Each company has some rules, standards and norms for doing business which generally changes with some social and cultural basis which can be different country to country. When the company apply these standards or norms as a part of their responsibility, it becomes ethical code of conduct of business. Ethics is an inevitable part of business responsibility. Corporate behavior should be ethical and responsible.
Businesses attempt to maximize profits as a primary goal on one hand while they face issues of social responsibility and social service on the other. Ethics is the set of rules prescribing what is good or evil, or what is right or wrong for people. In other words, ethics is the values that form the basis of human relations, and the quality and essence of being morally good or evil, or right or wrong. Business Ethics means honesty, confidence, respect and fair acting in all circumstances. However, such values as honesty, respect and confidence are rather general concepts without definite boundaries. Ethics can also be defined as overall fundamental principles and practices for improving the level of wellbeing of humanity.
A business which does not have the ethical criteria and does not respect them or fails to improve them will disrupt its integrity and unity, i.e., its capacity to achieve its goal, and lead to internal or external conflicts.
To initiate corporate giving, for example, would be a fiduciary breach of management in Friedman’s opinion: an agent for a principal is neither legally nor morally permitted to give away or “waste” the principal’s capital (Joyner & Payne, 2002). Milton Friedman also argued that ‘there is only one social responsibility of business – use its resources and engage in activities designed to increase its profits so long as it engages in open and free competition without deception and fraud.
However, ethical behavior and ethical business has effects not only on stakeholders, and shareholders but also on the entire economy. When a person act ethically in business decision-making process it ensures more effective and productive utilization of economic resources.
Freedom in the markets is a source of potential abuse and unethical behavior and late 2008 provides just such an example where the misbehavior in the housing lending market, the sub-prime scandal has led to serious economic problems in the USA which then spread elsewhere. Accounting information is often accused of providing an excuse for unethical behavior.
Any manager operating in a business environment needs to be aware of the importance of ethical behavior. Equally he will experience conflicts, in attempting to behave ethically, between different alternative courses of action, and may find conflicts between the firm’s objectives and his / her own personal motivation and objectives. No ready solution to these conflicts is available but a manager should be aware that research has shown that ethical behavior leads to better performance in the longer term, and so should be encouraged to act accordingly.