This paper looks at how ethics can affect the performance of business organizations. It has looked at the various ways through which morality within the financial management industry affects the performance of these industries. It has also illustrated how a number of companies have fallen because of failing to put into ethical considerations.
Ethics can simply be defined as the study of morality. Financial management can be defined as the act of planning, controlling, as well as organizing a company’s financial resources. It can also be defined as the act of managing the individual finances of people. It is very possible to balance financial management and ethics (Woodall, 1986).
The benefits of ethics to organizations cannot be overemphasized. It should however, be noted that despite the benefits, a number of companies have failed in the past simply because of ethics related issues. That is why ethics in business has greatly been looked at.
A number of banking institutions have collapsed due to their elimination of ethical values as well as the loss of moral values. Despite the fact that ethical factors affect banking institutions more that other businesses, several other companies have also been affected in the recent past.
It should be noted that an organization’s culture is very critical for the promotion of ethical practices. Similarly, it should be noted that ethical collapse is always followed by financial collapse. When an organization has ethical issues, it is very likely for the organization to face financial demise. When organizations experiences ethical problems, it is very hard for their financial performance to be improved.
While a number of companies associate ethics with efficiency within the companies, a number have always got out of business due to ethical issues. As earlier stated, perceived ethical as well as unethical behavior have serious impacts on the reputation as well as the share prices of companies. A number of companies have in the recent past failed to perform as expected due to myriad ethical issues (Verschoor, 1998).
It should be noted that a number of consumers favor the companies with policies that aims at conserving the environment. Similarly, companies that violate human rights are not always liked by consumers. This has substantial effects on the financial performance of these companies. It should therefore be noted that business can never be separated from the wider society.
Environmental management is one of the major ethical issues that companies should keenly look at. Companies with programs that are aimed at environmental conservation are always. Companies should come up with environmental legislation.
Unethical behaviors by companies can cause serious sales harms. In the present times, a number of customers will buy from companies that are ethical in their operations. They will easily boycott the organizations that are not ethical (WM Company, 1997).
A number of employees also like working for companies that are ethically responsible. Due to this, companies that are not ethically responsible will always be shunned by employees. Therefore, ethics also affects the productivity of employees within the organizations.
As noted, the effects of ethics on the performance of organizations will affect the entire economy. It should be noted that these effects have influences on the entire economy.
There are indeed a number of adverse effects which are brought about by failure of organizations to put ethical consideration in the forefront. As noted, a number of companies have dialed to succeed in the past simply because of failing to put into practice ethical practices.
Verschoor (1998). Corporate Performance is Closely Linked to a Strong Ethical Commitment. Business and Society Review, 104 (4), 407-415.
Woodall (1986). The Cost of Imposing an Ethical Constraint on an Investment Portfolio. Retrieved from www.sristudies.org