Question

In: Finance

Given that business is about maximizing stakeholder wealth and given that there are laws governing the...

Given that business is about maximizing stakeholder wealth and given that there are laws governing the process by which this is accomplished, is there even room for ethics in business? In other words, if organizations (and organizational members) follow the law, is there any additional need for ethical considerations? When organizations maximize stakeholder wealth, aren't they already doing the "right" thing according to the design and purpose of organizational existence?

Solutions

Expert Solution

Ethics is not only to maximise shareholder wealth but it refers to all the ethical situations and problems any business might come across. It has to do with social responsibility and corporate compliance. It denotes to all the organisational standards,practices, problems,principles,set of rules and regulations that guides the business owners to run his daily operations.

In today's complex business environment, there are lot of organisations which breach ethics. We hear many cases of fraud in business dealings. Many organisations have their own "code of ethics" which they follow to keep up to their business mission and vision. Ethical issues are not just with the investors or the shareholders, it is behaving with the code of conduct with all the stakeholders such as its employees, customers , suppliers, marketers, and towards its investors etc. For example in Indian context , Nirav modi is a business man wandering between the countries and is known to be hiding in London.He is wanted by the Indian government since August 2018 for breach of trust, money laundering.He is labelled as fugitive economic offender. He is accused of Rs.13000 crore fraud case.

Thus Business ethics are moral principles a business has to follow. Hence just if the organisation involves in maximising the shareholders wealth , but foregos the way a business has to be conducted then it is behaving unethically. Its also the criteria how your business will be judged by others. Some of the ethical principles are:

Honesty,Integrity,Promise-keeping, Loyalty, Fairness, Caring, Respect for others,Law abiding, Commitment to Excellence, Leadership , Reputation and Morale, Accountability.


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