Business Ethics & Stakeholders
Prioritize Customers & Stakeholders
The key stakeholders of an organization are employees, customers, shareholders, and suppliers. The organizations have certain obligations to them and these obligations are often affected by the selfish interests of the organization. Customers have a very important role in establishing the reputation of an organization. Therefore it is important to offer high-quality products that satisfy the customer’s requirements for the success of the company.
Today, the contribution of customers in developing ethical programs and social responsibility standards is not quite clear. In a study, the ethical environment of a firm was found to be positively associated with customer loyalty. However, there are many variants of customer loyalty.
In a competitive market, customer focus plays a key role in the performance of an organization. Also it is to be made sure that all unethical behavior rising from strong competition such as directly attacking the competitors through advertisements or any other means should be strongly avoided. Such behavior can even lead to legal disputes between competitors.
The performance of the organization is not in their discretion but in the hands of their stakeholders. Therefore it is necessary to maintain good faith and fair dealing practices when dealing with the stakeholders especially customers. Good faith and fair dealing can help you satisfy the expectations of the stakeholders.
Ethically questionable practices can also lead to lose of trust from the customers and stakeholders and can even lead to legal actions and lawsuits against the organization.
Legal Aspects of Consumer Protection
There is a strong base of legal protection for ethical responsibilities. At the federal level, the consumer protection laws are enforced by the Federal Trade Commission (FTC). Within Federal Trade Commission, the consumers are protected from deceptive and fraudulent business practices by the Bureau of Consumer Protection. There are consumer protection statutes and deceptive trade practices laws at the state level.
Stakeholders’ trust in an organization can be lost through false and misleading communications. Therefore ethical advertising is becoming an issue in organizational communications. Exaggerated claims and facts that are concealed can become a part of advertising communications. These can range in seriousness from the unethical behavior to the illegal behavior.
The Sarbanes–Oxley Act
Strong directives to encourage ethical leadership have been provided by the Sarbanes-Oxley Act of 2002 and the United States sentencing commission guidelines. According to the Sarbanes-Oxley Act, it is required for the boards of directors to provide oversight for all types of auditing. They are responsible for the developing of ethical behaviors. The Federal Sentencing Guidelines for Organizations makes the board members of the organization responsible for the ethical and legal compliance.
It is two different aspects what a company can do for its success and what the company should do for its success.
Establishing and maintaining stakeholder relationships
There are conflicts between stakeholders such as customer and other stakeholders, including the communities that deal with environment or economic development. Some customers prefer a self-centered approach while some prefer organized communication and actions as a group.
Organizational ethics programs have become popular for maintaining an ethical relationships with all the organization’s stakeholders. Often we see organizations creating an ethical or an unethical corporate culture that is dependent on their leadership and the commitment they have to the values of stakeholder relationships.
A strategic approach should be taken to improve organizational ethics which includes establishing, and monitoring ethical values. Main issues faced by today’s customers include privacy, identity theft, etc. Forming an ethical environment that considers the customers needs must be based on a foundation of ethical values that make strong connections between the standards and the actions of organizations.