Business ethics, an aspect of applied ethics, focuses on applying ethical theories of right or wrong, to real-life situations on such questions as how people should act in a company in order for it to be successful and provide fulfillment to all its stakeholders. In examining the recurring question of the impact of behaviour on business, Adam Smith opined that ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’ In stressing the importance and laying the foundation for the concept of stakeholder interest in a business, AA Berle, and GC Means, in their 1932 book, The Modern Corporation and Private Property, observed thus:
Corporations have ceased to be merely legal devices through which the private business transactions of individuals may be carried on. Though still much used for this purpose, the corporate form has acquired a much larger significance. The corporation has, in fact, become both a method of property tenure and a means of organizing economic life. Grown to tremendous proportions, there may be said to have evolved a ‘corporate system’ – as there once was a feudal system, – which has attracted to itself a combination of attributes and powers, and has attained a degree of prominence entitling it to be dealt with as a major social institution. […] We are examining this institution probably before it has attained its zenith. Spectacular as its rise has been, every indication seems to be that the system will move forward to proportions which stagger imagination today […] they management] have placed the community in a position to demand that the modern corporation serve not only the owners […] but all society.
RC Solomon describes ethics in a succinct manner –
Ethics is the quest for a life worth living: Putting every activity & goal in its place….. , Knowing what is worth doing & what is not worth doing,…It is also, within business itself, keeping in mind what is ultimately important and essential & what is not, what serves our overall career goals & what does not, what is part of business and what is forbidden to business, even when increased profit – the most obvious measure of business success – is at stake.
For most organizations, effective board leadership develops an organizational culture that guides the day-to-day actions of its management and by implication, the outcomes as reasonably expected by its stakeholders. Leadership will guide by integrating the rules, principles, or values that are acceptable. Juan Elegido outlines the essence of being ethical in business, certain factors that can turn out to be sources of competitive advantage to an organization:
– Enabling its members lead good lives in the real sense of the word.
– Easily acquiring good business reputation within its business environment,
– Winning the trust of its stakeholders (shareholders, customers, employees, creditors, tax authorities, and society.)
– Fostering among its employees an attitude of commitment to the firm’s interests.
Corporate Governance and Ethics have become real necessity for enterprise development in Nigeria. Company executives can no longer afford to pretend that business is not bound by any ethics other than abiding by the law. The position that corporations have the obligation to make a profit within the framework of the legal system, nothing more; and that the only duty of the business leaders is, ‘to make as much money as possible while conforming to the basic rules of the society’ can hardly stand in the face of several business failures where the companies were paying lip service to technical compliance with regulations. Compliance should embody observance of statutory provisions, codes of corporate governance, as well as ethics. The isolation of ethics or ethical behaviour from business dealings have in so many instances in the past led to business and system failures with catastrophic consequences.
It is true that legal procedures are technical, bureaucratic, and obligatory, but then ethics is conscientious, voluntary choice beyond normativity, to what is considered to be right or wrong. Law, especially criminal law, is reactive in nature and approach. That is why for instance criminal codes only criminalize an offence after it must taken place once or twice. Corporate governance is leadership driven. Leadership largely shapes business ethics in any organization; and that way helps us consider the interest of others, and in so doing lead the good life in the real sense of the word.