CORPORATE ETHICS AND

GOVERNANCE

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Introduction
Ethics is the branch of philosophy that studies
values and behaviors of a person.
Value study of a person is used to determine this
positive and negative attitude towards life.
Ethics studies concepts with good and evil,
responsibility and right or wrong.

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Ethics can be distinguished in three categories;
Normative ethics - used to regulate right and
wrong behaviors of individuals.
Descriptive ethics/applied ethics - is used to
consider controversial issues such as abortion,
animal rights, capital punishment, nuclear war etc.
Meta ethics - focuses on issues of universal fruits,
ethical judgments and meaning of ethical terms.

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The term ethics defines the standards that bear on
right and wrong issues of society.
Business ethics is a set of professional standards
which emphasize principles of honesty and duty to
the business and the general public.

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Governance
The act or process of governing or overseeing the control
and direction of something (such as a country or an
organization).
Governance is the process of making and enforcing
decisions within an organization or society. It
encompasses decision-making, rule-setting, and
enforcement.
Good corporate governance can benefit investors and
other stakeholders, while bad governance can lead to
scandal and ruin.

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Thus, corporate governance is the system of rules,
practices, and processes by which a company is
directed and controlled.
Corporate governance essentially involves balancing
the interests of a company's many stakeholders.
 Structure of rules, practices, and processes used to
direct and manage a company as enforced by the
Board of Directors.
Bad corporate governance can destroy a company's
operations and ultimate profitability.

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Communicating a company's corporate governance
is a key component of community and investor
relations.
Most successful companies strive to have exemplary
corporate governance.
For many shareholders, it is not enough for a
company to be profitable;
It also must demonstrate good corporate citizenship
through environmental awareness, ethical behavior,
and other sound corporate governance practices.

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Benefits of Corporate Governance
Creates transparent rules and controls, guides leadership, and
aligns the interests of shareholders, directors, management, and
employees.
Helps build trust with investors, the community, and public
officials.
Gives investors and stakeholders a clear idea of a company's
direction and business integrity.
Promotes long-term financial viability, opportunity, and returns.
Reduce the potential for financial loss, waste, risks, and
corruption.
The game plan for resilience and long-term success.

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Morals
Are context-specific behavioral norms that are usually
formed through peer pressure and individualistic
experiences.
Can also be referred to as a set of;
ethical virtues and the ethical culture of the
organizations, which can influence the employees
regarding their moral engagement with the organization
and ultimately influence.
belief systems that are imposed socially, while values are
more individualistic in nature.

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Some morals are - pre-conventional morality, conventional
morality
Morals differ from ethics as they are narrower in scope
and not as explicitly known.
Morals are also different from values as they are founded
on the social understanding of the right behavior and are
less individualistic in character.

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Can a person be moral but not ethical?
Yes, a person can be moral and not ethical because
what they might find to be morally correct might not
be morally correct in the eyes of the ethical code.
For example, a doctor might operate on a person in
pain during an emergency without having them clear
their past dues.
This might be ethically incorrect, as per the
guidelines of the hospital or the medical fraternity,
but might seem morally right to many doctors.

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Concept of Business
The term business can meaning intensely, an activity that
keeps an individual/firm busy. Can be seen from two
perspective;
In economic sense;
It’s the creation of utility
Commercial sense;
Purchase and sale of goods and services
A business includes that part of production which is
equally exchanged and results in mutual benefits to the
parties who exchanged goods in the transaction.

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Meaning of Business
Refers to an organization or enterprise engaged in
commercial, industrial, or professional activities.
Purpose - to organize some sort of economic
production of goods or services.
Can either be;
Profit - profit maximization
or non-profit - charitable mission or furthering a
social cause.
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Businesses range in scale and scope from sole
proprietorships to large, international corporations.
The term business also refers to the efforts and
activities undertaken by individuals to produce and
sell goods and services for profit

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Nature of Business
Business includes an occupation in which people are busy in
earning income by production or purchase, sale and exchange of
goods and services to satisfy the needs of people and earn profit.
True nature of business;
1. Economic activity - business is a human activity with a profit
motive
2. Human activity - business is a social process fulfilling its social
responsibilities.
3. System - consisting of various sub-ystems that are operated in a
balanced and coordinated way.
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Ethics
The concept began in the 1960s as corporations
became more aware of a rising consumer-based
society that showed concerns regarding the
environment, social causes, and corporate
responsibility.
The increased focus on social issues was a hallmark of
the decade.
Since that time, the concept of business ethics has
evolved.

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A Company's Business Ethics
Reflects generally accepted principles laid down by
the founders of the business and its governing body.
It encompasses the business's morals in relation to
the policies and practices that guide the business's
decisions and actions.
It also comprises the business's interaction with the
customers, the treatment of its employees, how it
interacts with other businesses and the government,
and how it deals with negative publicity.
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A business is termed as social organ and therefore it
should not indulge in any activity that is harmful to
the interest of all its stakeholders.
Goes beyond just a moral code of right and wrong;
Attempts to reconcile what companies must do
legally vs maintaining a competitive advantage over
other businesses.
Ensures a certain level of trust between consumers
and corporations, guaranteeing the public fair and
equal treatment.
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Ultimately, business ethics, concerns employees,
customers, society, the environment, shareholders, and
stakeholders.
Therefore, every business should develop ethical behavior
and practices that guide employees in their actions and,
To ensure they prioritize the interests and welfare of those
the company serves.
Doing so not only increases revenues and profits, but also
creates a positive work environment and builds trust with
consumers, business partners and other stakeholders..

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Business ethics ensure that a certain basic level of trust
exists between consumers and various forms of market
participants with businesses.
Some issues that come up in a discussion of ethics include;
corporate governance,
insider trading,
bribery,
discrimination,
social responsibility among others responsibilities.
The law usually sets the tone for business ethics, providing
a basic guideline that businesses can choose to follow to
gain public approval.
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Principles of Business Ethics
It’s critical to understand the underlying principles
that drive desired ethical behavior and how a lack of
these moral principles contributes to the downfall of
many otherwise;
 intelligent,
talented people and
the businesses they represent.

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They include;
1. Leadership: Has the conscious effort to adopt,
integrate, and emulate the other 11 principles to
guide decisions and behavior in all aspects of
professional and personal life.
2. Accountability – to the extent of holding yourself
and others responsible for their actions.
Managers must show commitment to
following ethical practices and ensuring others
follow ethics guidelines.

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3. Integrity - being honest, trustworthy, and reliable.
Manager with integrity consistently does the
right thing and strives to hold himself/herself to
a higher standard.
Brings in workability in business engements.
4. Respect for others - is a critical component.
Everyone deserves dignity, privacy, equality,
opportunity, compassion, and empathy.

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5. Honesty - fosters an ethical climate in an organization.
Partial truths, omissions, and under or overstating
don't help a business improve its performance.
Bad news should be communicated and received in
the same manner as good news so that solutions can
be developed.
6. Respect for laws: Ethical leadership should include
enforcing all local/county or national laws.
If there is a legal grey area, leaders should lean on the
side of legality rather than exploiting a gap.

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7. Responsibility: Promotes ownership within an organization,
Allows employees to be responsible for their work, and
Inculcates accountability on everyone.
8. Transparency: being open and honest.
As part of corporate governance best practices, this
requires disclosure of all relevant information so that
others can make informed decisions.
Without divulging trade secrets, companies should ensure
information about their financials, price changes, hiring
and firing practices, wages and salaries, and promotions
are available to those interested in the business's success.

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9. Compassion - treating all stakeholders with concern for their
well-being.
10. Fairness - brings in equal treatment for all.
11. Loyalty - a strong feeling of support or allegiance.
 Inspiring loyalty in employees and management ensures that
they are committed to best practices.
12. Environmental concern - it is of utmost importance to be
aware of and concerned about the environmental impacts a
business has.
More so, with limited resources
All employees should be encouraged to discover and report
solutions for practices that can add to damages already done.
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These principles if strictly pursued will lead to a
decent business environment and create healthy
relationships in the organization
Deviations from this principles can occur due to;
Ignorance and indifference to issues
Selfishness
Imperfect reasoning

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Some Common Business Ethics
There are various types of business ethics.
Both the nature of the company's business and its location
can affect its code of ethics.

1. Personal responsibility - a vital attribute for all employees

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2. Corporate Responsibility
All businesses have responsibilities to their
employees, their clients or customers and their board
of directors.
Some of these may be contractual or legal
obligations, others may be promises.
For example, a commitment to conduct business
fairly and to treat people with dignity and respect.
Whatever those obligations may be, businesses have
a responsibility to keep them.
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3. Loyalty
A valuable quality for everybody across the organization
It's important for members to be loyal to their coworkers,
managers and the company.
May involve speaking positively about the business in public
and only addressing personnel or corporate issues in private.
In addition, customer or client loyalty is important to a
company not only to maintain good business relations but
also to attract business by cultivating a positive reputation.

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4. Respect
A very critical business ethic, both in the way the
business treats its clients, customers and employees
and in the way members treat each other.
That is, both customers and employees feel highly
valued when they are treated with respect.
Could be an indicator that the organization cares
about their opinions, keep your promises work quickly
to resolve any issues they may have.

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5. Trustworthiness
Through honesty, transparency and reliability a firm cultivates
trustworthiness with its clients, customers and employees.
That is;
Employees feel they can trust their companies to keep to the
terms of their employment.
Clients and customers will able to trust the business with
their money, data, contractual obligations and confidential
information.
Being trustworthy encourages people to conduct business freely
and helps inculcate a positive reputation that ensure continuity of a
firm.
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6. Fairness
Exercising fairness and applies the same standards in
its operations regardless of rank or affiliation.
 Meaning, a business strives to treat its customers
with equal respect, offering the same goods and
services to all, based on the same terms.

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7. Social and Environmental Responsibility
Means, a company recognizes its impact outside of
the marketplace.
Today, many companies look for ways to help their
communities through volunteer work or financial
investments.
They may also adopt measures to reduce waste and
promote a safe and healthy environment.

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Examples of Business Ethics
Business ethics are shown in different ways by different businesses.
Some businesses show ethics through their code of conduct,
While others are seen in the business value statement. Here are
some examples of business ethics practices:
1. Diversity in the workplace
A business can display its unbiased view and drive for equality by
employing workers of different backgrounds, genders, social
groups, and races.
This also provides a diversity of thinking and a varied pool of
knowledge.
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2. Prioritizing customer needs
Offering the best services to them.
This can be done by, foffering a replacement or a
refund for a faulty product purchased by a customer.
3. Customer data protection
Dealing with online transactions or services,
customer information is usually collected by
businesses for various reasons.

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4. Corporate transparency
Brings in clarity in a firm’s communication both with employees
and customers.
That is, communication is unambiguous, so there's no confusion
about the policies or priorities that guide business decisions.
Transparent corporate communications are also honest and
truthful.
5. Community outreach
Companies often feel an
This can take the form of volunteer programs for employees,
sometimes at the company's expense.
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Importance of Business Ethics
They are critical for success in modern business as they establish a code of
conduct that drives employee behavior across the organization.
 When all employees make ethical decisions, the company establishes a
reputation for ethical behavior.
Its reputation grows, and it begins to experience the following benefits;
Brand image and recognition and growth
Increased ability to negotiate
Increased trust in products and services
Customer retention and growth
Attracts talent
Attracts investors
Increased performance
Gaining a competitive advantage,
Saving businesses from future legal action.

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Guides an organization in these operations and keep them in
line with laws and regulations, thus enabling businesses to
maintain a positive public image and reputation of respectability.
Attracts the best talent.
Business ethics lay the foundation for proper employee care.
In addition, providing great welfare for employees improves
employee productivity and encourages them to stay loyal to a
business's vision in the long term.
Builds relationships between a business and its customers -
strong bond between them.

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Help to maintain a business's reputation
among investors, who look for transparency in a company's
dealings.
In a nutshell, they like to know exactly what their money is
being used for.
6. Environmental awareness
Many companies take environmental concerns seriously,
whether that means reducing waste or cleaning local land, water
and air.
There are various ways businesses act on this, such as reducing
air travel and using teleconferencing technology as much as
possible.
Businesses might also promote recycling in their offices by
providing receptacles to collect recyclable waste.
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Responsibilities of a business towards various Stakeholders
1. Consumers
Produce goods that meet the needs of consumers
Establish the lowest possible price with efficient and reasonable profit
to the business.
Ensure fair distribution of products among all sections of the
consumers.
Make the products more satisfactory to consumers through the study
of consumers needs.
Handle the consumers complaints more carefully and analyze them
properly.
Ensure consumers enquiries related to the company, its products and
services.
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2. Shareholders
Pay dividends
Ensure the safety of investment and higher rate of return on
investment.
Improve communication with shareholders
Ensure professional practices in day to day operations of the
business.
Encourage sports and provide recreational facilities.
Practice ethical marketing
Ensure fairness in relation to competition based on the rule of ethics

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3. Community
No pollution of the environment
Be socially responsible, i.e. Aiding hospitals, schools, colleges,
religious institutions, sports activities
Organize community forums/groups discussions to promote
better understanding of national and local affairs
Offer products of right quality and quantity at the right price
Distribute the products where the customers are
Provide after sales services
Provision of products that are safe
Ensure proper weight measures

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Responsibility to the Government (County &
National)
Paying taxes and rates
Maintain impartiality towards political affairs
Contributing towards economic conditions of the
country
Safeguard against illegal business practices availing
good in the black market
Abide by the government regulations
Avoid over exploitation of limited natural resources
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Drawbacks of Business Ethics
Trade-off between profit maximization and ethics,
and the time it may take to develop or adjust business
ethics.
There is the potential for the company to become
too focused on ethics, which can lead to compliance
issues and legal problems. ...
It can be difficult to enforce ethical standards, as it is
hard to determine what is right and wrong in every
situation.
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Reduces company profits
Time consuming
Not ideal for Small Businesses
Creates instability as they are changed from time to
time as per company needs and desires
It becomes inconvenient to change these standards
within the business practices many times***

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