The rules of corporate ethics define the norms of behavior of the company’s employees and the principles of interaction between the functional units of the corporate structure. Moreover, the ethical principles of relations with the external environment of the business, including the state, play an important role. The system of ethical rules and regulations of the company allows the team to work as a whole at all levels of the organizational structure. It contributes to the achievement of the main business goal – to achieving high organizational performance and strong market position (Ciulla et al., 2018). Low ethical standards can lead to high income for some time, but soon this type of activity can become the object of close attention from government bodies, competitors and partners, public organizations, and journalists (Shaw, 2016). The result can be the loss of reputation followed by financial losses.
To make ethical principles, norms, rules, and standards become a reality, they must be included in decision-making process at all levels of management. They also should be implemented in the work practices of all employees, which is usually done through codes of conduct. To make the code effective, some disciplinary measures exist aimed to punish violators of the code and to reward behavior compliant with the rules of the code of ethics.
At the same time, there are examples that clearly show what harm a company can experience if it does not comply with ethical norms of interaction with consumers, society, and stakeholders. One food company applied the practice of greenwashing – using false eco-labels, when in fact there was no independent eco-review of the products. When this case became known, the company lost a significant number of its customers (Watson, 2016). It is possible that specific situations can arise, when business goals and rational egoism conflict with ethics, and in such cases these goals and interests must yield. However, the company’s reputation as an honest, ethical business partner contributes to its profitability. Firms consistently adhering to high ethical and business principles attract the best talent and retain them longer than others. The increase in the market value of a company grows significantly if there are clearly defined codes of ethics (Ciulla et al., 2018). This growth is ensured not only due to more coordinated and responsible work of employees, expanding their involvement, but also due to an increase in the company’s goodwill.
References
Ciulla, J. B., Martin, C., & Solomon, R. C. (2018). Honest work: A business ethics reader (4th ed.). Oxford University Press.
Shaw, W. H. (2016). Business ethics: A textbook with cases (9th ed.). Cengage.
Watson, B. (2016). The troubling evolution of corporate greenwashing. The Guardian. Web.