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Business Ethics: Functions and Comparison

University: London Business School

  • Unit No: 8
  • Level: Post Graduate/University
  • Pages: 18 / Words 4461
  • Paper Type: Assignment
  • Course Code: BUSN350
  • Downloads: 225
Question :

This assessment will provide certain questions which are like:

  1. Elaborate the business ethics and its functions.
  2. Provide the comparison in between case study in relation to business ethics.
Answer :

INTRODUCTION

Ethics the term of the investigation and analysis of moral principles and dilemmas. Mostly religious scholars and philosophers have studied ethics. The scholars are related to various fields and for the study of ethics creating new approaches, behavior ethics and applied ethics. And code of conduct set of rules and behavior for an organization and for a group. In this including religious rules and responsibilities, proper practice and outlining the social norms.

In this report selecting topic business ethics, it is a form of professional ethics and applied ethics, that examines ethical problems, moral and ethical principles. These ethics develop from organizational statement, individual or from legal system. On this topic covered two case studies that are related to business ethics values and showing crisis. All the study of business ethics is conducted by taking into consideration Australian businesses. This study is all about stating importance of ethical behavior in every department of companies. As well as from the point of view of social, cultural and environmental safety. 

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Business Ethics

In Australia, definition of business ethics not only includes fair and honest treatment of customers by a company but also focuses on privacy of individuals, effective communication. Ethical behaviour of business focuses on becoming honest, judging individuals on the basis of knowledge and skills not on any other criteria (Su, H. Y., 2014). Australian business ethics includes following:

  • Equality: Equality is most important for Australians as they do not prefer to show off their achievements and looking different from crowd. Indicators for judgement are an individual's abilities, skills, performance rather than personal power or influence.
  • Company Structure: According to this, every company has a specific hierarchical structure that comprises upper level managers and lower level employees. In context of ethical behaviour, there should not be misuse of authority by upper level and lower level employees should also be provided substantial power of decision making. As upper level managers take advice and suggestions from lower level employees then it will help in reducing difference between them.
  • Gender equality: In Australian context, treating women equally to men is standard practice. Women's also secure top ranking positions in corporate world having authority and responsibility to take decisions to their own. According to Australian business ethical behaviour, treatment of women professionals is same as treatment of people without taking consideration their social status and respecting them.
  • Negotiations: Negotiations in ethical behaviour are done by keeping in mind company policies and rules. Decisions are taken on the basis of facts, figures, proofs, and regulations rather than flowing in emotions. Australian companies often concentrates on doing negotiation process fast, adopting new ideas but on verifiable grounds. They do not believe in manipulating matters, bargaining instead they are centred on direct communication with other party.
  • Personal relationships: In Australian corporate business ethics, one's personal life is not mixed with professional life. However they can talk to their peers, colleagues and can establish informal relationships with them. But in this culture employees do not involve much in each other's personal space because it can lead to offence or controversy. Matters which can create difficulties such as religious, political views which differs from one person to another.

Information based on the survey conducted by EY in Asia-Pacific shows that employees of Australian companies believes frauds, corruption and scandals are increasing due to deteriorating economic state of country, emerging tough competition between companies in same industry and decreasing in quality of goods as well as services. Business ethics and corporate ethics are one and the same things. These are applied in every area or department of business. And helps through providing guidance to corporates, maintaining their better relations with investors, shareholders, government. Business ethics can be in the form of values, beliefs, norms, culture or morals. They can be either derived from individual perceptions, businesses code of conduct or from any judicial system. This philosophy of business ethics came in 1960's when awareness rises among corporates to consider consumer as king of market, also in respect to environmental issues concerns, corporate social responsibility, and on social issues. Business ethics are in trouble due to slow down in economic growth in Australia (Kolk, 2016). Australia has formulated Australian ethical standards and are compulsorily need to be followed by every provider of products and services. Some ethical code of conduct for Australian businesses are:

  • Resources are scarce, so there should be effective and efficient use of these resources.
  • For smooth processing of management systems, responsibility and accountability should be clear and should be divided among all according to capabilities.
  • Company can take competitive advantage but in a fair manner of competition.
  • Behave in honest, ethical and fair manner without any prejudice. 
  • Employee or any business person can not look for any financial or personal benefits while performing business duties.
  • There should be direct and open communication while negotiations with suppliers.
  • If anyone observes corruption or bribery in company, then immediately report.
  • Work health and safety standards should be properly followed. 

Study of business ethics consists of examining business practices, principles, corporate governance and corporate social responsibilities. Sometimes these ethics are also guided by law. It deals with obligations of a company that production activities of should not affect environment. Ethical behaviour in business is not only about right and wrong instead it is a broader concept which deals with standard codes of conduct (Fisher and Bonn, 2011). And these are managing conflicts between business and personal interest, should not involve in insider training, employees or managers can not earn unauthorised gains. Everyone is responsible for due care and conscientiousness in decision making and in performing duties. Company should be aware about policies and procedures on the basis of which work will be done. In case of breaching any of the above discipline, action would be taken on that organisation.

1. Case study

There were many scandals and frauds arise in history of Australia including major banks and companies. One of them was scandal of Commonwealth Bank of Australia. This bank is among four largest banks of Australia holds large market share in banking and finance industry providing a variety of banking services such as insurance, broking, lending, investment etc. It is also in the list of oldest banks operating in Australia. In year 2018, Royal Commission found misappropriation of accounts, misconduct, financial fraud, money laundering and many other illegal activities prevailing in Commonwealth Bank. Also bank denied to give claims to insurance policy holders, given irrelevant financial advice and provide compensation to individuals at slow pace. Between 2000 to 2016, all the bank account details of 20 million users were lost by Commonwealth Bank that was later admitted by it in 2018. In case of money laundering Commonwealth Bank has agreed to pay $700 million when it failed to provide report on details of transfer of money, deposits made, and accounts (Commonwealth Bank fined for money laundering, 2018).

This report is based on Ethical codes of conduct prevalent in Australia. Codes of ethical behaviour are mandatory for every member of company to follow guidelines. These standards are given in Australian community worker's code of ethics and Australian community work practice guidelines. These codes relies on fair treatment of everyone in Commonwealth Bank of Australia, clarity in communication, integrity of system software, co-operation with other associates and also supporting them, healthy work environment. These are all related to conditions inside Commonwealth Bank, also there is a responsibility towards general public because they use their resources. So in return Commonwealth Bank should give non-monetary benefits to society in the form of education, employment and other amenities. This phenomena is known as corporate social responsibility which is now compulsory for every organization. As compared from earlier time, CSR was not having so much importance but in recent years it is expanded. In some countries, it is mandatory to give some percentage of profit as CSR contribution to society (Pullen and Rhodes, 2015). For example, company that follows ethics cannot ensure about profit and in contrast another company that does not follow code of ethics can give guarantee for profit. This is because, in this era public wants that every bank should behave in ethical way. So if any company acts in such manner, it can improve public image of an organisation. Also banks that acts ethically gain more advantage as compared with banks does not follow ethics. Business ethics are necessary because today many organisations can commit fraud or misconduct which creates threat to economic conditions of a country.

Business frauds can not be easily determined initially as seen case of Commonwealth Bank of Australia. If Commonwealth Bank do some misappropriation in accounts at a very small level then it can not be recognized in shorter time because of complexity of transactions. It is recognized after a long period of time when amount of misappropriation increases. Ethical misconduct is not only happens in the area of financial matters but it can also be determined in the area of environmental hazards, bribe and corruption scandals, ill treatment of employees, slavery, child labour etc. Generally large organisations like Commonwealth Bank of Australia commits fraud after establishment of trust and brand image in the eyes of customers. Responsibility of managers and a corporation is to maximize profit of shareholders in ethical way. AUSTRAC (Australian Transaction Reports and Analysis Centre) is financial intelligence agency of Australia who imposes allegations on Commonwealth Bank of Australia for money laundering. In that case Commonwealth Bank was also bound to pay legal cost worth $2.5 million to AUSTRAC. Business ethics can also be understood with the moral and cultural standards taught by parents to their children. So in the same way banks should also follow these standards. These standards forbids immoral actions. An enterprise is a group of person combines to form an organisation, run it and also generating profit. Some people say that ethics are mend for individual or a human being, business is only runs according to law and to earn profit. But as one knows that business ethics are different from just ethics or business ethics are much broader than just ethics. Success or failure of Commonwealth Bank is also attached to the internal as well as external stakeholders in which it is operating (Deshpande, Joseph and Shu, 2011).

Ethical and moral standard of an enterprise develops culture and also create impact on employee's morale, image in the eyes of public, their trust, and also on potential consumers. Business ethics can not be understated because it builds trust to other peers also so that it helps in future collaboration along with customer loyalty towards them increases. Commonwealth Bank which adheres to business ethics gain extra benefit as compared to other competitors who can face judgement of law, criticism by general public etc. Unethical issues of an enterprise included violation of patents and copyrights, bribery, hazardous working conditions, unfulfilled commitments, not complying with environmental standards, use of harmful raw materials, improper arrangements of safety for workers, harassment at workplace etc. Law and business ethics are also related with one another in the fact that if company is violating law then it is understood that it is also violating the law. These are increasing because fines charged by government is very less as compared to their share of revenue. This resulted in continuous committing unethical practices because it does not create any burden on that entities.

Business ethics are divided in various parts according to department:

  • Business ethics in human resource: Here in this department of Commonwealth Bank of Australia, ethics are applied in managing human resources with equality, hence they should be discriminated on any basis. Because if they will treated fairly then it would boost their morale. Also employees will become more productive and able to perform given task efficiently and effectively. If company well treat their employees then in the future it helps to attract talented work force and create efficient pool for recruitment.
  • Business ethics of sales department: This can be understood with the help of an example, tobacco and liquor companies produces products which are very harmful for human health. As well as it can also cause dangerous diseases. This side of these industries can not be compensated to the employment created by them. 
  • Business ethics in marketing area: Marketing is vital part for Commonwealth Bank. And it is done after analysing needs of customers. But today companies try to manipulate moral values and customs. Marketing strategies are used in organisations to establish brand image, to take competitive advantage, to make goodwill, to draw potential customers etc. So to take advantage of these they often provide misleading information.
  • Business ethics of production department: In process of production, companies sometimes forget about environmental concerns, means create pollution, release toxic substances from factories which later create water pollution, also air pollution caused by releasing harmful gases. Most of the experiments are done on animals which should be forbidden. Many NGOs, social activists and government are working in this area to save environment and also insisting on producing environment friendly products.
  • Ethics in competition and insider trading: Competition can prove better if happen in a ethical way. Some common unethical practices in business are price discrimination, price wars, fixing of price etc. Insider trading is illegal if any person trade in securities with the information not available to general public. But legal in case crucial information is public.

Business ethics are also applied on companies doing business internationally. Big international companies and multinational corporations which involved in overseas trade to earn profit as well as for expansion are neglecting business ethics (Fernando, 2011). These companies look for countries in which labour is cheap and resources are in abundance. This behaviour increases competition between developing countries to provide cheapest labour and resources to companies of developing countries. Along with this they also want flexible law system so that MNC do not have to spend much on dealing with the legal system. So this all contributes in unethical behaviour in which these companies involved in exploiting developing countries. Concept of business ethics will be more effective if it will be associated with effective corporate governance. Corporate governance refers to the system in which roles and responsibilities of every participant in management of organisation are evenly divided such as board of directors, managers, stakeholders, employees, shareholders etc. so that decision making becomes smoother. At last business ethics in every organisation is necessary for facilitating business operations. It is considered as an significant factor while taking any decision regarding corporate affairs.

Outcome: Result of this case study is that in Commonwealth Bank of Australia many scandals arrived relating to financial planning, advice, information data loss, insurance department fraud, financing risky projects of fossil fuels which can lead to disastrous situation in climate change. So later in this case study, corporate social responsibility along with corporate governance have been discussed. And how these unethical behaviour by banks like Commonwealth Bank can be minimized with the help of applying ethical codes and conduct in every department of banks or organisation (Higgins, Milne and Van Gramberg, 2015). After that businesses that involves in overseas trade violate business ethical standards. As Commonwealth Bank had also done the same.

2. Case study

The scandals of the 1980s, broaden in to the 1990s, came as a fundamental shock to Australians and new Zealand. Both countries have pridefulness themselves some what naively and smugly and on being open, antitrust and honest societies (Business Ethics in Australia and New Zealand, 2000-2018). So it was very convincing to see both gross dereliction and corruption of exposed to duty in virtually every sphere of public life. But the most optimistic outcome, however, a midst an almost Australia have daily diet of amazing revelations, has been ability to operate system specially the media and judiciary – to reveal and dealing with dishonesty at the high level.

After literature review and an extensive survey it is clear that there is now distributed awareness of the need for reform in many areas of corporate governance, public administration and professional behavior (Ramsay, Troth and Branch, 2011). A continuing cause for involvement lack of leadership in addressing and identifying complex ethical dilemmas, this area particularly related to disclosure and conflict of interest. In ethics education giving different different indication relating to feedback from professional bodies, university business school and industry association and indication is go slow. While several ethical prominent individual and centers ethicists have acquaint given ethical issues and innovative programs greater than prominence in the narrow vocational ism and in the media still takes precedence over personal values in the business and management curriculum (Mujtaba, Tajaddini and Chen, 2011).

There is advanced degree of need confusion in New Zealand and Australia. This is the ascendant drawn from opinion survey, relevant publications and a variety of initiatives that have wanted to address ethical problems. The recent surveys conducted to confirmed impression by the author including a broad cross section of the community and covering about forty universities, government, professional bodies, agencies and businesses. Many times leaders let down to people. Nadir is one of them and in 1980s represent his dictatorship and never want to repeat that. The collective sense, of shock, shame, and disappoint comes through quite strongly (Galbreath, 2014). Business ethics have influence positive impact on development and intellectual capital. Knowledge has most important part of modern businesses and this study argues that business ethics related with the development of intellectual capital and intangible knowledge resources. Businesses are with ethical values at the set of reinforce ethical conducts and they try to successfully to build trust with their various stakeholders. They are leading to the formation of an ethical approach for business. With this approach business can encourage problem solving, creativity among employees, open communication and increase organizational capital. For increasing to human capital attract and retain to good talent (Edwards and Kirkham, 2014).

Ended the years, growing attention has been paid to the environmental, ethical and social dimensions of business, mostly related to corporate social responsibility heading. They are praise to various types theories of ethics. They are as follows -

  • Realist theories – According to this theory suggested that an action is morally right when that action make more total utility for the group as a phenomenon than any other options. Sometimes using this slogan “The greatest good for the greatest number”. This is computing quantitatively the projected of general population's utility among competing options. In this principle appeals that underlie democracy and capitalism, it is a realist theory. The normative connection with the good and aggregate happiness is a factual claim. In this including deontology theory that one's duty to do for particular action and this action inherently right and calculations of other sorts. It defines right action of it's ability to take the greatest aggregate utility.
  • Swing theories – Ethical intuition-ism can described justification of theory and describe proximate grasping of self evident ethical truths. Virtual ethics is also sometimes called character ethics and agent based (Vitell, 2015). It takes view of point of living of life should try to excellence that all do and others do. For example: an athlete can achieve excellence in a sport ans as well as same a person achieve more excellence. These Virtues or excellence are both like non-moral and moral. The way for these habits are developed and excellence will sort of community of virtue ethics under the umbrella. When god and value of truth are sources of these community values, then the theory based on realist. When culture based geography sources using for random creation, then the theory is anti-realist. In this theory behavior influence by the culture and that is real effect. According to this theory all are social animals and this theory often draw with communitarianism, which corroborate positive mutual role that society plays in our lives. Detractors are point on that fact that virtue ethics does not spring particular directives on specific actions (Cheshire, Everingham and Pattenden, 2011).
  • Anti realist theories – Ethical non intuitive is a theory that advise the descriptive analysis of culture and language tells us in ethical situations on appropriate attitude in need to developing. Ethical propositions can be analyzed by linguistic devices, and follow the social program as represented to society and language. These values of social group and society related to imperatives.

The environment of business ethics relating to battle of reputation, credibility and competitive advantage. During the past 30 years, the business exist for society and shareholders have been increasing his expectation. Many people are have stake so they are take interest of business impacts and activities. In business ethics influence by technology and innovation and technology is developing in a very fast and achieve technology evolution and new inventions (Galbreath, 2011).

Outcomes – According to this case study result will be come that corruption is main problem of this study. Both countries not following accounting standard principle so they don't showing financial statements of companies and stakeholders disappointed with them. That is reason to increasing unethical behavior in business (Golob and Podnar, 2011). The countries are exposed in virtually every arena of public life. After that positive results comes that as amazing revelations that was ability of the system and specially media or judiciary helping them to expose corruption on highest level. After survey on this case literature review clear that awareness needed on broadly level in these areas corporate governance, public administration, and professional behavior. In these countries companies did not showing records and annual reports to government and stakeholders and they were earn for personal use, not distribute dividends and profits on time. If they were showing financial statement so they were not properly categorized every head in under headings. After that taking feedback from many sections like as university businesses, professional bodies, industry association and business schools were giving reason that low progress in ethics education (Lindorff, Jonson and McGuire, 2012).

Read Also: Human Resource Management Practices - British Airways

Comparison between above two case studies on business ethics:

 Case study I

 Case study II

In this case study, ethics and codes of conduct applied in Australian companies have been examined. Also rules and regulations of governing body of ethical business standards are mentioned. Focus is on only businesses operating in Australia. Interpretation of business ethics in internal and external environment. Consequences of unethical behaviour by businesses are also discussed.

While this case study explains about scandals and frauds arise in Australia and New Zealand regarding violation of established ethical business standards. So concentration is on above mentioned two countries. Earlier both these countries were very confident on their honesty, loyalty and trust but after frauds, they both started to strengthen their policies of business ethics. Also compulsion to follow standard ethics in subsequent areas.

Later, various forms of business ethics are given such as ethics in area of human resource, sales, marketing, production department, competition and insider trading.

Various types of ethics theories are being explained such as realist theories, swing theories, anti realist theories etc. These theories draw attention to corporate social responsibilities of companies.

After that concept of international business ethics is mentioned which states ethical and unethical behaviour of multinational corporations exists in developed countries with other developing countries. This happens at the time of establishing business overseas.

In this case study, impact of technological advancement on the culture of a country during recent years has been analysed. Along with this influence of innovation on business ethics.

CONCLUSION

This report concluded that business ethics necessary for every business for carry on businesses on broad level in accurate way. So in first case study commonwealth bank including many scandals that is not related with business ethics like as money laundering, loss customer data, financial data loss, not giving insurance claim and not taking advise by financial ad-visor for financial planning after that result was come that government charges fine on the bank for these scandals. In second case study Australia and new Zealand's companies not showing his financial data to stakeholders and not follow accounting standard principles for maintain accounting. After that government showing news broadly sphere to everywhere through media and virtually. After that government organize innovative programs and giving information about ethical issues.

REFERENCES

  • Su, H. Y., 2014. Business ethics and the development of intellectual capital. Journal of Business Ethics.119(1). pp.87-98.
  • Kolk, A., 2016. The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business.51(1). pp.23-34.
  • Fisher, J. and Bonn, I., 2011. Business sustainability and undergraduate management education: An Australian study. Higher Education.62(5). pp.563-571.
  • Pullen, A. and Rhodes, C., 2015. Ethics, embodiment and organizations. Organization.22(2). pp.159-165.
  • Deshpande, S. P., Joseph, J. and Shu, X., 2011. Ethical climate and managerial success in China. Journal of Business Ethics.99(4). pp.527-534.
  • Fernando, M., 2011. A social innovation based transformative learning approach to teaching business ethics. Journal of Business Ethics Education.8(1), pp.119-138.
  • Higgins, C., Milne, M.J. and Van Gramberg, B., 2015. The uptake of sustainability reporting in Australia. Journal of Business Ethics.129(2). pp.445-468.
  • Mujtaba, B. G., Tajaddini, R. and Chen, L. Y., 2011. Business ethics perceptions of public and private sector Iranians. Journal of Business Ethics.104(3). pp.433-447.
  • Edwards, M. G. and Kirkham, N., 2014. Situating ‘giving voice to values’: A metatheoretical evaluation of a new approach to business ethics. Journal of Business Ethics.121(3). pp.477-495.
  • Vitell, S. J., 2015. A case for consumer social responsibility (CnSR): Including a selected review of consumer ethics/social responsibility research. Journal of Business Ethics.130(4). pp.767-774.
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