Business Ethics

In the modern world, the concept of business ethics has become an integral part of most corporate companies. The reason being, they are important for managing a sustainable business mainly because of the serious consequences that can result from decisions made with a lack of regard to ethics. In South Africa for example, businesses are regulated by the Companies Act and the King Code of ethics which provides guidelines to corporates on accepted moral values and how they are expected to run their businesses.

The conventional way of ethics is about the decisions or practice with the prevailing norms of acceptability in society. So this approach is simply based on what society perceives to be ethical in their eyes using common sense. If society deems your action as an organization to be abnormal then they will judge you as being unethical, and they will just compare your action with how another organizations acted in the same situation. This is not really favorable in modern day business, because reputation is everything.

Ethical norms can be driven by a leader’s beliefs on how the society views her and the influence of external factors like the law. The law dictates that ordinary civil servants (not just CEO’s and CFO’s) conduct business in an ethical manner, and that they are accountable for their actions, especially when dealing with shareholders’ funds.

The Institute of Directors in Southern Africa (IoDSA) in 1992 set up the The King Committee, which was tasked to develop a set of governance principles to promote the highest standards of corporate governance within the South African business community. They introduced The King Code of Governance Principles and the first King Report on Corporate Governance (King I) was published in 1994 and set global standards of best practice, King II was published in 2002 and then King III in 2009. The latest version of the document is the “King IV Report on Corporate Governance for South Africa 2016” which was released on 01 November 2016. All JSE listed companies should abide by these rules, but we cannot say that these rules do not apply to small emerging enterprises, because they apply to the business society at large. Companies cannot operate in a vacuum and just focus on their financial gain, a whole lot of other aspects need to be considered, such as the environmental issues in areas which they operate (climate change, emissions, water pollution etc). The impact that a business can have on a breach of human rights and ecological surroundings, is one that is inexcusable. Mining companies have been at the forefront of this controversy in South Africa, for instance not providing proper housing, electricity, running water, social and recreational centers for their employees. The King Code of Governance Principles embodies that corporate South Africa considers and nurtures the natural environment in which they operate.

Business has many layers of responsibility and ownership, from investors to shareholders, boards of directors, management and employees, which in actual fact share a common goal of seeing the business succeed. Each of these individuals need to uphold these good ethics in the name of the company. But yet today in this country we still see a global retail company whose share price went crashing within days because of irregular accounting. Now this is exactly what the King code of ethics is striving to curb, and yet some individuals will still try to defy the ethical norms. Many can argue that it is my business and I can do whatever I want with it, and I will argue that your business has stakeholders who hold the same interests as you. Its success is important to them as much as it is to you, because for as long as you are in business, upholding good ethics, they will remain employed. External stakeholders (consumers, surrounding communities, schools, sports clubs and the rest) should not suffer because of selfish conduct of an individual.

All that is undertaken by the organization in the name of good ethics must be documented and reported accordingly. Leaders should be transparent in their dealings in a way that instills confidence in all their stakeholders. We can all agree that most businesses exist for the main purpose of meeting the bottom line, but not solely so when they are considered corporate citizens according to the King IV philosophies. They have a duty to all citizens of society to be thoughtful of their interests and not just those of the business.

Writer: Kabelo Motsugi