Firm behaviour which seeks to give considerable weight to ethical Essay - 1

Firm behaviour which seeks to give considerable weight to ethical concerns must do so at the expense of profit. Discuss ma - Essay Example Having established a definition of ethics, the question as to whether or not a business can sustain very prominent ethical principles without sacrificing profitability requires significant examination. According to Milton Friedman (2003), a respected business theorist and philosopher, the only genuine goal of a business is to ensure shareholder satisfaction and earn a profit; this over all other objectives. Friedman’s view is that attainment of profit, by which some individuals in society believe this objective to be akin to greed and materialism, supersedes the demand for sustaining the highest standards of moral and decent behaviours. For many in society, however, this is deemed unethical behaviour requiring further focus on social responsibility. There is, however, ample evidence that both profit achievement and production of ethical behaviours can be effectively balanced. Why ethics and profit can achieve equilibrium Within a business dynamic, it is recognised that leaders who publicly exhibit high standards of ethical behaviour are more apt to gain trust from employee followers, making it more motivational for employees to follow the established mission and vision of the leader (Watts 2008; Resick, Hanges, Dickson and Mitchellson 2006). According to the literature, transparency and trust are two key dimensions for establishing a cohesive organisational culture (Barrett 2011). Since ethics and trust go hand-in-hand, theoretically the ethical leader will be able to establish an organisational culture that remains unified and consistently working toward modelling ethical behaviours that have been openly demonstrated by the leadership. Business theory and marketing theory, further, indicate that once a very cohesive and cooperative organisational culture has been established, it is easier for the firm to sustain competitive advantages that are attributed to human capital development. For instance, Armstrong (2007) indicates that once trust and cohesion have been established, employee followers of the ethical leader are more committed to attaining organisational goals and more loyal to the business due to the fact that the ethical leader was able to speak to the hearts and minds of employees. Why is this important to understanding whether ethics and profit can be balanced? When an organisation is perceived by external investors to sustain a very cohesive organisational culture, they are considered to be world class organisations with much more incentive for investment potential (Very, Lubatkin, Calori and Viega 1997). The ethical leader described in the aforementioned example has managed, theoretically, to build more loyalty and commitment simply by exhibiting ethical behaviours. Concurrently, the external investor now witnesses the human capital advantages of establishing a cooperative team environment and subsequently provides investment that assists the organisation in its long-term strategic plans and objectives, such as new ca pital machinery for production or improving the marketing function. In this example, ethical behaviours served as the absolute catalyst for improving the financial situation of the business. Without having exhibited ethical behaviours, the leader would not be creating an organisation