Business ethics, how they influence the day to day life of an organisation

(An Ethnographic Report on Business Ethics)

Management in Context

By Ghufran Ullah Tahir University of Bradford United Kingdom

For more reports on various topics

Contact: ghufran77@hotmail.com

Word count: 2471

Business ethics and how they influence the day to day life of an organisation

It is argued that there is a strong business case for ethics even in the business world , in that corporations get multiple benefits by operating with a perspective, broader and longer than their own immediate, short-term profits. In order to explore it in detail what business ethics means and how they influence the day to day life of an organisation, I would first share an ethnographic study conducted in one of the stores of Co-operative Group, then we will disscuss what ethics particularly business means, finally we will analyse what we learned from the ethnographic study using the

ideas from the theories of business ethics.

This is Headingley Leeds, West Yorkshire. The Co-operative Food Supermarket is situated on cardigan road, Headingley, just 5 minutes drive from famous Headingley Cricket Stadium Leeds. It is a medium-sized Food supermarket with probably more than 1000sq. feet shop floor area, with its own car parking facility. If you notice, keeping the surrounding area in mind it is unusual that you see the store of this size in the middle of concentrated populated area. More notably, it is licensed to serve alcohol 24hours a day, a visible miracle of effective lobbying. Imagine drunken customers coming to buy alcohol at 3.am, shouting and making noise in the streets, reminding the neighbours about the cost of having supermarket at a walking distance from the house.

Shopping trolleys line up in car park to accompany you during your visit. As you enter the store, warm puffs of

air from fan heater on top of entrance door, welcome you. On your left hand side piles of baskets and on the right hand side a strong man in green uniform exchanges smile with you. He is obviously the security guard.

I wonder how he can stand still for an eight hours shift by the soft-drinks chiller. I feel that it is colder inside the store than outside. The store is so bright and colourful that I feel fascinated. A sign on fridge saying “Ethical Water” draws my attention to itself, and the labels on water bottles claim to be 100% chartable. I see a shop assistant wearing black trouser and fleece filling vegetable in green vegetable trays; green colour inspired me to think about green fields where they were grown. A pillar with posters on it saying “Fair Trade Bananas” tells another story about making a living in cruel world. All the fresh vegetable packed in plastic knocks on human heart and asks “what are we doing to this planet”.

But it is so fascinating to see fruits and vegetable from all corners of the world under one roof.

More notably the shoppers, there are customers from vast ethnic backgrounds, Black, White, Asian and Chinese all un-dividing, buying different kinds of food from one place. But the store layout divides the food into different sections, big signs hanging on ceiling; guide the customers to different sections. In chilled section I see a young sales assistant piling the empty

cardboard in a cage, probably for the recycling purpose. By further navigating through the aisles I see, promotional point of sales saying “Half Price”, “Buy One Get One Free”, attract customers to buy and save. It is not just point of sales that induce customers to buy products, also there are leaflets in every aisle hanging with shelves to invite customers to join as members and earn shares in company.

I notice the prices are comparatively higher than other supermarkets. Pillars all around the shop with beautiful and colourful posters, draw attention towards Co-operative’s Corporate Social Responsibility policy.

Poster are everywhere around the store saying, “we were first to provide fair trade products”, “we are helping to reduce poverty in Africa”, “our stores use renewable energy”, “We are saving the environment”, etc. In order to further explore the

co-operative I requested the manager to spare some time to tell me more about it. He took me to the warehouse, where I had the chance to see, how things looked behind the scene.I asked what being ethical means. “Being ethical means doing business by following best practice values and principles” he replied. “We were the first to introduce fair trade products this dates back to more than 100 years.

Co-op is member’s owned, we don’t have any share holders, just members. Our profits are distributed to the customers, who are its members, and rest goes to business and we also help to reduce poverty in Africa, we are building wells there”.He adds, “Our fair trade policy provides the producers in poor countries a fair reward for their work”.Why do you follow this “Ethical” policy I asked? He replied “well, that is why we (co-op) were made. Our aim is to create a better society. We serve the community”. He explained all in good details and happily, I also got the chance to speak to some of his other colleagues. So far so good. But whenI pointed out that plastics were not being put in recyling bins, he said, “recycling facilities are there but people (at co-op) are too lazy to send them”. I said bye to the manager and thought, the coffee in my house had nearly finished, so why not buy some. But sooner I saw the massive queues of customers, I changed my mind. There were at least 10 customers in each of the three queues. With a deep sigh, I put the jar back into shelf.So, what do ethics mean in literature and what is it to be ethical for a business.

It is frequently said; teach our children the difference between right and wrong. Those of suspicious turn of mind will ask exactly whose conceptions of right and wrong are to be planted in the minds of the young. Even Plato in his dialogues,

‘Meno and Protagoras’ faced the difficulty of saying what virtue is. There are three different forms of ethics: descriptive, normative, and philosophical. Descriptive ethics refers to the general beliefs, values, attitudes and standards that, as a matter of fact, guide behaviour. (Benn, 1998)

The word ethics was derived from the Greek word ethos, meaning “custom”. Thus descriptive ethics examines the typical beliefs or values that determine what is customarily done.Normative ethics prescribe what we should believe or value. The difference between descriptive and normative ethics, therefore, is the difference between what is and what ought to be. Philosophical ethics is to think about the legitimacy of the standards and norms themselves, to seek a rational justification for our ethical principles. In this sense “ethics” refer to a branch of philosophy that systematically examines more abstract questions about how humans ought to live. (Desjardins and McCall, 2000)

Narrowing down the topic now we seek to know what“Business Ethics” mean.“Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed”. (Laura, 2004).

By right and wrong we mean morally right and wrong as opposed to, for example, commercially or financially right or wrong. Moreover, by business ethics, we do not mean only commercial businesses, but also government organisations, charities and other organisations (Clarkson, 1995). Here the question arises how ethics is different from the law. Surely the law is also about issues of right and wrong? This is true, and there is considerable overlap between ethics and the law. The law might be said to be a definition of the minimum acceptable standards of behaviour. But not every ethical aspect is covered by law. For instant being faithful to girlfriend is not a legal thing, but an ethical issue. So the ethics start where law ends. (Crane and Mattan, 2004)

What is CSR then?

Corporate social responsibility (CSR) is about how businesses align their values and behaviour with the expectations and needs of stakeholders - not just customers and investors, but also employees, suppliers, communities, regulators, special interest groups and society as a whole. CSR describes a company's commitment to be accountable to its stakeholders. CSR demands that businesses manage the economic, social and environmental impacts of their operations to maximise the benefits and minimise the downsides. (www.csrnetwork.com)

It means corporations have social responsibilities as humen do, making corporations, artificial humen. hmmm that is interesting.But the purpose of business is to make profit. How can a business make profits, if it just cares about ethics? Are ethics not conflicting with very purpose of business,

because doing business means making money, money and money. Isnt it? (Luijik, 2001) points out that the very notion of business ethics might be seen as somewhat suspicious as it implies that ethics is something, that not originally present in business, or, even worse, something which is opposed to business; Don’t think so.

Making profits is a responsibility itself, towards those who have invested in it, and the society as well. Businesses provide jobs, making profit do promote desireable social ends. But offcourse, not at the

expense of others. Many businesses do harm the society, environment and they do manipulate even their own employees. (Behrman, 1988).

But the question is, are these corporations accountable in some way for the consequences for their actions. If yes, then to whom? Are they only accountable to their shareholder, or all stakeholders, or to the whole society. Should there be any accountability at all in the first place.

Many theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholders, and that these duties consist of more than simply obeying the law. (Davis and Blomstrom, 1975).

A business has moral responsibilities to stakeholders, people who have an interest in the conduct of the business, which might include employees, customers, vendors, the local community, or even society as a whole. The stakeholders have certain rights with regard to how the business operates, and this includes even rights of governance.

Since the corporations now shape and influence so much of public life in modern societies, since in effect they are political actors, they have to become more accountable to society. (Carroll and Buchholtz, 2006).

Lets returning back to the Co-operative. The idea of making a company, which is owned by its customers and employees is different to those traditional companies owned by one or more bignosed wealthy persons, and/or shareholders, of which, majority of them never come to see the places they own. Co-op’s

founders must have faced the enormous challenges of gathering enough members to raise enough money to start up a business. But the co-operative is not a chartible organisation or only for members, it is a commercial business like others run for profits, the difference is in its formation.

There is one more thing different here, unlike others, each member has only one share in the company, so all memebers have equall voting power. Does it not raise some interesting questions about its management at corporate level, its board of directors etc. They must have a lot less pressure of shareholders than the directors in other companies face. No shareholder would bother much having just one share of worth only two pounds.

The most important are its claims of being ethical. Its vision of creating a better society is enough to attract environmental conscious customers to shop at it and even join as members. As you navigate through the aisles, you see the slogans like “Co-operative means Ethical”, “we were first to provide fair trade products”, “we helping to reduce poverty in Africa”, “our stores use renewable energy”, “We are saving the environment”, “we are trustworthy”, all these slogans try to impress its customers.

So did the store manager, he tried his best to convince me that co-operative indeed is an ethical business.But it is hard to justify 24hour licesnce to serve alcohol as to be equally ethical, while being in the middle of

populated area. Can someone still call himself ethical while his neighbors cant sleep peacefully at night because of him.

But I should not neglect the positive side of having a 24 hours store in one’s neighbourhood. Only those can understand its benefits, who ever had ear pain in middle of night. Charging the customer a higher price for goods, using the monoply power in the area can not be called ethical either.

Having a business mission “creating a better society” may inspire those companies, who openly neglect the social and environmental issues. Co-op does full range of fair trade products. Fair trade products gaurantee the producer their fair part.It is fact that these huge national and multinational companies make their profits in millions and even in billions, but the poor farmers in developing countries who produce raw materials, still struggle to feed their families. The thing that I liked the most that I could see the foods from all over the world here. We all love curries, don’t we? Then it makes me think, does the food travel from other continents not contribute to pollution? Many of the fruits and vegetable could be grown locally with little efforts.The posters advertising ethics were being effectively used for marketing.

I struggle to decide whether co-operative is an Ethically conscious firm “one that realises that ethics are useful and important for corporate image. Whose Ethical behaviour is enlightened self interest” OR is it Ethically engaged firm “One which wants to do the right thing. Has a code of ethics, but ethical culture is not fully integrated in the firm”. (Lee, 2008)

Companies use their ethical work as marketing strategy, and manipulate those customers who care about environment and the society. Some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. (Knight,1980).

In conclusion, increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions is increasing. Today most major corporate websites emphasise on commitments to promote non-economic social values under a variety of headings e.g. ethics codes, social responsibility charter etc. (Harwood, 1996). As we have seen at co-operative the ethical claim are so high that they took the form of its business mission. More companies are taking positive initiatives e.g. promoting fair trade, using renewable energy, moving towards decreasing food mileage, etc. Shareholders and investors themselves, through socially responsible investing are exerting pressure on corporations to behave responsibly. Non-governmental organizations are also taking an increasing role, leveraging the power of the media and the Internet to increase their scrutiny and collective activism around corporate behavior. (Carroll and Buchholtz, 2006). This is now upto the society how they re-act to the loud claims of these organisations of being ethical. The consumers have to judge themselves the intentions of companies for adopting the attractive CSR policies. But at least some are moving towards taking positive steps of caring about the communities they serve.

A specail thanks to store managers at Co-operative Food, Cardigan Road, Leeds, West Yorkshire.Mr. Asif Khan, Mr. Steve Machin, Ms. Carol Redfern,Mr. Abdul Azam

References:

Behrman, Jack N. (1988). Essays on Ethics in Business and the Professions. Englewood Cliffs, NJ: Prentice Hall

Carroll, A.; A. Buchholtz (2006). Business and Society: Ethics and Stakeholder Management, 6th ed. Mason, OH: Thomson/South-Western.

Clarkson, M. (1995). "A stakeholder framework for analyzing and evaluating corporate social performance". Academy of Management Review. Vol.20, pp.92-117.

Crane, Matten (2004). Business Ethics, New York; oxford university press.

Davis, K.; R. Blomstrom (1975). Business and Society: Environment and Responsibility, New York: McGraw-Hill.

Desjardin, J. and McCall, J (2000), Contemporary Issues in Business Ethics. 4th Ed. Stamford; Thomson Learning

Hartman, Laura (2004). Perspectives in Business Ethics. Burr Ridge, IL :McGraw-Hill

Harwood, Sterling (1996). Business as Ethical and Business as Usual. Belmont, CA: The Thomson Corporation

Knight, Frank (1980). The Ethics of Competition and Other Essays, University of Chicago Press

Lee, Hugh (2008), Lecture slides, Management in Context, (2008-9) lecture 6, University of Bradford.

Roux, M. (2007). "Climate conducive to corporate action: 1 All-round Country Edition". The Australian. Canberra, A.C.T. pg.14 Van Lujik, H.J.L (1990). Recent Developments in European Business Ethics’. Journal of Business Ethics, 9: 537-544

http://www.csrnetwork.com/csr.asp (accessed on 10-12-2008)