2.1 The importance of ethics for company

Successful businesses fail, profitably running businesses suffer from a downfall and some seemingly effective corporates receive a great fall in their profits and popularity and one of the main reasons behind these surprising failures was the lack of corporate ethics.

Ethics is an important part of life and running a successful business is no exception to this. To become successful, a business needs to be driven by strong ethical values. The mindset of a businessman creates a mindset for his/her company, which in turn sets the work culture of the business organization. For a business to prosper and maintain its wealth, it ought to be founded on certain ethical principles. A business that is based on ethics can run successfully for long years. Moneymakers who do not heed to ethical values can only earn a short-lived success. To last long in the market, business ethics is essential.

For a business to achieve long-term profits, customer relationship is of utmost importance. To gain a long-term relationship with customers and achieve customer return for the business, the business needs to be based on ethics. The trustworthiness of a business, its customer service, its customer care, its way of dealing with customers and its urge to retain their old customers, is a part of ethics in business. Business ethics leave a long-lasting impression on the customers and the impression on their minds builds trust, fetching a business more customers while retaining the older ones.

Ethics is an integral part of running a business and hence ethical values accompany business by default. Without following certain ideals in business, one cannot become successful. Success that is attained without a foundation of strong ethics is bound to be short-lived. A business cannot continue to prosper without an ethical base. A few successes can be coincidences or flukes but persistent success can only be a result of a strong foundation of ethics.

The benefits given by the business organization should not be used in an unfair manner. The use of company resources for personal benefits and taking an undue advantage of business resources is completely unethical. Using the wealth of the business for personal reasons is not ethical. Using company funds for personal reasons is unethical. A thoughtful and a careful utilization of company resources is a part of business ethics. A vigilant and a prudent use of resources is an essential component of ethics in business. Accepting bribes, pleasing the so-called 'important' clients, favoring a part of the customers while being unfair towards the others is against ethics in business. The primary aim of business is not just to maximize profits. It is rather to cater to the needs of society and work towards benefiting the masses.

‘Corporate (business) ethics’ is the application of ethical values, such as integrity, fairness, respect and openness, to business behavior. It relates to all activities of a company, from how it develops, produces and delivers its products and services, to its interactions with its customers, suppliers, employees and wider society. Embedding these values and being seen to do so has become increasingly important to overall business success.

When an organization behaves unethically it always jeopardizes itself. Employees, who don't like the engage in unethical behaviors, can sue the firm for hostile work environments and there is always a risk to be sued by the employees who feel discriminated by the firm.

Unethical practices compromises the long term viability of the firms, especially in countries like US and the Europe where people question more about the ethical practices of the organization. If the firms engage in unethical practices it loses the trust of its stakeholders and cannot survive in the long run. There are many firms which eventually went down by conducting unethical practices for example Enron and WorldCom. The organization that shows poor judgment breaks faith of its employee and peoples; is answerable to them and have to face the consequences of their actions. We know that workers are company's best asset and if you workers think that company is engaged in unethical actions they will simply not respect the company anymore, which in long run will generate losses for the company. So, creating an ethical environment is more important today than it was ever before.

Standards of conduct may need to be above that required by law to avoid reputational damage. Failure to comply with the law will always be unethical and damage reputation. But conduct may not be contrary to the law yet still be considered to be unethical and cause damage to a company’s reputation. A company’s concerns in relation to its reputation should extend beyond those for which it is personally responsible under a legal liability, for its reputation can be damaged by other high risk areas such as the actions of third parties, including advisers, suppliers, contractors, and business partners in joint ventures.

Failure to be seen to implement acceptable ethical standards of conduct can also impact upon the degree of regulation or legislation that might otherwise be introduced to constrain behavior.

Ethical behavior and corporate social responsibility can bring significant benefits to a business. For example, they may:

• attract customers to the firm's products, thereby boosting sales and profits

• make employees want to stay with the business, reduce labor turnover and therefore increase productivity

• attract more employees wanting to work for the business, reduce recruitment costs and enable the company to get the most talented employees

• attract investors and keep the company's share price high, thereby protecting the business from takeover.

Unethical behavior or a lack of corporate social responsibility, by comparison, may damage a firm's reputation and make it less appealing to stakeholders. Profits could fall as a result.