Academic journal article Forum on Public Policy: A Journal of the Oxford Round Table

Measuring the Ethical Quotient of Corporations: The Case of Small and Medium Enterprises in India

Academic journal article Forum on Public Policy: A Journal of the Oxford Round Table

Measuring the Ethical Quotient of Corporations: The Case of Small and Medium Enterprises in India

Article excerpt

Ethical business values translated into management behaviours can make the difference between employee satisfaction and frustration--with the consequent impact on results.

Maister, 2008


A present day term, ethics are the rules or standards governing the conduct by which one lives one's life and makes all his decisions. Being Ethical means doing what is right to achieve what is good. The study and assessment of morals is Ethics. It is the character or custom by which one lives one's life. Ethics are ready reckoners of how to react to certain situations long before that situation happens. The term is employed, used, associated with sustainable development that cannot survive without it. While morality answers the question "what should I do?" ethics, for its part, answers the question dealing with "how should I do", or better still: "how should I live within and by my company?" Ethics therefore questions not only the person, but also his environment. It questions the world insofar as relationships and exchanges are concerned. Rendered present by the intermediary of charters and obligations of sustainable development, it fully participates in the social responsibility of the company and aims at guiding its steps towards the attainment of this goal (Fray, 2007). The fact that ethics aims at improving the world and its exchanges explains as to why it touches on the professional ethics and value systems of organizations. In this frame of mind, ethics serves above all to construct the very point of view of the company, without disconnecting it for all this from its environment, but on the contrary by enabling it to create its landmarks within this environment in relationship to the other players (Begley & Stefkovich, 2007).

Whether or not values and ethics are consciously employed as guides to decision making by individuals, they remain in general an important influence on the cognitive processes of individuals and groups of individuals. Values can be formally defined as conceptions of the desirable with motivating force characteristic of individuals, groups, organizations, and societies that influence choices made from available resources and means (Hodgkinson, 1978). Begley (2006) describes the influence of values within individuals as the internal psychological reflections of more distilled levels of motivation (e.g. a concern for personal interests, consequences, or consensus) that become tangible to an observer in the form of attitudes, speech, and actions. Thus, values in their various forms, including ethics, can be thought of as conscious or unconscious influences on attitudes, actions, and speech. However, it is important to note that valuation processes can involve more than ethics. Values can take different forms and can be best categorized according to their motivational grounding. Ethics, as a particular form of values, as opposed to the scholarly discipline, are normative social ideals or codes of conduct usually grounded in the cultural experience of particular societies.

The collapse of companies such as Enron, Arthur Anderson, WorldCom and Global Crossing in the USA, HIH Insurance and OneTel in Australia, Bhopal Gas Tragedy and Satyam in India and Parmalat in Italy has led to a loss of confidence by the investing public in the system of financial reporting and accountability. A major factor in this loss of confidence was the unprecedented implosion of one of the then "Big 5" accounting firms, Arthur Andersen, with the loss of 85,000 jobs worldwide and the loss of public trust in the accounting profession that accompanied it. These developments led to the promulgation of the Sarbanes-Oxley Act of 2002 in the USA and similar legislation such as the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 in Australia. The globalization and diversification of accounting services, combined with market competition and high profile corporate collapses has drawn attention to the accounting profession and its perceived ethical standards (Ponemon, 1995; Ashkanasy and Windsor, 1997; Armstrong et al. …

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