Business Ethics and the Development of Intellectual Capital

Business Ethics and the Development of Intellectual Capital

Business Ethics and the Development of Intellectual Capital

Business ethics is the ethical reflection of a business towards its behaviours and their impacts (Epstein 1987, 1989). This reflection can be shown in its emphasis of corporate values upon integrity, accountability, honesty, trust, fairness, responsibility, cooperation, mutuality, professionalism and open communication (Weeks and Nantel 1992; Kaptein 2004; Schwartz 2005). As such, an ethical business also cares about stakeholders that might be impacted by its behaviours (Schwartz 2005). These stakeholders include employees, shareholders, customers, suppliers, community and society as a whole (Das 2005; Rawwas et al. 2005). An ethical business’ efforts to care about these stakeholders can be shown in the following ways (Weeks and Nantel 1992; Kaptein 2004; Johnson 2003; Schwartz 2005). For instance, it will try to eliminate discriminations, provide better working conditions and development opportunities for its employees and require them to obey professional ethical norms. For shareholders, it will, for example, emphasise corporate governance, information transparency and work for their best interests. For customers, it will, for instance, refuse to cheat them or produce faulty or harmful products, while it will provide for suppliers reasonable profits and cooperation opportunities. For society and community, it may try to avoid environmental damage and develop environmental friendly technologies, products and processes. However, its ethical reflection should also consider the efforts needed to care about all these stakeholders and develop a balance among them due to limited resources (Donker et al. 2008). Under the traditional view, the most important task for businesses is to maximise their profits and shareholder equity in a legal way (Friedman 1962) and fulfil market expectations upon their profits (Lopez and Rees, 2002). However, businesses concerned with ethical issues pertaining to stakeholders can achieve competitive advantage and better performance by attracting excellent employees,improving image on shareholders, customers and suppliers and avoiding the legal compensation and image damage due to unethical behaviours harmful to stakeholders (Francis and Armstrong 2003; Donker et al. 2008). Businesses can also increase stakeholders trust, satisfaction and commitment when business ethical values and behaviours fulfil their expectations (Fritz et al. 1999; Strong et al. 2001). Besides, from stakeholder theory, stakeholders and their interests are intrinsically important regardless of their contributions to businesses (Donaldson and Preston 1995; Berman et al. 1999). Thus, businesses should treat them fairly, fulfil their expectations and have the obligation to inform them when business behaviours and performance affect intellectual assets, society and environment (Deegan and Unerman 2006; Guthrie et al. 2006). The above literature suggests that business ethics is itself intrinsically important, and it can also serve business ends to improve competitive advantage. Business ethical thinking and conducts can be guided by corporate ethical values because corporate values affect business strategy (Dolan et al. 2006), decision-making and behaviours (Boynton 2006). Corporate values are a group of core and shared values that establish the philosophy and way of understanding corporate activities (Broms and Gahmberg 1983; Cambra-Fierro et al. 2008). Thus, corporate values affect what a business considers as right things to do (Biong et al. 2010). Consequently, businesses having ethical values should demonstrate the aforementioned caring behaviours towards stakeholders and act ethically because businesses align their actions with values (Valentine et al. 2011b). Based upon the above, corporate ethical values in this study are considered as a group of core and shared values pertaining to ethical issues that establish the philosophy and way of understanding corporate activities. It is the responsibility of senior management to establish and strengthen an ethical environment in a business (Robertson and Crittenden 2003; Robertson 2008). To promote ethical values within businesses, senior management often publicly notify the importance of ethics, award employees for their ethical behaviours, clearly develop policy and codes for ethical conduct, require employees to follow professional ethical guidelines, hold business ethics training programmes and seminars and set up business ethics commissions (Callan 1992; Weiss 1994; Sauser 2005; Schwartz 2005). As such, business ethics and corporate ethical values can also be demonstrated through and measured by the degree to which an individual believes his or her organisation supports business ethics through reinforcement and other management behaviours (Huntet al. 1989; Valentine et al. 2011b). Ethical conduct guided by ethical values and reinforced by a business through rewards and punishments can form an organisational culture, referred to as a set of norms and values shared by organisational members. This encourages certain patterns of behaviours through which organisational members understand and respond to their environment (Rousseau 1990; Schein 1996), and creates a positive environment encouraging trustworthy behaviours.

From “Business Ethics and the Development of Intellectual Capital” by Hwan-Yann Su

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