Social

White Paper Ethics and Profits

Profitability and Ethics in US Corporations Today Businesses are required to adhere to the regulations provided in the law at whatever cost. However, some corporations have found themselves attempting to contravene the law in an effort to avoid taking the required responsibility. There is a growing concern that has attracted research in this area. This paper puts into perspective the situation in America and the overall outcome of the actions taken by corporations. The relationship between ethics and profitability is not easy to establish because there are other accompanying factors. However, the available evidence shows that there is a relationship between profitability and the adoption of business ethics.
It is a universal requirement for businesses today that they ought to adopt corporate social responsibility. However, there are some businesses have been adamant to embrace this ethical requirement. In addition, sustainability and environmental conservation are aspects that corporations have the mandate to look unto. A research conducted by Cotte and Trudel (2008) indicated that consumers were willing to pay more for ethical goods as opposed to the unethical ones. It is also apparent that the consumers who uphold high ethical standards are the ones that make the largest market segment.
There are several reasons that facilitate the adoption of unethical behavior. The ultimate motivation is too make more profit in most instances. Professor Yuri Mishina and his colleagues conducted a research on 94 United States based manufacturing companies and established that the factors that contribute to unethical behavior include corporate greed, internal pressure from the management as well as external pressure that comes from the investor expectations especially when the industry is doing well. This pressure makes the decision makers to fault the ethical considerations and do anything to ensure that their expectations are met (Michigan State University, 2010). This clearly indicates that there is tension between ethics and profitability.
Ethics is beyond a moral vision, it provides an opportunity to make profits. According to Steve McKinney (2014), the president of McKinney Consulting, companies that make ethical decisions do very well in trust, reliability, and predictability. He points out that the impact of bad ethics is costly to the company, usually increasing the transaction costs. From his views, it is clear that unethical behavior kills trust hence the number of customers as well as partners decline. Therefore, unethical behavior does not increase profitability. To support his views is Parks (2008) who points out that there may be an underlying cost of poor ethics especially in the long term.
There are companies that have managed to remain ethical while still maintaining profitability. The high enrollment of companies for consideration in the Ethisphere Institute world’s most ethical companies in 2012 is an indication of the desire for recognition of the efforts made in ensuring they adhere to ethics. US companies such as Adobe Systems, American Express, Cisco systems among many others have appeared in the list yet their profits are doing well.
Ethics are very important. Even if there is competition and the need to make fast cash, he long term effects of unethical decisions and behavior can cost the company a great fortune. Due to competition, it is difficult for businesses to legislate and enforce legislations. Some of the companies may take advantage over the others in order to increase their profitability, which in itself is an unethical deed.
In conclusion, some unethical behavior can increase profitability if they go undetected. However, such decisions and behavior are very detrimental for the long-term survival and profitability of the company. It is therefore proper that companies should compete effectively without using unethical decisions or behavior to have competitive advantage.
References
McKinney, S. (2014). Ethical and profitable decisions. Mckinney Consulting. Retrieved from http://www.mckinneyconsulting.com/index.php/leaders-library/117-ethical-and-profitable-decisions
Michigan State University. (2010). How do businesses balance profitability and ethical behavior? Retrieved from http://report.president.msu.edu/2010/stories/ethics.php
Parks, P. A. (2008). Ethical practices linked to profitability. San Antonio Business Journal. retrieved from http://www.bizjournals.com/sanantonio/stories/2008/06/02/focus2.html?page=all
Seal, Tom.(2013). Sustainable supply chains: why placing ethics over profits pays off. The Guardian. Retrieved from http://www.theguardian.com/sustainable-business/sustainable-supply-chains-ethics-profits
Smith, J. The world’s most ethical companies. Forbes. Retrieved from http://www.forbes.com/sites/jacquelynsmith/2012/03/15/the-worlds-most-ethical-companies/
Trudel, R. and Cotte, J. (2008). Does being ethical pay? The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB121018735490274425

Back To Top