Effect on Companies When Not Following Codes of Ethics

Effect on Companies When Not Following Codes of Ethics

The concept of ethics has been connected to the socialisation of people throughout human civilisation. The understanding of ethics keeps changing and developing depending on different variables such as time and context. Changes cannot always be predicted, and acting ethical is not always an easy task (Isidorsson, 2010). Regardless, research reveals that being perceived as ethical can be advantageous.  Ethics in organisation entails vital aspects such as honesty, integrity, and fairness. Therefore, acting ethically is a form of social responsibility of professionals in a company to guarantee survival and stability.

A code of ethics guides professionals in conducting business with honesty and integrity. The document outlines the mission and value of a company and describes how professionals are supposed to do business and approach problems. The ethical principles are based on the company’s core values and standards to which employees are supposed to follow and uphold. Jefferson (2017) argues that although ethics do not have a price tag, they can significantly affect a company’s financial results such as diving of stock prices, protects, leaving of customers and other firms restricting the ability to do business. Therefore, failure to comply with the code of ethics can result in severe damages especially in regards to reputation and in severe cases; it can lead to the downfall of the company. In this research, it is essential to examine the effect of not following the code of ethics in a company, and how it affects its financial results. Further, the study will review the effectiveness of the code of ethics through ethical decision-making and the extent to which its lack affects the company.

Research Rationale/Context

Ethics is on the agenda of big corporations, and the importance of having a way to deal with the concept is acknowledged to be of more importance. Andrade et al. (2017) argue that companies are increasingly interacting with their stakeholders via several relationships thus leading to an increase in scrutiny of the practices they observe primar

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