Question

what are the ethical responsilities of a firm to its employees and customers.

Answer 1

• An organization does not operate in a vacuum. To be successful, any business needs to appeal to a variety of different stakeholders. Stakeholders are generally defined as groups of people who have a relationship with the business.
• Examples of a small business's stakeholders include its employees, vendors, customers, owners and the residents of the community in which it operates. The basis of each relationship varies and can range from statutes and contracts to informal understandings. Each group requires the business to meet a certain set of ethical standards. Failure to meet these ethical standards can lead to anything from decline in sales to legal penalties.

Definition of a Stakeholder

• The term "stakeholder" encompasses a vast array of groups that have an interest in the organization. An interest does not have to be a formal relationship where the other party receives financial compensation or a product, but an informal relationship with someone who could be affected by the business.
• For example, an ordinary citizen who does not buy a company’s product or its shares can still be a stakeholder because the business’s actions affect his community. By employing people and paying taxes, the business’s presence could indirectly benefit the citizen. If the business pollutes the community’s water supply, the citizen could be harmed. So despite a lack of a formal relationship, it is still possible for an individual to be a stakeholder in an organization.
• Good Faith and Fair Dealing
• Much of what a business does is defined by the contracts it has with vendors, employees and its own customers. Beyond the explicit rights and obligations defined by the contract, the organization also has an implied covenant of good faith and fair dealing. This covenant is an ethical obligation that courts attempt to enforce.
• This standard obliges all contracting parties to not do anything that would make fulfilling the terms of the contract impossible. Examples of acting in good faith include granting the other party access to physical resources under the organization’s control or providing timely information to complete a contracted task.
• To assess what constitutes good faith, a court will rely on the doctrine of equity, which requires the court to resolve a case based on principles of fairness and justness as defined by the circumstances of the situation. Therefore, "good faith" is merely the legal establishment of ethics into contractual good faith.
• Employment Law
• The employee is an important stakeholder: While it is the employees who provide the necessary labor, they are in a subservient position to the organization. As a result, state and federal laws have been implemented to ensure that employees are treated with respect and are fairly compensated.
• There are eight rights employment law provides employees: the ability to organize; minimum pay; equal compensation regardless of sex; safe work environments; unemployment benefits; nondiscriminatory hiring; family and medical leave; and the ability to voice concerns without employer retaliation.
• Employment law cases are also decided using equity principles. While the employment law code provides the framework necessary to analyze employment law situations, it is the principles of equity and ethics that allow the court to interpret the elements of the case to arrive at its decision.
• Social Responsibility
• An organization owes a duty not only to the people it operates directly with, but to anyone who may be affected by the business’s activities. An organization has a responsibility to support the public interest when it can, or at the very least minimize any negative impact it has on its surrounding community.
• An organization can meet these goals in a variety of ways, such as by promoting charitable acts by its employees and minimizing pollution during the production of its products. By being socially responsible, the entity cannot only meet its ethical obligations, but promote its public image and possibly avoid violating laws.