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Business ethics are the principles
values and standards that guide behavior in the world of business. Most people
would probably agree that both individuals and business organizations must
conform to solid morals to retain the high ethical standards. However
businesses face more complicated ethical issues than individual members of
society. Businesses must make a profit to survive and they have a fiduciary responsibility
to their shareholders to maximize to increase the value of the company. The more
profit business earns, the longer the life of the business will be, however if
the business earn profits in a manner that is considered unethical, the life of
the business can be shortened such as in case of Enron and Lehman Brothers.
Businesses must balance their goals of maximizing profits with the needs in the
matters of society. Many businesses have failed due to financial and legal repercussions
resulting from their poor business ethics. It is essential for business to maintain
a healthy balance which often requires to compromise little bit of the profits.
Business ethics involve a large range of ethical dilemmas and decisions made by
business organizations and stakeholders. Organizations often need to make
business ethics decisions balancing their goal of profit maximization with
non-economic issues such as environmental and social concerns. Employees also
face business ethics dilemmas such as choosing whether or not to accept a bribe
or a gift from a potential supplier or choosing whether or not to be a
whistleblower over perceived unethical business practices.

            Business ethics are made up of principles and values. Principles
are very specific, universal and absolute boundaries that rule the conduct and
behavior of society. Rules are often based off of principles examples of
principles include freedom of speech, equal opportunity and equal right to
civil liberties. Values are belief among a person, culture or organization of
what is right or wrong. Values are used to develop social norms of behavior in
are enforced by society as society develops a general consensus of values and
what behavior is considered right or wrong. Examples of values are integrity, accountability
and trust. Employees, employers, investors and community in general determine whether
an action is considered right or wrong. Although their determinations are not
often right, but they do have a great influence over society’s acceptance of
business behavior and activities.

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            Ethical culture is the component of the corporate culture
that relates to the principles, values and beliefs of what is considered to be
normal acceptable behavior. The ethical culture is the established patterns and
decision making processes used by employees when faced with ethical issues. The
goal of any company is to establish an ethical culture that minimizes the need
to enforce rule compliance into maximizing use of ethical guidelines and
principles among employees. A company that establishes a good ethical culture
creates values that are shared, supported and promoted by employees and top
management. Research has shown that companies that create a positive ethical
relationship among its employees, customers and investors, experienced
increased operational efficiency, employee loyalty, willingness to invest from
investors, customer satisfaction and ultimately increased financial
performance. It is very important to create a positive and ethical attitude
from the top management of the organization, where managers and company
leadership embrace corporate values, ethical behavior and enforce rules in a
consistent manner. Otherwise employees will lose trust and lower their own
ethical standards. Ethics only become embedded in the workplace culture when managers
respect employee rights, pay fair wages, and give equal promotion opportunities.





Code of
conduct is put in place to help guide employees. Code of conduct lists rules of
what is expected by the company. It protects the business legally from any liabilities
that may arise from employee’s misconduct. Sometimes what is considered unethical
in one country may be customary among business people in another country. An example
of this would be gift-giving in Japan, where in America gift-giving is
generally associated with bribery.

The understanding
of business ethics by employees is essential in preventing fraud in the
business. Fraud is an act of wrongful intended criminal act by a person or another
company to achieve financial gain. An ethical corporate culture diminishes instances
of employee fraud and theft and encourages employees to do the right thing. Employees
are less likely to commit fraud when they feel that management embraces
corporate values, models ethical behavior and enforces rules in a fair and consistent
manner. Implementing effective internal controls deters fraudulent activity because
internal controls are designed to detect and prevent errors, misappropriation
and non-compliance. Inadequate financial controls give employees room to manipulate
financial transactions for personal gains. Anti-fraud education and a fraud
hotline for anonymous tips are key components of fraud detection and prevention
since they encourage whistleblowers and decrease monetary losses from financial
fraud. The occurrence of fraudulent activity can be avoided if businesses
incorporate an ethical corporate culture, internal financial controls and an
anti-fraud training and reporting program.


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