corporate culture, is necessary, though not sufficient in solving ethical problems within firms” (p. 43). Today managers should promote ethical behavior through two effective approaches: individual approach and organizational approach. The first approach means that employees’ level of moral development, ethical conduct and ethical sensitivity could be motivation sources to act ethically (James, 2000). The second approach means that ethical behavior is influenced by external factors, such as organizational rewards, or punishments, corporate culture, and other factors. In large organizations, special attention is paid to business ethics and corporate society responsibility aimed at ethical practices (Doh & Stampf, 2005).

Some examples of ethical decision making practices in large organizations

Ethical decision making practices play an important role in large business organizations, firms and corporations. Unethical behavior requires the practice of sound and effective ethical principles and discipline. Researchers suggest that organizational culture and climate have a strong impact on the individual ethical decision making practices (Ferrell & Fraedrich, 2009). Ethical work climate can be viewed as a key factor in the development of personal values. There is a relationship between moral values and moral development of employees and their ethical work environment. There are many ethical decision making practices that have many social responsibility implications, but at the same time, these decisions reflect the ethical climate and organizational culture. For example, in many large organizations, the collective involvement of employees in decision making practices result in the organization’s success in business. Many ethical decision making practices are associated with ethical and socially responsible conduct of employees (Hassan & Agus, 2005; Ferrell & Fraedrich, 2009).

In large organizations, employees and other stakeholders should trust their leaders in terms of ethical decision making. In other words, business ethics should be incorporated in everyday activities to promote ethical decision making practices. According to Jonathan Doh and Stephan Stampf (2005), “in many large organizations, employees have infrequent interactions with executive management” (p. 13). As a rule, large organizations demonstrate strong corporate culture, which stands for the “accepted behavioral norms of the organization”(Doh & Stampf, 2005, p. 13). Leaders in large organizations often hold the positions which require ethical decision making. They should avoid any conflicts in the workplace and explain employees the negative consequences of gossips. The researchers suggest: “people are going to judge you not by what you say but what you do” (qtd. in Doh & Stampf, 2005, p. 13). At the same time, executives in large organizations are focused on ethical values which require the appropriate actions to convey their beliefs to the whole organizational context. Thus, ethical decision making is one of the most important assets of a business organization.

In today’s business environment, employees use various methods to effective ethical decision making. It is very important for large organizations to provide effective communication tools and control mechanisms to promote and maintain the established ethical culture (Ferrell & Fraedrich, 2009). According to recent research,“ companies that fail to monitor activities and enforce ethics policies provide a low-risk environment for those employees who are inclined to take advantage of situations to accomplish their personal and sometimes unethical objectives” (Ferrell & Fraedrich, 2009, p. 206). In large organizations, special attention is paid to managers who are responsible for overseeing routine operations of employees in the business environment.  As a rule, large organizations provide effective training and communication practices that are aimed at providing control over ethical decision making (Doh & Stampf, 2005).  It is very important to be aware of the fact that “the business operates ethically, that it does not become the victim of fraud or theft” (Ferrell & Fraedrich, 2009, p. 206). In large organizations, there is always a proper control over employee behavior, stakeholders’ communication and any other interactions which may lead to abuse through unethical behavior or misconduct.

Business ethics contributes to employee commitment, investor loyalty, customer satisfaction, the organization’s profits and many other benefits that should be taken into consideration by managers of large organizations involved in ethical decision making practices (Treviño & Weaver, 2003).  In general, it is obvious that there is a close link between business ethics, ethical decision making and organizational performance. Many examples from the business world practices and recent research prove the fact that it is very important to build ethical reputation among stakeholders, including employees, customers, and the general public (Ferrell & Fraedrich, 2009).  Moreover, recent research shows that organizational ethics plays a vital role in performance. Ethical culture affects three dimensions: employee commitment and trust; investor loyalty and trust and customer satisfaction and trust. As a result, these three dimensions have a strong impact on the organizational profits (Ferrell & Fraedrich, 2009).

In 2013, Ethisphere assessed large companies and corporations in more than 100 countries and 36 industries to define the most successful organizations in terms of business ethics. Ethisphere used special rating system, the Ethics Quotient, which was based on a “series of multiple-choice questions in a survey designed to capture a company’s performance in an objective and standardized way” (Smith, 2013, para.4). The experts reviewed codes of ethics, litigation and regulatory infraction histories of the organizations,  assessed their investment in innovation and sustainable business practices as well as the activities aimed at improvement of corporate citizenship,  and studied nominations from stakeholders (senior executives, employees, industry peers, suppliers and customers). The statistical data show that the most ethical companies and corporations in the USA are Microsoft Corporation, Realogy Corporation, T-Mobile USA, the Aerospace Corporation, Fluor Corporation, Xerox Corporation, Intel Corporation, Kimberly-Clark Corporation, Mattel and some other large organizations that have developed and successfully maintain the Code of Ethical Conduct, corporate culture, corporate social responsibility and implement effective policies to enhance ethical decision making practices (Smith, 2013).

  1. Conclusion

Thus, it is necessary to conclude that business ethics plays a crucial role in decision making process in large organizations. Business ethics is caused by globalization, which creates a rather complex and unpredictable set of relationships in the business environment. Business ethics is focused on the interaction of business and ethics. Moreover, business ethics is comprised of the values, moral principles and norms that guide employees’ behavior in a proper way. Undoubtedly, ethical decision making affects not only the organization, but also the society. In large organization, business ethics programs and corporate social responsibility programs help to improve financial and social performance, as well as the levels of employees’ motivation and commitment. Business ethics can have a strong impact on decision making in large organization. Ethical decision making is necessary for resolution of various work-related issues, interpersonal conflicts and dilemmas that occur in professional context.  In large organizations, ethical decision making and ethical leadership are interrelated.

 

 

References

De George, R. T. (1995). “Moral issues in business” in An Introduction to Business Ethics, ed. by George D. Chryssides and John H. Kaler. Cengage Learning EMEA.

Doh, J. & Stampf, S. (2005). “Towards a framework of responsible leadership and governance” in Handbook on Responsible Leadership and Governance in Global Business, ed. by Jonathan P. Doh and Stephen A. Stumpf,  Edward Elgar Publishing.

Hassan, Z. & Agus, A. (2005). “Ethical values in business” in Sustaining Growth and Performance in East Asia: The Role of Small and Medium Sized Enterprises, ed. by Charles Harvie and Boon-Chye Lee. Edward Elgar Publishing.

Ferrell, O. C. & Fraedrich, J. (2009).Business Ethics 2009 Update: Ethical Decision Making and Cases. Cengage Learning.

Jeurissen, R. (2007). Ethics & Business. Uitgeverij Van Gorcum.

James, H. S. (2000). “Reinforcing Ethical Decision Making Through Organizational Structure,” Journal of Business Ethics, 28 (1): 43-58.

Jose, A. & Thibodeaux, M. S. (1999). “Institutionalization of Ethics: The Perspective of Managers,” Journal of Business Ethics, 22 (2): 133-143.

Near, J. P. & Miceli, m. P. (2012). “Organizational dissidence: the case of whistle-blowing” in Citation Classics from the Journal of Business Ethics: Celebrating the First Thirty Years of Publication, ed. by Alex C. Michalos and Deborah C. Poff. Springer.

Roa, F. C. (2007). Business Ethics and Social Responsibility. Rex Bookstore, Inc.

Sharma, P. & Bhal, K. T. (2004).Managerial Ethics: Dilemmas and Decision Making. SAGE.

Smith, J. (2013). “The World’s Most Ethical Companies” Forbes. June 3, 2013. Retrieved from:< http://www.forbes.com/sites/jacquelynsmith/2013/03/06/the-worlds-most-ethical-companies-in-2013/>

Treviño, L. K. & Weaver, G. R. (2003). Managing Ethics in Business Organizations: Social Scientific Perspectives. Stanford University Press.

Thiel, C. E., Bagdasarov, Z., Harkrider, L., Johnson, J. F. & Mumford, M. D. (2012). “Leader Ethical Decision-Making in Organizations: Strategies for Sensemaking,” Journal of Business Ethics, 107(1): 49-64.

The terms offer and acceptance. (2016, May 17). Retrieved from

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"The terms offer and acceptance." freeessays.club, 17 May 2016

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"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

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