BUSINESS ETHICS AND ORGANIZATIONAL PERFORMANCE

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BUSINESS ETHICS AND ORGANIZATIONAL PERFORMANCE

ABSTRACT

This study focuses on business ethics and organization: of selected companies in rivers state. Factors influencing unethical behaviour such as formal company policy, ethical climate of the industry, ethnic content, behavior of one’s equal, behaviour of a person’s superior etc were examined. Questionnaire were administratered and analyzed as the data collected were analyzed with the use of spearman’s correlation coefficient to determine the measures of the degree of relationship between two sets of ranked observation. It was however concluded that ethnics is the science of conduct, hence an integral part of business organization. Organizations should put in place code of conduct, statement of moral principles and maintain high moral standards and values to enhance overall organizational performance. Amongst four findings were first that there is a significant relationship between professionalism and profitability. This is because high ethical standards are expected from managers of business which will enable them to perform their duties devoid of mischief, illegal and questionable practices in the organization. Second, that there is a significant relationship between morality and return on investment. This is because morality is concerned with the principles of right and wrong behaviour and the degree to which an attitude is seen as the right or wrong is what morality stands for. Based on the findings of this study, the researcher recommends thatL1) company must have ethnical code and conducts that will formally direct and guide their employees. (2) Corporate policies that will build a culture of honesty, trust and integrity in the work environment should be formulated. (3) That all forms of reposition and discrimination in the place work should be avoided. (4) Companies should insist on professionalism. It was finally recommended that companies should put in place ethical programmes that will serve as a check on the ethical conduct of the organization members.

TABLE OF CONTENTS

Title Page i

Declaration ii

Dedication iii

Certification iv

Acknowledgment v

Abstract vi

Table of contents vii

CHAPTER ONE: INTRODUCTION

1.1 Background of the study 1

1.2 Statement of the study 5

1.3 Purpose of the study 8

1.4 Research questions 9

1.5 Research hypotheses 9

1.6 Significance of the study 11

1.7 Scope/limitation of the study 12

1.8 Definitions of terms 14

1.9 Organization of the study 15

CHAPTER TWO; REVIEW OF RELEVANT LITERATURE

2.0 Introduction 18

2.1 Business ethnics 19

2.1.1 Why business ethnics 20

2.1.2 Business and ethnics 21

2.2 Ethnics of finance 27

2.3 Ethnics of human resources management 28

2.4 Ethnics of sales and marketing 31

2.5 Ethnics of production 35

2.6 Contemporary views of business ethnics 36

2.6.1 Differing opinions regarding business ethnics 37

2.7 Ethical principles in business 38

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction 50

3.1 Research design 50

3.2 Sampling procedure/sample size determination 52

3.3 Data collection methods 54

3.4 Operational measures of variables 55

3.5 Test of validity and reliability 56

3.6 Data analysis techniques 57

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.0 Introduction 60

4.1 Questionnaire distribution and collection 60

4.2 Data presentation and analysis 61

4.3 Test of hypotheses 65

CHAPTER FIVE: DISCUSSION, CONCLUSION AND RECOMMENDATION

5.0 Introduction 75

5.1 Discussion of findings 75

5.2 Recommendation 77

5.3 Implication for research findings 77

5.4 Conclusion 78

5.5 Suggestion for further studies 79

Bibliography 80

Appendices

Questionnaire letter

Questionnaire distributed

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Over the years, a great deal of research has focused on business ethnics. Like many constructs in management, business ethnics. Has been conceptualized and measured in several ways. Common to all the conceptualizations of business ethics found in the literatures in a link with ethical principles and morals or ethical problems that arise in a business environment. previous studies have also demonstrated that business ethics is positively related to the process by which good conducts are applied in business (Machan), 2007:38). In addition, Watson (2003:56) stated that business ethics involves the exhibition of high level of integrity in business dealings, and in must apply to all aspects of business conduct which must be relevant to the conduct of individuals and business organizations as a whole.

According to Nwachukwu (2006:18), ethics is seen as the “Science of conduct”. It involves learning what is right and doing the right thing. Thus, when discussing the rules and principles that define right and wrong conduct, one is dealing with ethics.

Most researchers of business ethics treat the business firm as exhibiting good ethics when the organizational members known what is right or wrong in the workplace and doing what is right. The process of exhibiting good ethics is seen as the principles, policies and values that serve as operational guidelines for individuals and organizations for decisions concerning what is morally right and or wrong (Nwachkuwu, 2006:18). To Jaja and Okwandu (2006:51), ethics is the science relating to moral action and one’s value system. Managers envision ethics as dealing with principles or morality and what is wrong or right (Jaja and Okwandu, 2006:51). Ethics is concerned with motives and attitudes and the relationship of these attitudes to the good of the individual. Ethics has to do with action we wish people would take, not actions they must take. Then, values are interwoven with ethics, values are personal beliefs about the truth and worth of thoughts, objects from the laws as ethics may be distinguished from the laws. Ethics are internal to one, and it looks to the good aspect of an individual rather than society as a whole, and concerns the “why” of one’s actions. The law comprises of rules and regulations pertinent to society as a whole, and is external to one and concerns one’s actions and conduct. What did the person do or fail to do as opposed to why did the person act as he or she did? These are issues in ethics (Jones and Parker, 2005:19).

Ethics concerns the good of an individual within society where law concerns society as a whole as opposed to individual in society. Laws can be enforced through the courts and states while ethics are enforces via ethics committees and professional codes (Jaja and Okwandu, 2006:51; Seghin, 2003: 49; and Jackson, 2004:16). Ethics have also been an integral part of business. Throughout business, one can find codes of ethics, statement of moral principles, treatise on maintaining high levels, and recorded discussion of moral and ethical issues.

Production of quality product fit for human consumption is human activities for business. These human activities and how society views them directly affects the morals, customs and beliefs of human kind. Business ethics provide the standards for professional behaviour and are the study of principles of right and wrong conduct for entrepreneurs and manager. Ethics promote the study of morality, mental judgment and moral problems.

Consequently, the study of business ethics provides business owners with the parameters what is acceptable and unacceptable behaviour. It provides the standard against which people can compare their behaviour. It provides a focus and common goal. It helps business owners to deal with managerial mischief which includes illegal, unethical or questionable practices of individual managers or organizations. It is a common believe that organizations have goals or objectives which must be accomplished to achieve goals. All organizations are purposive. They are established to accomplish an objective. Individuals in an organization work in order to help accomplish these objectives (Nwachukwu, 2006:11).

These individuals wish to accomplish their own goals through the organization when the goals of the individual and the goals of the organization are the same, we have goal congruency. A company may have many or multiple objectives. The objectives could be stated to cover major operation responsibility areas such as, shareholders, customers, employees and society, and joint venture partners. These goals cover the major stakeholders and they must be achieved through positive indices that indicate organizational performance, such as return on investment, sales volume, profitability and profit margin among others gap this study explores to analyze the interactive, between the dimensions of business ethics and organizational performance. Hence, this study is intended to examine “Business Ethics and organizational performance with focus on selected companies in Rivers State.

1.2 STATEMENT OF THE PROBLEM

Business ethics has been the focus of many studies in the management literature over the last 25 years. This attention is likely due to several reasons, the control of professionalism in business practice, the determination of the main aim which determines the fundamental purposes of a company, issues regarding the moral rights and duties between a company and its shareholders, and ethical issues concerning relations between different companies as well as the corporate social responsibility of the firm in relation to how ethical rights and duties existing between companies and society is debated (O’neiil, 1998:27). Specifically, discussion on ethics in business is necessary because business can become unethical, and there is plenty of evidence today on unethical corporate practices.

Even Adam Smith (1920:13) opined that “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in conspiracy against the public or in some contrivance to raise prices”. Business does not operate in a vacuum. Firms and corporations operate in the social and natural environment. by virtue of existing in the social and natural environment, business is duty bound to be accountable to the natural and social environment in which it survives (Viraghalmy, 2003:31).

Irrespective of the demands and pressures upon it, business by virtue of its existence is bound to be ethnical for at least two reasons. One, because whatever the business does affects its shareholders, and two, because every juncture of action has trajectories. One of the conditions that brought business ethics to the fore front is the demise of small scale/high trust and face to face enterprises and emergence of huge multi-national corporate structures capable of drastically affecting everyday lives of the masses. Thus, the overriding assumption is to ascertain how professionalism in business practices can be developed? In what ways can individual’s behaviour in corporate bodies be ascertained? Identification of the abilities and skills of each employee in the company, ascertaining how the employee is capable of working with other colleagues given that behaviour, structure, and processes are all crucial to the overall and successful operation of a company while working with people of diverse cultural backgrounds.

Based on this, it will be necessary to examine the ethical climate of the organization. The ethical climate of an organization refers to the process by which decisions are evaluated and made on the basis of right and wrong. When people make decisions that are judged by ethical criteria, these questions always seem to get asked why did he or she do it? Good motives or bad ones? His responsibility or someone else’s? Who get the credit, or the blame? So often responsibility for an unethical act is placed squarely on the individual who comments it but the environment has a profound influence, as well. (Baridam and Nwibere, 2008:28). Thus, the problems to be investigated in this study will be to examine how professionalism, a dimension of business ethics affect profitability, cans which is a dimension of organizational performance. In what ways can value system enhance the realization of sales volume? To what extent can morality influence return on investment? How can rules affect profit margin? Based on this, the study will explore the interactive relationship of the dimensions of business ethics and organizational performance.

1.3 PURPOSE OF THE STUDY

According to Borgerson and Schoreder (2008:96), evidences has shown that business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. Consequently, the man objectives of this study are to:

1. Investigate how professionalism can influence profitability.

2. Identify the effect of value system on sales volume.

3. Examine the extent to which morality can influence return on investment.

4. Ascertain how rules can influence profit margin.

5. Identify the common conceptualizations of business ethics within the Nigerian work environment.

6. Investigate the common conceptualizations of organizational performance within the Nigerian work environment.

1.4 RESEARCH QUESTIONS

In view of the objectives of this study, an attempt will be made to address the following research questions.

1. What is the relationship between professionalism and profitability?

2. To what extent can value system affect sales volume?

3. Does morality influence return on investment?

4. What is the relationship between rules and profit margin?

1.5 RESEARCH HYPOTHESES

Using the literature review, conceptual, framework, and the research question as the backbone to the study, the following hypotheses were formulated.

H01: There is no relationship between professionalism and profitability.

H02: There is no relationship between morality and return on investment.

Figure 1.1 Conceptual Frameworks

Text Box: Professionalism Business Ethics Organizational Performance

Source: Survey Data, 2010

1.5.1 OPERATIONAL DISCUSSION OF THE CONCEPTUAL FRAMEWORK

The conceptual framework seeks to ascertain the interactive relationship between the measures of business ethics and organizational performance. Business ethics is a decision involving choosing between wrong or right, and accepting the right one. It involves moral principles and high level professionalism to avoid unethical business activities. Hence, morality which is the process of adhering to what is good, and professionalism, which is the exhibition of high work standards are the measures of business ethics. On the other hand, organizational performance is the level at which the achievement of a firm are identified by the use profitability index and return on investment as score cards to ascertain the degree to which a company can carry out its activities and realize the set objectives. Thus, profitability, which is the rate at which revenue, is greater that expenses, and return on investment, which shows how well corporate resources are used to achieve set objectives by efficient and effective management of corporate resources are the measures of organizational performance.

1.6 SIGNIFICANCE OF THE STUDY

This study is carried out with a view to increasing the wealth of knowledge accumulated so far on the subject matter, business ethics and organizational performance. The study will also expose the objectives of the firm with respect to how business ethics is applied in the decision making process of a company in order to achieve set goals which the realization of the expected performance for proper competitive advantage.

In addition, Nigeria organizations, businessman and women, students, resources owners, and lecturers in management will stand to gain a lot as the study will contribute immensely to their wealth of experience in the area of business ethics, and it will stimulate thoughts in creative minds as a basis for further research.

1.7 SCOPE/LIMITATION OF THE STUDY

The study is supposed to focus on the activities of selected companies in Rivers State from 1985 to 2010 in terms of business ethics and organizational performance. Specifically, the study will investigate selected companies in Rivers State of Nigeria, and they include Rivers vegetable oil company limited, Dutil Prima Nigeria Limit ed, Epenal Boats Builders, Nigeria Limited, first Aluminum Nigeria Limited, and New Engineering Nigeria Limited.

However, in the process of carrying out this study, the researcher encountered some limitations and constraints. A limitation would be any constraint beyond the ability of the control of the researcher that may affect the internal validity of the study. The internal validity of an experiment is the extent to which extraneous variables have been controlled by the researcher, so that any observed effect can be attributed solely to the treatment of the variable (Gall, et al, 1996:96).

This study is supposed to cover selected companies operating in Rivers State of Nigeria so as to collect adequate data on the interactive relationship of business ethics and organizational performance. This intended scope could not however be attained due to cost of collecting data, and considering the time available for the research.

The study, therefore, will cover the major headquarters of the twenty-three local government areas of rivers state: Okrika, Bonny, Port Harcourt, Opobo, Bori, Omoku, Sakepenwa, Nchia-Eleme, Okechi, Kpor, Rumuodomanya, Abua-Central, Ngo, Ogu, Eberi-Omuma Isiokpo, Abonnema, Ahoada, Buguma, Akinima, Degema, Afam and Emohua. This is based on the spatial distribution of companies in Rivers State of Nigeria, which shows a high concentration of these companies in a few administrative and urban duties. Data collected from the companies in these headquarters of local government areas were generalized to be a true presentation of the other parts of Rivers State not covered in this study.

Another limitation was the attitude of most managers of the companies towards giving out information in good time. Besides, most of the managers are very reluctant to part with information about other jobs or giving vital information to competitors. All these frustrated the efforts of the researcher to retrieve the entire questionnaire that were administered. These limitations not within-standing, the sample technique adopted for this study will provide valuable findings that will make it add some information to the already existing body of knowledge.

1.8 DEFINITION OF TERMS

To avoid possible confusion, ten terms will be operationally defined.

Business

The sum total of all activities involved in the production of goods and services for profit.

Ethics

Science relating to moral action and one’s value system.

Business Ethics

A professional ethics that examines ethical principles and moral problems in the business environment.

Organizational

Connected with a company

Performance

A means of accessing results.

Organizational Performance

The indices indicating the achievement of corporate goals.

Professionalism

The degree to which work standard is highly regarded.

Profitability

The excess of revenue over expenditure

Morality

The extent to which good will be chosen for bad

Return on Investment

An indication of how well resources are used effectively to generate profits.

1.9 ORGANIZATION OF THE STUDY

The study is organized into five chapters. Chapter one deals with the introductory aspect of the study, which is the background of the study, statement of the problem, purpose of the study, research questions and research hypotheses. Others are: significance of the study, scope/limitations of the study, definition of terms and organization of the study. Chapter two deals with the review of related literature on the subject matter. Chapter three attempts to describe the research design, sampling procedure/sample size determination, data collection method, operational measures of the variables, test of validity and reliability, and data analysis technique. Chapter four deals with the presentation and analysis of data. And, chapter five presents the discussion, conclusions, and implications of the research findings, recommendations and suggestions for further research.

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