EFFECTS OF BUSINESS ETHICAL PRACTICS ON THE COMPANY’S

PERFORMANCE: THE CASE OF HARAR BREWERY SHARE

COMPANY, EAST HARARGHE ZONE, HARARI NATIONAL
REGIONAL STATE, ETHIOPIA

MBA THESIS
GEMECHIS ABDETA

JUNE, 2019

HARAMAYA UNIVERSITY
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Effects of Business Ethical practics on the Company’s Performance: The Case

of Harar Brewery Share Company, East Hararghe Zone, Harari National
Regional State, Ethiopia

A Thesis Submitted to Department of Management

College of Business and Economics
Haramaya University

In Partial Fulfillment of the Requirements for the Degree of

Master of Arts in Business Administration

Major Advisor: Mulugeta Damie (PhD)

Co-advisors: Srikar Dammu (PhD)

By

Gemechis Abdeta

JUNE, 2019
HARAMAYA UNIVERSITY
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HARAMAYA UNIVERSITY
POSTGRADUATE PROGRAM

As Thesis research advisor, I hereby certify that I have read and evaluated this Thesis prepared
under my guidance by Gemechis Abdeta entitled “Effects of Business ethics practice on the
company’s performance: The case of Harar brewery share company, East Hararghe Zone,
Harari National Regional State, Ethiopia” and recommended that it be accepted as fulfilling
the thesis requirement.

Mulugeta Damie (PhD) ________________ ____________

Major Advisor: Signature Date

Srikar Dammu (PhD) ________________ ____________

Co-advisor: Signature Date
As member of the Board of examiners of the MBA Thesis Open Defense Examination, we
certify that we have read and evaluated the Thesis prepared by Gemechis Abdeta and examined
the candidate. We recommend that the Thesis to be accepted as fulfilling the Thesis requirements
for the degree of Master of Art in Business Administration.

_______________ __________________ _____________

Chairperson Signature Date
_______________ _________________ _____________

Internal Examiner Signature Date

_______________ ________________ ___________

External Examiner Signature Date

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DEDICATION

I dedicate this thesis to my beloved wife for nursing me with support and affection and for her
dedicated care and for the stake she had in my success in life.
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STATEMENT OF THE AUTHOR

I declare that this thesis is my own work and all the materials used are duly acknowledged.
This thesis is submitted in partial fulfillment of the requirements for MBA degree at Haramaya
University and is deposited at the University Library to be used under the rules of the library. I
solemnly declare that this Thesis was not submitted to any other institution anywhere for the
award of any academic degree.

Quotations from the thesis are allowable without special permission provide that accurate
acknowledgment of source made. Requests for permission for extended quotation from the
thesis, reproduction of this thesis in whole or in part may be granted by the Head of Department
of management or the Dean of the College of Business and Economics when in his or her
judgment the proposed use of the material is in the interest of scholarship. In all other instances,
however, permission must be obtained from the author.

Name: Gemechis Abdeta Signature: ____________

Place: Haramaya University Date of Submission: _______________

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BIOGRAPHICAL SKETCH

The author was born on 15 March 1989 G.C from his father Mr. Abdeta Selbana and his mother
Mrs. Tejitu Tasissa in the rural area known as Igu bodji, which is located in Bodji chekorsa
District, West Wollega Zone, Oromia National Regional State. He completed his primary and
secondary school education at Bodji Chekorsa Elementary School and Bodji Dermaji Secondary
School respectively. After completing the secondary school, he joined Rift Valley University and
graduated in 2011 with BA degree in the field of Accounting. Since his graduation, he has been
working as an Accountant at Haramaya University Central Finance Directorate. He joined
Haramaya University in 2015 to pursue his postgraduate study in MBA.
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ACKNOWLEDGEMENTS

First and foremost, my utmost gratitude goes to my major advisor Dr.Mulugeta Damie
(Ass.profesor) and Dr.Srikar Dammu (Co advisor). Had it not been for their guidance, the thesis
could not have been completed with its present form.

My sincere gratitude also goes to the Harar Brewery Share Company staff, employees and others
for their cooperation and involvement during data gathering process.

I would like to acknowledge the people whom I owe everything for becoming what I am today,
my father, my mother, and my beloved wife. Their love, unwavering care and support are what
have shaped me to become the person I am today.

I would like to express my sincere appreciation to Management Department, Haramaya

University for facilitating, instructing, guiding and coordinating me in the course of my
education.

Last but not the least, my heartily gratitude goes to my colleagues who have been supporting me
with my endeavor of my thesis.
 viii

ABBREVIATIONS

OLSM Ordinary list square Method

SR Social Responsibility

MNCs Multi-national corporations

HBSC Harar brewery share company

LRM Leaner Regression Model

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TABLE OF CONTENTS
DEDICATION ............................................................................................................................................. iv
STATEMENT OF THE AUTHOR .............................................................................................................. v
BIOGRAPHICAL SKETCH ....................................................................................................................... vi
ACKNOWLEDGEMENTS ........................................................................................................................ vii
ABBREVIATIONS ................................................................................................................................... viii
LIST OF TABLES ....................................................................................................................................... xi
LIST OF FIGURES .................................................................................................................................... xii
Abstract .......................................................................................................................................................xiii
1. INTRODUCTION .................................................................................................................................... 1
1.1. Background of the Study ....................................................................................................................... 1
1.2. Statement of the Problem ....................................................................................................................... 3
1.3. Objective of the study ............................................................................................................................ 4
1.3.1. General Objective of the Study ................................................................................................... 4
1.3.2. Specific Objectives of the study .................................................................................................. 4
1.5. Scope of the Study ................................................................................................................................. 5
1.6. Limitation of the study ........................................................................................................................... 5
2. LITERATURE REVIEW ......................................................................................................................... 6
2.1. Definition ethics ..................................................................................................................................... 6
2.2. Ethics, Morals and values ...................................................................................................................... 8
2.3. Importance of Ethics in Business ........................................................................................................... 8
2.4. Historical Evolution of Business Ethics................................................................................................. 9
2.5. Business Ethics before the 1960s ......................................................................................................... 10
2.6. Factors contributing to the Development of Business Ethics .............................................................. 11
2.7. Ethics in international Business ........................................................................................................... 11
2.7.1 Multinational Corporation Moral Guidelines............................................................................. 12
2.8. Social Responsibility and Ethics .......................................................................................................... 12
2.9 Standards of Business Ethics ................................................................................................................ 12
2.10 Major Business Ethical practices of Company ................................................................................... 13
2.11. Product Safety .................................................................................................................................... 14
2.12. Environmental Protection .................................................................................................................. 14
2.13. Employee Health and Safety .............................................................................................................. 16
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2.13.1.1. Safety Policies ...................................................................................................................... 16

2.13.1.2. Supervisor Safety Control .................................................................................................... 16
2.14. Business ethics related factors ........................................................................................................... 16
2.15. Employee Safety Control ................................................................................................................... 17
13.2. Conceptual Framework ...................................................................................................................... 18
3. RESEARCH METHODOLOGY ............................................................................................................ 19
3.1. Description of the Study Area .............................................................................................................. 19
3.2. Sample size .......................................................................................................................................... 19
3.3. Sampling Technique ............................................................................................................................ 19
3.4. Data Collection Techniques ................................................................................................................. 20
3.5. Sources of Data .................................................................................................................................... 20
3.6. Procedures of data collection ............................................................................................................... 20
3.7. Method of Data Analysis ..................................................................................................................... 20
3.7.1. Descriptive Analysis .................................................................................................................. 21
3.7.2. Inferential Analysis .................................................................................................................... 21
3.8. Ethical Considerations ......................................................................................................................... 22
4. RESULT AND DISCUSSION ............................................................................................................... 24
5. SUMMARY, CONCLUSION AND RECOMMENDATION .............................................................. 31
5.1 Summary ............................................................................................................................................... 31
5.2. CONCULUSION ................................................................................................................................. 32
5.3. RECOMMENDATIONS ..................................................................................................................... 33
6. REFERENCES ...................................................................................................................................... 35
Appendix I .................................................................................................................................................. 39
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LIST OF TABLES

Table

1.Historical Evolution of Business Ethics ...................................................................................................................... 9

2.Stage of Business Ethics................................................................................................................................................... 11
3.Demographic variables ..................................................................................................................................................... 24
4.Study variables of respondents ........................................................................................................................................ 25
5.Reliability Test ..................................................................................................................................................................... 27
6.Multi-collinearty test ......................................................................................................................................................... 28
7.Overall model summary of ANOVA ........................................................................................................................... 28
8.t-test of independent Variables ....................................................................................................................................... 29
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LIST OF FIGURES

Figure
1.Conceptual Framework ................................................................................................................................................... 18
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Abstract

This study aimed at investigating the effects of business ethics practices on the company’s
performance, in the case of Harar Brewery Share Company. To attain the aim, survey data were
collected from 189 respondents. Questionnaire, semi structured interview and document analysis
were used for data collection. The samples were selected through random sampling method. The
selection was made randomly from the employees of the company, who are heads of the different
units of the company. The study employed descriptive and inferential statistics for data analysis.
Qualitative data were presented in terms of mean, frequency and percentages and quantitative
data were analyzed using linear regression model. The finding of the study indicated that 76.2%
of the variation in company’s performance were due to independent variables, education status,
work experience business ethics related factor, employee safety & health, production safety
problem and social responsibility.
The result also revealed that education status, work experience, business ethics related factor,
employee safety and health, production safety problem and social responsibility have significant
effects on the performance of company (p<0.05). Among these factors business ethics related
factor and production safety problem had negative relationship with the company’s performance.
Due to this, the company should care on how to improve business ethical practice on company
performance and its product safety should be retained in a good manner for employees to get
many users of their products.
Key words: Business ethics, Company, Performance, Practice
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1. INTRODUCTION

1.1. Background of the Study

Over the years, the term ethics in organizational performance has long been associated with
management scholars and business leaders around the world (Harrington, 1991). There is a broad
agreement around the world that as a matter of corporate policy, every organization strives to be
committed in a manner that is ethically transparent (Wallace, 2007).

Behaving in an ethical manner is seen as part of the social responsibility of organization, which
itself depends on the philosophy that organizations ought to impact the society in ways that goes
beyond the usual profit maximization objective (Hanekom ,1984). It is often argued in many
instances that, it is in the interest of an organization to behave in a way that recognizes the need
for moral and ethical content in managerial decision as this will benefit the organization
especially in the long run (Etuk, 2009).

Business ethics practice is characterized by honesty, fairness and equity in interpersonal,

professional and academic relationship and it respects the dignity, diversity and the right of
individual and groups of people (Cole, 2002). Therefore, for an organization to move forward in
the aspect of performance, it is however important for such an organization to have a good
understanding of ethics and take it seriously as this can undermine the competitive strength of
the organization and the society at large (Anam, 2011) .

In recent times, most organizations have come up with codes of ethics in dealing with ethical
issues challenging them. Code of ethics as defined by the national institute of the management is
a set of moral principle used by organization to steer conduct of the organization itself and
employee, in all their business activities, both internally and externally. Ethics in the word of
organization, business involves everyday which encompasses such areas as integrity, honesty
and fairness (Schermerhorn, 1989).
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The present study has been stimulated by this idea of observing the effects of ethical behavior on
organizational performance with reference to Harar Brewery Share Company, Ethiopia. Business
ethics in short can be defined as the systematic study of ethical matters pertaining to business
industry or related activities, institutions and beliefs. It is the systematic handling of values in
business and industry (Donaldson and fee, 1999).

According to Fisher (2004) described business ethics as the code of ethical values that sets
standards of good or bad, or right or wrong, in one's conduct and thereby guides the behavior of
a person or a group. Particularly in this study, business ethical refers to product safety, employee
health and safety, social responsibility and obligation of the company to the community and
environment. Business ethics as the principles and standards that determines acceptable conduct
in business organizations. The adequacy of performance ethics in business is determined by
people (Akzo and Nobe, 2003).

In developed countries of the world, business companies are worried with a new part, which is to
collect the desires of the present generation without negotiating the ability of the next
generations to meet their own needs. Companies are being called ahead to take responsibility for
the ways their operations force societies and the natural environment. They are also being asked
to relevant sustainability principles to the ways in which they conduct their business (D’Amato et
al., 2009).

Many people in developing country like Ethiopia are striving to satisfy their basic needs.
Combined with other causes, unethical practices to satisfy their economic interest created serious
problem on business operations of developing countries of the world. Still there are some
business companies that perform their tasks in ethical and social responsible way (Baker, 2007).

To nurture free markets, businesses need to promote good business ethics and also have to
comply with government policy with relating to market oriented legal framework. Today, more
and more interest is developed towards the application of ethical practices in business dealings
and the ethical implications of business. It seems that limited studies were conducted in the past
to assess the business ethical practices in developing countries like Ethiopia. More specifically,
information on business ethical practices in newly emerging industrial sector is scarce.
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Therefore, this study is designed to examine the effects of business ethical practices in Harar
brewery Share Company on the performance of the company.

1.2. Statement of the Problem

As business ethical principle is important for business organization, its practice has tremendous
effects on the performances of a company that involves in business practice (Hoffman and
Frederick 1995). This shows that a company’s quality of performance directly or indirectly relies
on business ethical practice. This issue motivated the researcher towards the preferences of study
topic and studies the problem in the case of Harar Brewery S.C.

According to the aforementioned researcher, any research that focus on business organization
should give due emphasis for business ethics practice since it determines what is good and right
for the business or production of a given company. It is the code of moral principles that sets
standards of good or bad, or right or wrong, in one's conduct and thereby guides the behavior of
a person or group, institution or company. The particular business ethical issues rely on
company’s performance, which is affected by factors such as product safety, employee health
and safety, social responsibility and obligation of the company to the environment (Fisher,
2004).

Product safety is an important issue that needs to be underlined in the relationship between
business and consumers. Most of the companies lack the expertise to assess the safety of today’s
technologically sophisticated products and must rely at least to some extent on the impression
they assumed by suppliers. Therefore, the rising lack of confidence in the market system is, to
protect employee safety confirmed by the increase in user protection regulation (Hoffman and
Frederick, 1995).

Concerning employee health and safety, all employees have a fundamental right to execute their
job contract in safe and healthy conditions. Employees have been unprotected to extreme heat,
cold, excessive noise levels, dust, chemical agents, or radiation. According to Harvey (1994),
employees should be compensated sufficiently for risk they are asked to take both through
appropriate insurance and social security provisions. Some examples of social security provision
 4

are income and health insurance to retired persons, the disabled employee in the company, the
employee safety and other groups.

Businesses have been expected to play social responsibility by contributing to the health of the
society. Social responsibility focuses on the impact that business ethics practice has on society
(Fisher, 2004). Lastly, they are also expected to protect common occupation of natural resources
like water, air, and strategic ways of reducing effects of environmental pollutions.

Up to date, it seems there is no research conducted to investigate the effects of business ethics
practices on the performance of Harar Brewery S.C as far as the knowledge of the researcher is
concerned. Rather, some researches were conducted on business ethics practices. Among these,
Bekele Gebisa’s (2010) study can be mentioned. He investigated business ethics practices in the
case of MOHA Soft Drinks Industry Share Company. But he failed to see the effects of the
process rather he focused only on the practices. However, this research intended to study the
effects of business ethics practices on the performance of the mentioned company and the overall
effects of business ethics practices such as employees’ health and safety, product safety,
environmental protection and social responsibility implementation on the performance of Harar
Brewery S.C. Therefore, it came into point to fill in the research gap shown in Bekele Gebisa’s
work.

1.3. Objective of the study

1.3.1. General Objective of the Study

The main objective of this study is to investigate the effects of business ethical practices on the
performance of Harar Brewery S.C, Ethiopia.
1.3.2. Specific Objectives of the study

This study specifically intends to:

Assess the current status of Harar Brewery S.C in relation to business ethical practices.
Critically examine the effects of ethical practices on company’s performance.
Show case the need of good ethical practices for the successful processes gross of Harar
brewery S.C.
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1.4. Significance of the Study

Business organizations cannot ignore business ethical practice due the risk to their standing, and
increasing internal and external pressures. For instance, employees, governments and community
are expecting private and public sector organizations to be more ethical in their business ethics
practice policies and business dealings. Hence, it is important for Business Companies to
consider and implement business ethics principles in their practice.

Based on the finding, Harar Brewery Share Company can identify its stand in terms of exercising
a good business ethics practice and take corrective action if necessary. In addition to Harar
Brewery Share Company, other businesses companies, whether they are private, public, profit or
non-profit organizations, could have awareness that they should practice a good business ethics
practice to stay in action. Moreover, the findings contribute to business ethics practice and can be
used as references for interested researchers in this area.

1.5. Scope of the Study

The study was limited to business ethical practices, the case of Harar Brewery Share Company.
The ethical dimensions of business study are product safety, employee health and safety, social
responsibility, and environmental protection. Therefore, due to the broad nature of business
ethics practice, the research did not include areas other than the above variables.

1.6. Limitation of the study

The study was not be generalizable for other business ethics practice in Ethiopia as there is lack
of information and research conducted which help the researcher find the research gap in the
case of Harar Brewery S.C. Thus, it requires further researches that broaden the sample size to
include other businesses. The other challenge was the employees of the company were
intimidating to give their time to fill in the questionnaire. However, after persuading them to help
me some could prefer to have telephone interview so that the researcher could get the necessary
data from them.
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2. LITERATURE REVIEW

2.1. Definition ethics

The terms ‘moral’ and ‘ethical’ are often used equivalent to good or bad and as opposed to
‘immoral’ and ‘unethical’ (Frankene, 1993). Ethics is defined by Miner (1998) as a philosophy
of human conduct reflecting prevailing values especially those moral natures.

According to Kiston (1996) business ethics are moral principles that clarify what is right or
wrong, good or bad and what is suitable or unsuitable in various setting location. Bucholz (2003)
in his work on business ethics practice gets business ethics as the guiding values; principles and
standards that help people determine how things must be done. Ethics is a set of standard of right
and wrong established by a particular group and imposed on members of that group as a means
of regulating and setting limit on behavior (Judith, 2003). Ethics defined as the system of rules
that governs the ordering of values. This idea makes it possible to prescribe a code of behavior
for both work and one’s personal life (Robert, 2005).

Ferrell, Fraedrich and Ferrell (2004) suggest that business ethics comprises moral principles and
standards that guide behavior in the world of business. Whether a specific behavior is right or
wrong, ethical or unethical is often determined by the public as embodied in the mass media,
interest groups and business organizations as well as through individuals, personal morals and
values. Thus, ethics in business is directly related to social values, norms and global business
trends and is negatively related to corruption in society.

According to Sobhan (2000) argues that the supreme ethics in any society must be founded on
the principle of justice. Wood (1992) suggests that ethical actions are not, in the final analysis,
the responsibility of the individual alone. Instead, most actions are the result of managers and
employees following the norms of accepted behavior in the companies in which they work.

Trevino and Nelson (1995) define ethics as the principles, norms and standards of conduct
governing an individual or group. They also comment that two types of factors influence ethical
behavior: characteristics of the individual and the characteristics the organization. England
(2006) suggests that ethical decisions made by businesspeople, based on the following
considerations: 1) how employees can feel fulfilled professionally; 2) how customers can be
 7

satisfied; 3) how profit be assured for the stakeholders or shareholders; and 4) how the
community can be served.

Trevino and Weaver (1997) linked the matter of concern about ethics in business practices to
three factors: a) ethical failures diminish reputation; b) articulating ethical standards now makes
it easier to respond to criticism later; and c) adoption of ethical standards is a hallmark of a
profession.

According to Shafique (1996) commented that ethical behavior appears to be largely influenced
by a range of factors including the law, government regulation, social pressure, industry sector,
ethical codes and personal standards. Business ethics are as a function of culture, since the
cultural evolution in the business environment certainly will affect what are acceptable and
unacceptable business activities and management principles in the market place and in society.
Business ethics has the potential to become a significant aspect of corporate strategy and culture
(Svensson and Wood, 2003).Business ethics as the principles and standards that determine
acceptable conduct in business organization (Leopard, 2003).

According to Chmielewski (2004), Business ethics is the study of appropriate business policies
and Practices regarding potentially controversial issues, such as corporate governance, insider
trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities.
Law often guides business ethics, while other times business ethics provide a basic framework
that businesses may choose to follow to gain public acceptance.

It deals with good or bad, right or wrong behavior; it evaluates conduct against some absolute
criteria and puts negative or positive values on it, (Hanekom, 1984).Ethics as the study of ethical
judgments and right and wrong business ethical behavior (Guy, 1990). According to Anam
(2011), in Community subdivision, ethics addresses the fundamental buildings of a community
administrator’s duty as agent to the community. In other words, it is the moral justification and
consideration for decisions and actions made during the completion of daily duties when
working to provide the general services of government and nonprofit organization. Ethics are an
accountability standard by which the public will examine the work being conducted by the
members of these organizations (Kinston, 1996).
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The terms ‘moral’ and ‘ethical’ are often used equivalent to ‘good’ or ‘bad’ and as opposed to
‘immoral’ and ‘unethical’ (Frankene, 1993). Business ethics is a philosophy of human conduct,
reflecting main values especially a moral nature (Miner, 1998).

According to Bucholz (2003), in his work on business ethics, sees ethics as the guiding values;
principles and standards that help people determine how things must be done. Ethics is a set of
standard of right and wrong established by a particular group and imposed on members of that
group as a means of regulating and setting limit on business ethical behavior (Judith, 2003).
Ethics defined as the system of rules that governs the collation of standards. This idea makes it
possible to prescribe a code of behavior for both work and one’s personal life (Cardy, 2005).

2.2. Ethics, Morals and values

What are the differences between values, ethics and morals? Values motivate, morals and ethics
constrain." In other words, values describe what is important in a person’s life, while ethics and
morals prescribe what are not considered appropriate behavior in living one's life. Principles
inform our choice of values, morals and ethics (Birch, 1999).

Value refers to the relative worth of a quality or object. Value is what makes something
desirable or undesirable" (Shockley, 1999). Through applying our personal values (usually
unconsciously) as benchmarks, we continually make subjective judgments about a whole manner
of things Values, therefore, become part of complex attitude sets that influence our behavior and
the behavior of all those with whom we interact. What we value guides not only our personal
choices but also our perceptions of the worth of others (Loye, 2001).

2.3. Importance of Ethics in Business

Ethics concern an individual’s moral judgments about right and wrong. Decisions taken within
an organization are by individuals or groups, but whoever makes them will be influenced by the
culture of the company. The decision to behave ethically is a moral one; employees must decide
what they think is the right course of action. This may involve rejecting the route that would lead
to the biggest short-term profit (Margot, 2014).
 9

Business ethics is a form of applied ethics that examines ethical principles and moral or ethical
problems that arise in the business environment (Warren, 2011). It applies to all aspects of
business conduct. It is relevant to the conduct of individuals and business organizations as a
whole. It's part of Applied Ethics, a field of ethics that deals with ethical questions in many areas
such as medical, technical, legal and business. The range and quantity of business ethical issues
reflect the degree to which business is perceived to be at odds with non-economic social values
(Müller et al., 2014).

2.4. Historical Evolution of Business Ethics

Business ethics from managerial prospective as results of about what is right or wrong (suitable
or unsuitable) in the company context of planning and implementing business activities in a
global business environment to benefit organizational performance, individual achievement in
the workplace, social acceptance and approval of dukes and coworkers in the organization as
well as responding to the needs and concerns of relevant internal and external investors. The goal
of practical ethics in the company is to develop an ethical practice in organization (Hunt, 1991).

Table 1.Historical Evolution of Business Ethics

Micro Macro
Normative Values/Norms & Principles Norms & Principles and a Fair Economic
For Organizational Decisions System , i.e. Distributive Justice
Descriptive Codes, Standards of Conduct, Public Policy & the Legalization of Business
& Compliance Systems for Ethics , i.e. U.S. Sarbanes Oxley Act, EU
Organizations Privacy Laws

Adopted from (Hunt, 1991).

The scope of business ethics is so comprehensive that it affects almost every decision made in
social interaction.

Normative decisions in an organizational culture relate to what can be, that is, what a business
organization should consider in evaluating and improving their ethical conduct (Laczniak and
Murphy, 2006). Normative decision based on deontological and teleological norms.
Deontological norms involve hyperactive norms and local norms described by (Donaldson and
 10

Dunfee, 1994) as integrative social contracts. In deontological evaluation, the decision maker
evaluates the inherent rightness or wrongness of the behavior implied by each alternative (Hunt
and Vitell, 2006).

Descriptive or positive perspectives attempt to describe, explain, predict, and understand

business ethics activities and phenomena that actually exist (Hunt, 1991). In other words, a
descriptive approach to business ethics examines what actually exists, not what organizations
ought to do. In an organization, a descriptive perspective would examine policies on conflicts of
interest, strategies, compliance systems, and various artifacts of ethical standards in the
organization.

Table 1, micro is states that by way of the business ethics conduct of individual units
(organizations, businesspersons, or individuals, such as an entrepreneur).
Macro states that, the impact of business decisions on the various stakeholders in society.

2.5. Business Ethics before the 1960s

The history of business ethics before 1960 depends on one’s perspective and objectives in tracing
the concept. In this chapter, we are tracing the history of business ethics practice from the
viewpoint of the development of business organizations, as referred to in table 1. Ethics as a field
of thought has existed in religion and philosophy for thousands of years and has been applied to
business practice in the same way ethical values and norms have been applied to everyday life
(Aristotle, 2000).

Aristotle discussed economic activities through business ethical practice, commerce, and trade.
He makes normative judgments about greed, or the unnatural use of one’s capabilities, in the
pursuit of wealth for its own sake. Aristotle provides the first recorded definition of justice and
fair treatment of all parties in a transaction (DeGeorge, 2007). Fair treatment and justice have
been a part of our social existence since the beginning of civilization (Charles, 2008)

The study of business ethic practices started in ancient Greece which students of philosophy
pursue this line with interest. The first legal reference to fair business practice is in the
Magnacarta of 1215. In addition to this, Ferrell, Fraedrich and Ferrell (2008) stated in their book
that the study of business ethics has evolved through six distinct stages.
 11

Table 2.Stage of Business Ethics

Stage Period Major event
1 Before • Defined wage sufficient for education, recreation, health and retirements
1960 • Civil rights and environmental responsibility
2 1960s The rise of social issues in business ethics
3 1970s Business ethics as an academic field emerged
4 1980s Business academics and practitioners acknowledged business ethics as a
field of study.
5 1990s business ethics was well established as an academic discipline
6 2000 Institutionalization of business ethics

Source: Adopted from Ferrell (2008)

2.6. Factors contributing to the Development of Business Ethics

At a company level, there are a number of encouraging developments of business ethics such
setting up specific ethical programs which clarify a company’s business ethics; setting up
induction and ongoing awareness programs; development of business ethical policy statements
that are published internally and made known externally and publication of codes of ethics
(Hurne, 2008).

2.7. Ethics in international Business

Business organizations move from domestic to global and transnational competition, they are
finding that cultural values vary significantly across national boundaries. As a result, cultural
misunderstanding are likely to occur of which business ethics is the one Beekun, Stedham, and
Yamamura (2003). Similarly, Weaver (2001) states that Business practices which are appropriate
in one cultural setting may violate the established understanding of organizational and social life
in another cultural context.

According to Ferrell, Fraedrich, and Ferrell (2005), the international businessperson must not
only understand the values, culture, and business ethical standards of his or her own country but
also be sensitive to those of other countries.
 12

Home (2005) has listed the above ethical issues mentioned by Ferrell, Fraedrich, and Ferrell,
(2005) as they are common practices in less developed countries, which could be illegal and
unethical business practice in the developed countries. This shows that, multinational
organizations face a biggest challenge from these conflicting cultures.

2.7.1 Multinational Corporation Moral Guidelines

According to Hoffman and Frederich (1995) suggested moral guidelines that apply in general to
any multinational operating in third world countries and that can be used in morally evaluating
the actions of international corporations. International corporation produce more good than bad
for the host country, contribute by their business ethical practice to the host country’s
development, respect the human rights of its employees, pay their fair share of taxes, to the
extent the local culture does not violate moral norms, respect the local culture and work with it,
not against it, cooperate with the local government in the development and enforcement of just
background institutions.

2.8. Social Responsibility and Ethics

Businesses have great potential to change living standards of the community and to combat
poverty through utilization of economic resources in productive way if done ethically and
considering the impact of their operation on the society and ecology. This can brings fast
economic growth that increases living standard of the society. They produce goods and services
that employees want and they create job opportunity for the community. Through paying taxes,
they contribute to government revenue that can finance schools, hospitals and other public
services (Gebeyehu, 2015).

2.9 Standards of Business Ethics

According to Busa (2009), responsibility and integrity are important to improve standard of
business ethics practice that should be implemented by a business organizations. Responsibility
requires taking ownership of and being accountable for, one self’s acts and omissions. It requires
taking care of what is entrusted to somebody, recognizing the economic, social and natural
environments in which the business operate. It include Exercising obligations with due care,
diligence and the required skill and Pursuing business ethics practices that are economically,
 13

socially, and environmentally sustainable. Integrity requires doing what we say, and always
acting in good faith. This builds trust, which is necessary operates business ethics practice in the
company. The mentioned two terms cover being truthful and honest in all dealings with
employees and honoring commitments and delivering what are promised.

2.10 Major Business Ethical practices of Company

According to the aforementioned researcher, most ethical practices in business reflect the values
of corporate cultures of the company’s performance. Development of a corporate culture to
support business ethics practice based on four elements: ethical awareness, ethical reasoning,
ethical action, and ethical leadership. If any of these four factors is missing, the ethical climate in
an organization weakens a company’s performance. The following are major business ethical
practices that should be conducted in a company.

Ethical awareness dilemmas occur frequently in the workplace as the writer indicated. So
employees need help in identifying ethical problems when they serve employee & they need
guidance about how the company expects them to respond. One way for a company to provide
this support is to develop a code of conduct. Companies use their codes of conduct to specify
ground rules and/or identify key corporate values and provide frameworks that guide employees.

Ethical education is vital although a code of conduct can provide an overall framework; it cannot
detail a solution for every business ethical practice situation. Some ethical questions are
confusing, so businesses must provide instituted ethics trainings and awareness creation
programs.

Ethical action is significant that any companies must provide structures and approaches which
allow decisions to be turned into ethical actions and practices. A firm whose managers set
unrealistic goals for employee performance may find an increase in cheating, lying, and
misdeeds, as employees attempt to protect themselves.
Ethical leadership is one of the most important factors that leaders of company must not only talk
about business ethical practices but also demonstrate it in their actions in the company. This
principle requires employees to be personally committed to the company’s core values and be
 14

willing to base their actions on them. The damage from business ethical practice misconduct can
powerfully affect a company’s employee and its profit.

2.11. Product Safety

There are different characteristics of product quality mostly discussed in various literature and
books are: effectiveness (how well the product does its job), durability (how long it does its job),
and safety (whether the operation or use of the product involves risk of injuries). Among these
attributes, as (Doughty and Reinganum, 1995) stated in their research, product safety is not a
choice for organization, but a must. The problem of product hazards is much more complex due
to the vast increase in the number of products that can be considered, the new, and unique
procedure requirements and the largest variety of solutions available (John and Locke, 1974).

On the other hand, Company’s involved in setting priorities for establishing product safety
standards as mentioned by (Velasquez, 1982) are: frequency, cost and severity of injuries,
employee’s contacts/exposure, citizen’s willingness to incur risks, and costs of reducing risk
hazards.

2.12. Environmental Protection

According to DeGeorge, Richard (1982) Environmental concerns of businesses can be divided

into the local and the global. All businesses must comply with legislation that prevents gross
pollution of water, air, and soil. Manufacturing businesses can buy permits or trade tariffs in
order to be able to pollute up to a certain limit. They must also make provision for cleaning up.
Businesses must also face up to global environmental concerns; they know that their practice can
have wide ranging repercussions on the environment, especially on global warming through the
emission of greenhouse gases.

Environmental business ethics is formally defined as the study of human interaction with nature.
In this business ethics practice sense, environmental ethics is concerned with company’s
responsibility to protect the environment in which it operates. Public awareness of damage
caused to the environment by human action has derived a demand for governmental regulation
directly affected the ability of business conduct to their operation. Corporate response to
 15

governmental regulation is a primary area of concern in environmental business ethics, Kenneth

(2018).

A positive side of environmenal business ethics is the creation of new opportunity centered on
repairing existing environmental damage and developing new technologies to enable people to
conduct their business without further damage to the environment (Eligedo, 1996).

Company and vehicle emissions can cause acid rain that in turn can harm forests; oil spills can
destroy animal life and make farming impossible, dumping of industrial residues and garbage
into the sea or rivers can make them useless for swimming and other recreational activities and
destroy fish life; and soon (Bekele Gebisa, 2010).

According to Bekele Gebisa (2010), there are two different views concerning the responsibility
of the company in protecting environment (as cited in Hoffman, and Frederick, 1995).

These are only maximizing profit for its shareholders while operating within the law and
responsibility which goes beyond the standard set by the law. Business does not have an
obligation to protect the environment over and above what is required by law; however, it does
have a moral obligation to avoid intervening in the political arena in order to defeat or weaken
environment legislation (Bowie, 1989). Then Harar brewery Share Company is Globally Audited
and approved internationally for protecting and safeguarding the environments.

On the other hand, Frederick (1990) argued that the harm principle morally requires business to
find ways to prevent certain harm it causes even if such harm violates no environmental law. The
same authors argued that the harm principle morally requires business to find ways to prevent
certain harm it causes even if such harm violates no environmental law.

The Harar brewery share company has made substantial efforts to reduce waste by making all of
their bottles and boxboard recyclable; helping the surrounding community reaches their waste
diversion rates.

Another major contributor to waste in the brewing process is the spent grain; the Brewery has
mitigated this huge waste factor by selling it to local farmers to be repurposed as livestock feed.
There is no doubt that the Brewery values sustainability and environmental integrity based on
 16

their efforts to minimize waste; however, there another large part of production that currently
unaddressed: Water.

2.13. Employee Health and Safety

Ethics, health and safety are inextricably bound. It is clear that employee safety and health have
ethical dimensions since relevant managerial decisions affect workers’ lives and well-being.
Clearly, managerial attention to employee safety and health is not only an ethical mandate; it is a
prerequisite for sound business policies and practices (Stewart et al., 1996).

2.13.1.1. Safety Policies

Implementation of safety policies suggests that the companies expected to invest a considerable
amount of their resources to promote the safety and physical well-being of their employees. As a
result, there must be quality excursions (short-term training) of corporate safety policies to
reduce injury incidence and injury risk. Then the level of company’s incidence is very low.

In addition to this, Watson et al, (2005) illustrated the importance of management policies and
practices that emphasize safety, and equally important, the degree to which management follows
through on the implementation of such policies and practices.

2.13.1.2. Supervisor Safety Control

Supervisor support of safety represents the extent to which supervisors encourage safe working
practices among their subordinates. The perceived organizational support was related to
improved safety communication and safety commitment as well as lower frequencies of injuries.
Generally, through providing information to subordinates or sharing their attitudes or opinions
regarding safety, supervisors often act as a driving force affecting the safety of the work place
(Huang et al., 2004).

2.14. Business ethics related factors

The business-related factors focus on those variables that are directly related to the daily
operation and make-up of the business. Variables include, planning, record keeping and financial
control, and ownership form of the business (Dyke, L., E. Fischer, and A. Reuben, 1992).
 17

According to Hobson (2003) Strategies, such as these codes of ethics, are only one means of
achieving the ultimate goal of having ethical international responsibility in the engagement of
business worldwide. As stated above, there are many ethical responsibilities faced by
multinational organizations. Theorists generally agree that situational variables such as
organizational climate can effects of business ethical practices of employee (Mason, and McCall
Smith, 2010). However, there have been no forces does not make for effective action. The
recognition of the breadth of awareness of the many factors involved in even primary situations
has led to a somewhat variation of structuring of the concepts of the field (Rawls, J. (1985).
Perhaps to emphasize the broader aspects of the functioning of ethical and closely related factors
the somewhat newer approach is to identify such action under the Harar brewery share company.

2.15. Employee Safety Control

According to Watson et al (2005) there are four major approaches to improve employee safety in
the work place. According to the same authors, the first approach is to focus on the work
environment itself: making it physically safer. The major trust in this approach is to revise
policies, redesign jobs, and ergonomically design tasks with the human factor in mind. In
addition to designing a safe and health work place Stewart et al. (1996) forwarded that a
management’s responsibility is to provide adequate personal protective equipment for their
employee.

The second focus is to identify traits like neuroticism and introversion in employees that are
more likely to lead to accident. In contrast with the job design and trait models, a third approach
attempts to convince employees to behave more safely. Behavioral modification models of safety
emphasize that specific conduct can be encouraged by organizations that enhance employee
safety related outcomes. A fourth general framework for understanding employee safety
improvement is from the interpersonal or social perspective.
 18

13.2. Conceptual Framework

Product safety

Employee health and safety

Environmental protection Performance

Social responsibility

Business ethics factors

Figure 1.Conceptual Framework (Gebisa, 2010)

 19

3. RESEARCH METHODOLOGY

3.1. Description of the Study Area

This study was conducted in Harari National Regional State. Harar is located 526 km from Addis
Ababa, the capital city of Ethiopia. Harar Brewery Share Company manufactures and distributes
beer and non-alcoholic drinking. The company was founded in 1984 and is based in Harar,
Ethiopia. As of August 11, 2011, Harar Brewery Share Company started to work as a subsidiary
of Heineken International. The company’s annual production is up to 250,000 hecto liters of
beer, a 5% a Bv pale lager, Waliya Beer, Sergenga, as well as Hakim Stout, a 5.8% a bv stout.
The company produces Sofi Buna, Buckler alcohol free beer, Sofi Malta, non-alcoholic beverage
that targets the Muslim population as a customer segment.

3.2. Sample size

The company has about 630 workers with the composition of professional and semi-professional
(chemical engineers, chemists, electricians and electronics experts, microbiologists, health
professionals and social science professionals) to non-professional ratio about 1:10.

3.3. Sampling Technique

Harar Brewery Company is the only beer company in Harar city and were selected through
convenience sampling technique. The Central Limit Theorem (CLT for short) basically says that
for non-normal data, the distribution of the sample means has an approximate normal
distribution, no matter what the distribution of the original data looks like, as long as the sample
size is large enough (usually at least 30) and all samples have the same size. And it doesn’t just
apply to the sample mean; the CLT is also true for other sample statistics, such as the sample
proportion. Because statisticians know so much about the normal distribution, these analyses are
much easier Deborah J. Rumsey 2008). By taking 30% of the employee.Therefore, 189
respondents were included as sample size in this study. The researcher believed that these
employees can provide reliable data for the research. The random sampling was done using
lottery method for questionnaire and departments/sections of the company assigned for specific
activities were considered for the interview to assess the business ethical practice.
 20

3.4. Data Collection Techniques

Data regarding general practices of business ethics, product safety, employee health and safety,
social responsibility and environmental protection were collected using a five point Likert Scale
measurement. Semi-structured interview and document review were used. The semi structured
interview questions were addressed for section/department heads and managers. The document
review included annual reports of the company, strategic plan of the company, operational plan
of the company and company’s gridlines manual related to company performance.

3.5. Sources of Data

Primary and secondary data were used for the study. Both sources of data were used by
categorizing the information, which is relevant with each source. Primary data were the data that
were collected using methods such as semi-structured interviews and questionnaire. On the other
hand, secondary sources of data such as annual performance reports, office memos on business
ethics activities and company’s strategy plan were used to collect relevant data. Different
responses given by customers at different outlets were also used as a source of data and obtained
from records of marketing department.

3.6. Procedures of data collection

The questionnaire was prepared in English as the respondents in the company can understand the
language since almost all had specializations in different fields of study besides working with
foreigners. The prepared questionnaires were filled by company’s employee selected from
different units of the Harar Brewery S.C on issues of business ethical practices and company
performance. After semi-structured interview questions were drafted, the researcher had face to
face communication with section heads and managers to get relevant data via interview.

3.7. Method of Data Analysis

Data processing is an important part of the entire survey operation. It includes editing, coding,
data entry, data cleaning and reliability examination, (Guo et al, 2009). The researcher made all
the tasks of data processing. After the data were collected, the data were analyzed and then
interpreted and discussed using statistical techniques. The collected data were analyzed using
both descriptive and inferential data analysis methods.
 21

3.7.1. Descriptive Analysis

Quantitative data collected through closed ended questionnaires were analyzed by the use of
SPSS (Statistical Package for Social Sciences) version 20 and it was presented through
percentages and frequencies. On the other hand, the content analysis is used for data collected
through interview. Content analysis is a research technique used to make replicable and valid
inferences by interpreting through systematically evaluating texts (e.g. documents and oral
communication) (Guo et al, 2009).

These interviews were used face to face and telephone interview so as to make them appropriate
for the person to be interviewed. The interview was made with higher officials of the company
who have in depth knowledge on the effects of ethical practices on company’s performance. In
these semi-structured interviews, interviewees were not subjected to highly standardized
questioning but allowed to express their opinions and feelings about business ethics practice in
the organization based on their own point of views. From the researcher point of view, this
approach was useful because these respondents were able to elaborate on the status of business
ethics practice in the company.

3.7.2. Inferential Analysis

The relationships between the variables of the study were presented using correlation by
applying linear regression model. Correlation analysis was used to examine the strength of the
relationship between each of the determinant factors of company performance and multiple
regression analysis was employed to examine the simultaneous effects of several independent
variables on the dependent variable.
Pearson correlation coefficient measures the linear relationship between the study variables. The
correlation between any two variables always lies between -1 and 1. If r is -1, this figure
indicates that the dependent and the independent variables have absolutely negative relationship
while r is 1 showing the existence of absolute positive relationship But correlation coefficient of
0 implies that there is no any linear relationship between dependent and independent variables.
Regression analysis consists of techniques for modeling the relationship between a response
variable and one or more explanatory variables or predictors and it answers questions about the
 22

dependence of a response variable on one or more predictors, including prediction of future

values of a response, discovering which predictors are important, and estimating the impact of
changing independent variable on dependent variable. Consequently, this leads to the use of
multiple linear regression models in order to achieve the main and specific objectives of the
study. Many methods have been developed to determine various parametric relationships
between response variable and independent variables.
These methods typically depend on the form of parametric regression function and the
distribution of the error term in a regression model. Generally, most regression models are
written as a function of predictor variables and random error.
yi  f ( x1, x2,...xk )  i (1)

Where k is the number of regression’s that are involved in the regression model, Yi is the
dependent variable , X1, X2, …, Xk are independent variables and  i is the random error term.
The parameters need to be estimated so that the model gives the best t-test to the data. These
parameters are estimated based on least squares method principle. In this study, the least squares
principle was utilized to derive estimates of the regression parameters.
Then the simple linear regression model of our study can be written as:-
Yi   0  1 x1   2 x2   31 x3   4 x4   5 x5   6 x6   i (2)

Where,  i is the random error term,X1 = education status, X2= business ethics related factors, X3=
employee safety and healthy related factors, X4 = product safety related factors, X5= social
responsibility, X6= environmental protection and β1, β2, β3, β4, β5, β6 are coefficients of factors
while βo is the constant.

3.8. Ethical Considerations

To start the research, the necessary approval and permission letter was written and obtain from
the University and requested to the study area that is the “effects of business ethical practices on
the company’s performance: The case of Harar brewery share company. All sample of target
population were treated in ethical manner. Further, brief description about the title, purposes and
objectives of the study were made clear to the target population during data collection.
Moreover, they were informed about their valuable and genuine responses contributions for the
achievements of the study. Also, participants were on voluntary basis and treated with respect,
 23

and instrument design was made as relevant as possible.

 24

4. RESULT AND DISCUSSION

As the aim of the study was to assess the effects of business ethics practices on company’s
performance in the case of Harar Brewery S.C and the discussion of the study revealed the
effects of business ethics practices on the particular company’s performance and key findings are
discussed throughout this chapter.

Table 3.Demographic variables

Variable Category N=189

Percentage
Female 39.7
Sex Male 60.3
Total 100
<=25 4.2
Age 26-35 38.6
36-45 30.7
>45 26.5
Total 100
Diploma 22.2
BA/BSc 29.1
MA/MSc 6.3
Education Status PHD 1.06
Other 41.3
Total 100
Work Experience in 1-5 40.7
Years 6-10 30.2
11-15 17.5
16-20 10.6
Above 20 1.1
Total 100
Source: Own Survey Data (2018)

Based on the results presented in Table 3, among 189 respondents included in this study, 60.3%
were males and 39.7% were females. This indicates majority of the participants were males.
Regarding to their age, 38.6%, 30.7%, 26.5% and 4.2 %were found in the category of 25-35
years, 36-45 years, >45 years and <= 25 years respectively. From this, we see that most of the
respondents were in the average age category (i.e. 25-35 years). In the same case out of 189
employees of the company who were included in this study, 29.1% were BA/BSc holders while
more than half, 65.5% were either diploma holders or have lower qualifications. Similarly,
 25

regarding the work experience of respondents, about 40.7%, 30.2%, 17.5%, 10.6%and 1.1%had
work experience of 1-5 years, 6-10 years, 11-15 years, 16-20 years and above 20 years
respectively.

These figures show that in Harar Brewery Share Company, newly recruited staffs were higher
than the senior staffs, and it also shows that as the working experience increased the number of
workers were decreased over time.

Table 4.Study variables of respondents

N = 189
Variables(Factors) Correlation value
Percentage
Strongly Agree 54
Agree 45
Business ethics related factor -0.74
Disagree 0.5
Neutral 0.5
Strongly Agree 47.1
Agree 48.7
Employee safety & health Disagree 1.59 0.53
Strongly disagree 0.5
Neutral 2.11
Strongly Agree 48.16
Agree 46.05
Disagree 1.59
Social responsibility
Strongly disagree 0.5
Neutral 3.7 0.55
Strongly Agree 41.26
Agree 40.22
Production safety problem Disagree 6.87
Strongly disagree 8.47 -0.41
Neutral 3.18
Strongly Agree 48.14
Agree 44.44
Environmental protection Disagree 3.18
Strongly disagree 2.12 0.38
Neutral 2.12
Source: Own Survey Data (2018)
Based on the results reported in Table 4, among the total respondents 54% and 45% were
strongly agree and agree that business ethics had impact on company performance respectively.
That mean negative business ethics affects the productivity of the company. In similar fashion,
around 96.3% of the respondents believed that employee safety and health had positive
 26

contributions for the increment of company productivity. For the factor social responsibility and
environmental protection, 94.21% and 82.58% of the respondents agreed that lack of social
responsibility and environmental problems respectively had great effects on the productivity of
the company. Besides on these, 15.3% of the respondents disagreed that production safety
problem had no effect on company’s productivity while only 3.15% were neutral. Regarding
environmental protection, about 5.3% respondents were disagreed while 2.12 were neutral.
About 2.9% of the respondents on social responsibility were disagreed while 3.7% of them were
neutral regarding the effects of social responsibility towards company’s performance.

Furthermore, the analysis of the interview response of the company manager showed that there
are company’s moral principles, value statements such as quality service, employee
empowerment, and customer satisfaction. This implies that the company has written ethical
standards, publication of codes of ethics, training program on business ethics and ethical
committee or ethical officer, which are the indicators of formal business ethics which increase
the productivity of the company.

The quality control department head answered that sometimes the company faces slight product
eminence problems, like bottleneck breakdown (defected bottle). Concerning this problem, the
company gives considerable value to production care. This is because once a collection of
defective products made; the adverse effect on employees and users of the production will be
high and the company can simply lost its good name. This indicates that, the company gives
more attention to product care to keep its product image. The company manager, the possible
environmental pollutions that could arise from the company are: boiler noise, factory liquid
waste, and other solid and liquid wastes from different sources in the company, which had an
effect on the company products. The manager supports that the business ethics is not a choice but
a must to deliver quality products which also complies with government rules and regulations,
satisfies customers and treats employees fairly and the like. Therefore, it is impossible to ignore
business ethics, which is vital for the organizational success.

The correlation values are important to know the association between the dependent variable and
the independent variables. From this the value -0.74 reflects that there exist strong negative
relationship between business ethics related factor and company productivity as the sign had
negative correlation. Similarly production safety problem and company performance has
 27

inversely relationship since the correlation value is negative. On the other hand the variable
employee safety & health, social responsibility, environmental protection, education status and
work experience has positive relationship with moderate correlation value of 0.53, 0.55, 0.42 and
0.61 respectively. Even though the variable environmental protection, age and gender had
positive association with company production, the association is weak.

In general, since the correlation values of the independent variables are different from zero for
all, all variables have an association with the company’s performance. But the association did not
indicate about the significance of the variable. Therefore, significance of each dependent variable
can be observed from individual t-test presented in Table 8.

Table 5.Reliability Test

Variables Cronbach's Alpha Cronbach's Alpha Based on N of Items

Standardized Items
Business ethics 0.809 0.812 8
Employ health and safety 0.718 0.756 7
Product safety 0.821 0.842 7
Social responsibility 0.734 0.714 9
Environmental protection 0.704 0.735 5
Source: Own Survey Data (2018)

George and Mallery (2003) suggest a tired approach consisting the following cronbanche’s alpha
value >=0.9 is excellent,>=0.8 is good,>=0.7is acceptable,>=0.6 is questionable,>=0.5 poor and
<=0.5 is unacceptable.

From the result of Table 4.3, the alpha coefficient for the 8 items in the variable business ethics
is 0.809 which suggests that the items have relatively higher internal consistency (reliability).In
similar way alpha coefficient for the 8 items in the variable employee health and safety is 0.718
which is >0.7 and hence the internal reliability acceptable. For the variable social responsibility
is also interpreted in the same way.
 28

Table 6.Multi-collinearty test

Variables VIF
Business ethics related factor 1.03
Employee safety & health 1.19
Environmental protection 1.90
Production safety problem 1.13
Social responsibility 1.12
Source: Own Survey Data (2018)

Since VIF is a measure of how much the variance of the estimated regression coefficient β is
inflated by the existence of correlation among the predictor variables in the model. A VIF of
value less than 10 means that there is no correlation among the kth independent and the remaining
independent variables, and hence the variance of β is not inflated at all. From the result of Table
6, the VIF values for each variable are less than 10 indicating the non-existence of multi-
collinearity.

As the result of this, it is concluded that each of the independent variables are not correlated or
there is no multi-collinearity among the independent variables

Table 7.Overall model summary of ANOVA

Sum of Mean
Sours of variation Df F-test p-value(sign)
Squares square
Regression 20.323 9 2.258
Residual 72.767 179 0.407 5.56 0.000
Total 93.090 188
R- square 0.762
Source: Own Survey Data (2018)
The result of ANOVA in Table No 7 indicates the overall significance of the model. Since the p-
value (p=0.000) is less than the level of significance (α=0.05), it can be said that the result is
significant. This significance shows that there is at least one significant factor which affects the
performance of Brewery Share Company.
 29

After the overall test of model assumptions, the multiple linear regression model of the total
output production over the significant explanatory variables were modeled based on the
estimated values of the parameters and based on the individual t-test for the significance of the
individual independent variables.

Table 8. Regression result and T-test of independent Variables

Coefficient 95 % Confidence
Variable t-value P-values
(β) Interval
Constant 4.20 6.13 0.00 2.85 5.55
Business ethics related
-0.08 -4.86 0.00 -0.10 -0.04
factor
Employee safety &
0.031 1.75 0.008 0.02 0 .04
health
Environmental
0.03 1.55 0.12 -0.14 0.2
protection
Production safety
-0.04 -4.01 0.00 -0.05 -0.03
problem
Social responsibility 0.05 2.38 0.02 0.009 0.096
Gender 0.08 0.79 0.43 -0.12 0.29
Age 0.09 1.68 0.09 -0.02 0.21
Education status 0.036 0.45 0.024 0.02 0.04
Work experience 0.05 0.81 0.04 0.01 0.09
Source: Own Survey Data (2018)
Individual t-test is used to identify independent variables which contribute significant effect on
the performance of the company. Based on the statistical results of Table 8, the variables which
had p-value value less than 0.05 are significant so that they are included in the model. But
variables which have sign value higher than 0.05 should not be included in the model. Based on
this information, the fitting linear regression model that relating company performance with the
independent variables is given as:

^
Y  4.2  0.036x1 0.05x2  0.08x3  0.031x4  0.04x5  0.05x6
Where, X1 = Education status, X2 = Work experience, X3 = Business ethics related factor,
X4 = Employee safety & health, X5 = Production safety problem and X6 = Social responsibility

The model parameters were interpreted as follows. The constant term 4.2 shows that, when the
effects of all independent variable are constant the productivity of the company will change by
 30

the amount of 4.2. The figure β1 = 0.03 indicates when education status changes the lower rank
to the next rank, the company production increased by 0.03 amount. The Company’s
performance is also increased by the amount of 0.05 for 1-year increment of work experience
when the effects of other variables are held constant.
The figure β3 = -0.08 indicates business ethics related factors changes the performance of the
total company’s production is decreased by -0.08 when the business ethics are not good. In a
similar way, the company’s performance increases by 0.03 if the safety of employee and their
health are in a good condition. Similarly, for a unit increase in production safety problem and for
a unit increase in social responsibility, the performance of the company decreases by 0.04 unit
and increases by 0.05 total unit of output respectively.
The coefficient of determination is 0.762 s presented in a Table 3 which shows that about 76.2%
of the variation in company’s performance is explained by those independent variables
considered in the study while the remaining 23.8% of the variation can be explained by other
related factors not considered in this study.
 31

5. SUMMARY, CONCLUSION AND RECOMMENDATION

This section mostly focuses on conclusion and recommendations. First, summary of the main
findings of the study are discussed. Then after, recommendations on what should be done in the
future were suggested.

5.1 Summary

This study was conducted in Harar Brewery S.C with the general objective of assessing the
effects of business ethics practices on company’s performance. A total of 189 respondents that
consume products produced by the company (i.e. about 30% of the total population) were
included in the study. Questionnaire and interview were the main source of data for this study.
The questionnaires were developed for employees of the company while interviews were made
with managers, section heads of the company. In this study, most of the participants were males
60.3 % and regarding to their age most of them fall with in the category of 25-35 years 38.6 %.
In the same case, more than half the study participants (company employees) were diploma
holders and with lower educational qualifications 65.5 % while there were a minimum number of
PHD 1.06 % employees in the company.

Concerning with work experience of the employees, more of the employees in the company had
working experience of 1 - 5 years (40.7%) while very few employees have work experience of
above 20 years in the company (1.1%). This figures show that the effects of business ethics
practice in Harar Brewery Share Company, newly recruited staff were higher than the senior
staff that means the new staff can take time to adapt the business ethics practice of the company.
This can affect the company performance and it also shows that as the working experience
increased the numbers of employees were decreased over time.

The study also showed that 99% of the respondents agreed that business ethics had impact on
company performance. In similar way, around 96.3% respondents agreed that employee safety
and health had its own contribution for the increment or decrement of company productivity. For
the factors social responsibility and environmental protection, about 94.21% and 82.58% of the
respondents respectively agreed that lack of social responsibility and environmental problem had
 32

great effects on the performance of the HBSC in Ethiopia. About 81.55 % of the respondents
agreed that product safety had an effect on the productivity of the company.

The coefficient of determination is 0.762. This shows that about 76.2% of the variation in
company performance is explained by the independent variables (i.e. education status, work
experience, business ethics related factor, employee safety and health, production safety problem
and social responsibility) while the remaining 23.8% of the variation can be explainable by other
related factors which were not included in the study.

5.2. CONCULUSION

Business ethics practices are the ones that provide competitive advantages for world-class
companies like Harar Brewery S.C which a subsidiary of the known Heineken group. The
particular business ethical issues rely on company’s performance, in which its production get
measured in terms of product safety, employee health and safety, social responsibility of the
company to the environment.

This research was conducted on effects of business ethics practice on company performance to
investigate the overall effects of business ethical practices on the performance of HBSC,
Ethiopia due to the above reasons. To achieve the objective of this study both primary and
secondary sources of data were used for this study. Both sources of data were used by
categorizing the information, which is relevant with each source. Those primary data were
collected using questionnaire and secondary data were obtained from reports, office memos on
business ethics activities and company’s strategy plan to get relevant information.

The collected data were analyzed using both descriptive and inferential data analysis methods by
the use of SPSS (Statistical Package for Social Sciences). In descriptive analysis, percentage and
frequency were applied to present the result of the study. In inferential case, correlation analyses
was used to examine the strength of the relationship between each of the determinant factors of
company performance and multiple regression analysis was employed to examine the effects of
independent variables on the dependent variable.
 33

The result of this study revealed that business ethics is first, employee safety is the second
health is the third, social responsibility is fourth and environmental protection is the fifth factors
based on the response of the respondents who agreed about 99 %, 96.3%, 94.21% and 82.58%
and 81.5% respectively agreed that lack of social responsibility and environmental problem had
great effects on the performance of the HBSC in Ethiopia. About 81.55 % of the respondents
were agreed that product safety had an effect on the productivity of the company.

The inferential analysis identified that factors employee safety and health, environmental
protection, social responsibility, education status and work experience were positively associated
with the performance of the company while the other factors, business ethics and production
safety problem, are negatively associated with company productivity.

The result also confirmed that business ethics related factor, employee safety and health,
production safety problem, social responsibility, education status and work experience have
significant influence on company performance (p<0.05). On the other hand, gender, age and
environmental protection were found to be insignificant variables to affect the performance of
the factory (p>0.05) which showed that there was no significance difference in performance
between males and females employees. Similarly, the total production of beer over time was not
different among employees who had different age (difference in age) does not alter the
production of beer.

5.3. RECOMMENDATIONS

The fact that almost all of the respondents have strongly agreed on bad ethical practices, the
company should work to improve the environment of the business ethics for better performance
and success of the company. The result output also showed that there is negative correlation
between business ethical practices and the company’s performances. Therefore, further study
should be done to clearly identify where this negative correlation emanated from and give
seasonable remedies.

The company should deploy an including strategic management model in which its mission
statement should clearly incorporate social policy and environmental protection. Furthermore,
other stakeholders such as local communities and concerned government bodies should take part
 34

while the company is making strategic planning to make sure things are alright from different
perspectives. In other word, the rights of all stakeholders’ claimants should be taken care while
strategic formulation and implementation for sustainability of the company is undertaken.

Implicitly the mission of the company is not clearly stated and hence the policies and strategies
were not in place. Therefore, the policies, strategies and purposes of the company should be
internalized among employees and at each management level so that the values, norms and ethics
of the work place are accepted among all stakeholders. More importantly, different types of
policies such as applied policy, implied policy and adopted policies should be blended and used
either to develop good ethical work environment or to survive and grow under dynamic business
environment.

In general, the intension of the company should be bold enough in providing products to
consumers, profits for investors, jobs and safety for employees, taxes for governments,
protection of the environment and services for the communities.
 35

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Appendix I

Questionnaires for Employees of Harar Brewery Share Company

Dear respondents, this is a research titled “Effect Of Business Ethics Practice on Company
Performance; the Case Of Harar Brewery Share Company” The research is carried out in
order to fulfill the requirement of Post graduate program Directorate of Haramaya University
for the Master’s degree in Business Administration. You have been selected as a respondent to
this questionnaire because I believe the information that you will provide will be very useful in
enabling me realize the objectives of the study. In answering the questions you may be requested
to put a tick (√) mark inside the boxes that indicate your level of agreement for each statement. I
highly appreciate the fact that you have taken time to fill in this questionnaire. Thank you in
advance.

Thank you for your kind cooperation

Part 1:- Background

1. Gender Male Female

2. Age ≤25 26-35 36-45 above 45

3. Educational back ground

Diploma BA/B.Sc. Degree MA/MSC PhD

4. Work experience in the organization

1- 5 6-10 11-15 16-20 over 20 years

 40

Part 2. Question related to product safety, employee safety and health, social responsibility
and environmental protection.
.

Measurement items Strongly Agree neutral Disagree Strongly

agree disagree

Part 1.Business ethics related questions

1 The business ethical behavior has

effect on an organization performance

2 Your company always recognize and

respect societal ethical moral norms
3 There is a moral standards of business
ethical behavior that workers should
follow in your company

4 There the way to decrease unethical

business behavior in your company.

5 Business Ethics addressed formally or

informally in your company

6 The business ethics is important for

the success of the company

7 It is possible to consider business

ethics practice in your corporate
strategy

8 There any a good progress of business

ethics in your Company
 41

Part2.Questions related to employee Safety and Health

9 The ethical behavior of employee in

your company meet up with the
company ethics.

11 Interims of solving the problem of

product hazards, is much more
complex

12 The working environment is

comfortable

13 Train and follow- up the proper use of

protective equipment by the employee

14 Heating and lighting of working

rooms or areas are adequate

15 Supervisors encourage safe working

practices among their subordinates

16 Washing and toilet facilities are

adequate, and kept clean

Part 3: Questions related to Product Safety

17 Company product is fair in price when

its related with other

18 Product safety in relation to other

attributes of product quality

19 Your company product is healthy

 42

20 There are relationship between

unethical behavior and organizational
productivity

21 Your company face product safety

problem

22 Insurance for possible product failure

(hazards to the users)

23 Unethical business behavior has

negative impact on organizational
productivity

Part 4: Questions related to social responsibility

24 The nature of Social responsibility

activities undertaken by Your
Company
25 Your company try to do what is
expected morally or ethically.

26 Social Responsibility is an
unconditionally acceptance
responsibility of Business ethics

27 Compensation insurance which

covers work related accidents

28 Your company more public

recognition given to
Community doing well in the area
of Social Responsibility.
 43

29 Your work environment maintained

in adequate clean condition

30 Your company responds to changes

in business ethics as it is a function
of time and culture.

31 A culture of reward for high moral

standard in your organization.

32 social responsibility as
organizational competitive
advantages

Part 5.Environmental protection

Company is working on the heath

of the community.
33

34. There is problem on environmental

pollution because of your
company’s production

35 Strategies/methods that the

company developed to protect the
environment.

36 Your company provides insurance

service for the community if
pollution happened in the area of
the company

37 Methods that are the company uses

to reduce or avoid wastage in the
community (waste management
 44

strategies)

Part 6: Questions related to company performance

Measurement items Strongly Agree neutral Disagre Strongly

agree e disagree

38 Business ethics practice, employ

health and safety, product safety,
social responsibility and
environmental protection improve
company performance.