Ethics, corporate governance and corporate behavior

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Ethics is not new for people in business. The corporate world has always had some rules, standards and norms for doing business. However these are generally changing with some social and cultural basis which can be different country by country, even though we might expect universal rules. When the company applies these standards or norms as a part of its responsibility we can call them an ethical code of conduct of business. Moreover ethics is also inevitably a part of business responsibility. Corporate behaviour should be ethical and responsible; that is why corporate promises for their shareholders and stakeholders have to behave fair, ethical and equitable. And of course ethics is inevitably related to governance

Defining ethics

Ethics shows a corporation how to behave properly in all its business and operations. However, business ethics is characterized by conflicts of interests. Businesses attempt to maximize profits as a primary goal on one hand while they face issues of social responsibility and social service on the other. Ethics is the set of rules prescribing what is good or evil, or what is right or wrong for people. In other words, ethics is the values that form the basis of human relations, and the quality and essence of being morally good or evil, or right or wrong. Business Ethics means honesty, confidence, respect and fair acting in all circumstances. However, such values as honesty, respect and confidence are rather general concepts without definite boundaries. Ethics can also be defined as overall fundamental principles and practices for improving the level of wellbeing of humanity.

Ethics is the natural and structural process of acting in line with moral judgments, standards and rules. Being a concrete and subjective concept, "business ethics" can be discussed with differing approaches and in varying degrees of importance in different fields. Indeed, it is highly difficult to define ethics and identify its limits and criteria. Accordingly, there are difficulties in discussing this concept in literature as it is ubiquitous in business life, at the business level, and in human life. According to what, how, how much and for whom ethics is or should be are important questions. It is not always easy to find answers to these questions (Aras & Crowther 2008a).

A business which does not respect ethical criteria and fails to improve them will disrupt its integrity and unity, i.e., its capacity to achieve its goal, and will lead to internal or external conflicts. Business ethics is the honest, respectful and fair conduct by a business and its representatives in all of its relations. A predicate question to the role of ethics in business is the question of why businesses engage in ethical practices. Some authors, notably Milton Friedman (1962), would strongly deny that a business has a responsibility to any group but the firm's shareholders.

To initiate corporate giving, for example, would be a fiduciary breach of management in Friedman's opinion: an agent for a principal is neither legally nor morally permitted to give away or "waste" the principal's capital (Joyner & Payne, 2002). Milton Friedman also argued that 'there is only one social responsibility of business - use its resources and engage in activities designed to increase its profits so long as it ... engages in open and free competition without deception and fraud' (Friedman, 1962).

However, ethical behaviour and ethical business has effects not only on stakeholders, and shareholders but also on the entire economy. We believe that when we act ethically in business decision-making process this will ensure more effective and productive utilization of economic resources.

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