A study of the relationship between ethics and business at two selected Johannesburg organisations and how it affects their objectives
TABLE OF CONTENTS
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General description and background
????? 2.1 Population of interest
????? 2.2 Approach to solve the problem
Aims and objectives
Literature review and the use of theories and concepts
????? 4.1 Definition of ethics
????? 4.2 Necessity of ethics within the company
????? 4.3 Benefits of a code of corporate conduct
Research design and method
????? 5.1 Data collection
????? 5.2 Methodology
????? 5.3 Sampling
Analysis of data and findings
????? 6.1 Research results
????? 6.2 Questionnaire data analysis
Recommendations
????? 7.1 Management
????? 7.2 Personnel
Conclusions
References and sources
10. Annexure
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1. GENERAL DESCRIPTION AND BACKGROUND
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The new trend in business is to achieve profitable operations ethically. Companies are investing huge amount of monies to certify conformity with ethics, corporate governance and corporate social responsibility.? Their objectives are set according to the fore mentioned to guarantee good reputation and success in the operations. ??
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No man is an island.? The same applies to business.? The communities within which businesses operate contribute to their success as they avail their resources (human, natural and often financial) to those entities.? It makes business sense to consider them in setting the objectives of companies.? The reputation of organisations is also at stake as a bad balance between their objectives as set by their owners and their corporate social responsibilities might affect their operations adversely.?
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Organisations achieve their objectives thanks to their personnel.? The personnel have to accept the values promoted by firms in order to reach the objectives in the same manner.? The values have to be ethically right to be accepted by the workforce.? If not, they will be some reluctance on the part of employees in conforming to those values; as a result the companies? success may be compromised.
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It is therefore imperative for Centro Internet Caf? and Ubuntu CC to address ethical issues to avoid disastrous consequences.? Should it slide, not only will businesses lose productivity and profit, but also will they face bankruptcy.? It is crucial for enterprises to act quickly through the setting of code of ethics, which the personnel should adhere to.
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1.1 Population of interest
The targeted population of interest is the personnel of both Centro internet caf? and Ubuntu CC.? The census size is sixteen (16) staff members: two (2) managers and five (5) workers for Centro Internet Caf? and two (2) managing partners and seven (7) employees for Ubuntu Close Corporation.????
The researcher chose this sample because he observed them over ten (10) days.? He will focus on employee?s theft despite the many ethical issues facing businesses.
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The different hypotheses are formulated as follows:
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Hypothesis 1
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Employees? theft affects the performance of organisations
Employees? theft does not affect the performance of organisations.
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Hypothesis 2
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Employees? theft affects equally different industries.
Employees? theft does not affect different industries equally.
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1.2 Approach to solve the problem
The researcher approached the management of Centro Internet Caf? and Ubuntu Close Corporation and obtained statistics on the value of missing cutleries and USB Flash discs as well as statistics on profits achieved. The statistics covers the period from August 2006 to April 2007.? It enabled him to work out the variations in theft during the period.
Data were captured and computed by using a computer programme: Microsoft Excel.
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Alternatively, a questionnaire was designed for the same population of interest.
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2. AIMS AND OBJECTIVES
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This research study will attempt to achieve the followings:
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To demonstrate the necessity of an ethical culture within the organisation and how that culture should be in line with the objectives of the enterprise. ?Through observation, the researcher will identify the areas of ethical weakness of the subjects to the study and make suggestions on how to improve them for the benefits of the two organisations under study.
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To identify the benefits that can be derived from compliance with an appropriate ethical culture.? Based on his observation, the researcher will focus on how Centro Internet Caf? and Ubuntu CC could perform better, should they set and abide by a code of ethics knowing that the cost of setting an appropriate code of ethics is high.
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To recommend the right attitude in terms of ethics.? With the emergence of corporate governance and corporate social responsibility in the new business environment, organisation?s objectives should therefore be attuned to comply with an accepted code of corporate conduct.? Failure to do so, can impact harmfully on its performance.? Consistency to ethical values does not come cheap, but the corporation stands more chances to succeed in its industry since it will be accepted within the community for its values and good status.
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Within the company, there are also ethical challenges that management face.? The individual behaviour of employees has to be ethically oriented not to affect the functioning of the company.? The attitude of employees towards the assets of the firm as employees? theft limits the resources available to satisfy the needs of customers.? Also, voluntary absenteeism and lack of involvement from the workforce will affect the results of the enterprise and will need to be addressed.? Should they not, the objectives of the organisations will be affected negatively.? Hence, directors should find ethical ways to get their personnel to abide by the norms of the enterprises.?
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3. LITERATURE REVIEW AND THE USE OF THEORIES AND CONCEPTS
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3.1 Definition of ethics
Ethics is defined as moral principles that control or influence a person?s behaviour.? It is also said to be a system of moral principles or rules of behaviour.
Ethics is closely related to corporate governance.? Corporate governance is defined by the King Report (2002) as the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations.
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3.2 Necessity of an ethical culture within the organisation
For Rossouw (2002) ethics concerns itself with what is good or right in human inter-action.? He addresses the issue of business ethics through different perspectives that he called the social scientific position, the ethical control position, the managerial position, the organisational interest position and the ethical guidance position.? Also, he explained different ethical approaches: the descriptive approach that is informative, the prescriptive approach that is normative and the meta-ethical approach that relates to issues of judgement.? Rossouw explained the neglect of ethical values in business trough the concept of myths.? He identified six myths that business people use to justify the neglect of ethics in business.? However, for each myth the author of the books found valid reasons not to be unethical.? He also tackled moral issues in business.??? Lastly, he suggested ways to deal with ethics in business.? What came out of that is the principle of corporate governance, the codification of ethics, the fight against fraud and the building of trust in the practice of business.
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Gandolfo (2004) reported that Pope John II acknowledged that ethical values are above the pursuit of maximum profit.? He said: ?It is necessary, rather, to always refer to the higher values of human living if one wants to help the true growth and full development of the community.? The defunct pope quoted the Italian catholic economist Giuseppe Toniolo: ?Christian morality must be considered ?as the most powerful factor in awakening economic energy in peoples and in guaranteeing its most regular and efficacious relations.?
Gandolfo admits that profit is the result of a good use of productive factors and duly satisfaction of corresponding human needs.? He suggested that profitability is not the sole needle of the firm state.? The financial statements might be good, but the personnel who are the most valuable assets of the organisation dishonoured and their dignity snubbed.? ?Besides being morally inadmissible, this will eventually have negative repercussions on the firm?s economic efficiency. In fact, the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavouring to satisfy their basic needs, and who form a particular group at the service of the whole of society.?
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Brooks (2004) spoke about the expectation that business exists to serve the needs of its shareholders and the society.? He specified that it is unlikely that businesses will achieve its long-run strategic objectives without the support of key stakeholders such as shareholders, employees, customers, creditors, suppliers, governments, host communities and activists.? He insisted on the fact that businesses get their reputation from the credibility that their stakeholders place in the corporate commitments, the reputation of the company, and the strength of the competitive advantage.? There is a high expectation on the customers? side that the organisation?s activities will respect their values and interests, giving rise to the emerging of accountability and ethical matters.? Corporations now have to account for what they are doing and how they are doing it.? Also, there is a realistic belief on the stakeholders? side that they can have a major impact on corporation?s consumer markets, capital markets and the support offered by employees and lenders.? Furthermore, reforms were asked for business to be more accountable to the investors and professional accountants to bear in mind that they should protect the interests of investors and other stakeholders.? However, as the achievement of non-investor stakeholders are becoming barriers to the overall objectives of the organisation, new regulations need to be set to meet the ethical expectations of stakeholders.
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De George (1989) sees an obvious connection between business and ethics.? He explains that by giving no chance of survival to a businessman, whose assets are being stolen by his employees or who is committing fraud.? Besides, he recognises the need of businesses to operate from moral perspectives, because immoral actions are in many instances bad for business.? Business operations influence individuals, society and the common good.? If morally sound operations are in the common good, subsequently operating a business according to moral norms is in the common good.
Also, a reason for making a practice illegal is its immorality. De George said: ?if immoral practices are not policed by an industry, but are engaged in until made illegal, the resulting legislation is frequently excessively restrictive, over-determined, and more costly than uncoerced compliance with normal norms.?
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3.3 Benefits of a code of corporate conduct
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Sir Worcester (2007) acknowledges that an ethical business has more chances to succeed than an unethical one.? According to him, unethical behaviour is bad news for shareholders and employees.? He emphasises that a code of ethics should be adhered to, to be worthy.? Employees should blow the whistle in an unethical situation and know that something is going to be done against that.? The code of ethics needs to become a fundamental part of the enterprise and need to be monitored. Good business ethics is not jus good for the business, but for the whole business industry.?? In addition, he confessed that there a close relationship between ethics and financial performance.
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Cory (2001) said that rights of minority shareholders have not been safeguarded to the advantage of companies and majority shareholders.? The resources of the organisation are used to serve first the interests of the powerful shareholders and the objectives of the organisation are oriented to satisfy their private agenda.? Cory admitted that the minority shareholder is powerless in front of the unethical business man, who has means to afford the best lawyers and is highly connected.? The latter enjoys excessive privileges and benefit from inside information as he is influential and is hence the first one to gain from any opportunity available within the company. Yet, avenues have been developed to protect minority shareholders through the internet, transparency, which allows free, instantaneous, interactive communication between shareholders, between shareholders and companies and between shareholders and the institution that protect their interests; activist association through the organisation of campaigns that will banish the unethical business man instead of envying him, to refuse their donations, to honour them in any kind and to blacklist them; and the ethical funds, which will make life more difficult for the powerful shareholders who gain advantage from the inside information, who cause the collapse of shares price in order to buy minority shareholders out and who act legally but unethically.
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Meanwhile, Wyburd (1998) tackles ethical concerns in areas, where for some reasons competition is limited or restricted despite the possible intervention of the government.? Necessary measures need to be taken to protect the consumer.? He extended his concerns to foreign countries, where precautions are taken to protect the local market.?
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A recent (anonymous, 2003) stated chief executive officers who have committed their companies to ethics, have done so to achieve long term profitability.? The benefits that companies derive from ethics are among others the promotion of a strong public image and avoiding criminal act of omissions which can lower potential fines.? For the investment made to be line with ethics, the benefits that are obtained are well too high.
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4. RESEARCH DESIGN AND METHOD
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In establishing the relationship between business and ethics and the effect of the latter on the objectives of the business, the researcher adopted the scientific observation method as his aim is to confirm the close liaison between business and ethics and to analyse the impact of that liaison on the corporate objectives.
The scientific observation method is the systematic process of recording the behavioural patterns of people, objects, and occurrences as they are witnessed (Zikmund: 2003).
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4.1 Data collection
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Statistics were obtained from the management for the period August 2006 to April 2007, which is nine (9) months.? Data were taken from the organisations computer systems.
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4.2 Methodology
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The researcher made use of descriptive statistics and measures of variability to conclude whether hypotheses ought to be discarded or not.
Data were also useful to quantify the variations in profits due to employees? theft during the targeted period and to contrast the results of the two organisations under study.
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4.3 Sampling
A questionnaire was compiled to gather supplementary information, relevant to the subject matter.? The questionnaire was distributed among the population of interest and the researcher made sure that they understand its content.? They were assured of the confidentiality of their information and we suggested that they ask questions when they needed clarity.
Other variables such as earnings, ranking, and experience were taken identified and included in the questionnaire.? From the questionnaire, the researcher could have an insight regarding ranking, experience, earnings, knowledge about ethics and views on the use of the organisations? assets of the personnel of both the Centro Internet Caf? and Ubuntu CC.
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Hypothesis 1
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Employees? theft affects the performance of organisations
Employees? theft does not affect the performance of organisations.
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Hypothesis 2
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Employees? theft affects equally different industries.
Employees? theft does not affect different industries equally.
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The two industries are the information technology industry and the leisure industry.
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We used correlation to describe the relationship between variables for the two hypotheses.? The results were processed through Microsoft Excel.
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5. ANALYSIS OF DATA AND FINDINGS
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5.1 Research results
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The researcher had a satisfactory rate of return (87.5%) on the questionnaire as out of the 16 issued out, he received feedback on 14.
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Hypothesis 1
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Employees? theft affects the performance of organisations
Employees? theft does not affect the performance of organisations.
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Centro Internet Caf?
Ubuntu Close Corporation
Month
Value of stolen goods
Profits
Total
Value of stolen goods
Profits
Total
06-Aug
R 725.00
R 4,230.00
R 4,955.00
R 1,062.00
R 12,302.00
R 13,364.00
06-Sep
R 630.00
R 4,615.00
R 5,245.00
R 985.00
R 12,436.00
R 13,421.00
06-Oct
R 825.00
R 4,165.00
R 4,990.00
R 652.00
R 13,040.00
R 13,665.00
06-Nov
R 598.00
R 4,615.00
R 5,213.00
R 930.00
R 12,512.00
R 13,442.00
06-Dec
R 960.00
R 4,131.00
R 5,091.00
R 1,327.00
R 11,726.00
R 13,053.00
07-Jan
R 1,020.00
R 3,942.00
R 4,962.00
R 1,421.00
R 11,643.00
R 13,064.00
07-Feb
R 743.00
R 4,222.00
R 4,965.00
R 782.00
R 12,938.00
R 13,720.00
07-Mar
R 698.00
R 4,548.00
R 5,246.00
R 836.00
R 12,947.00
R 13,783.00
07-Apr
R 725.00
R 4,615.00
R 5,340.00
R 896.00
R 12,938.00
R 13,834.00
Total
R 6,924.00
R 39,083.00
R 46,007.00
R 8,891.00
R 112,482.00
R 121,346.00
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Table 1: Stolen goods value and profits of Ubuntu CC and Centro Internet Caf? for the period August 2006 to April 2007.
Centro Internet Caf?
Mean = R 5112.00
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Median = R5091.00
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Mode: R725.00 and R4615.00
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r = -0.87
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Since the data used are quantifiable, the researcher used the Pearson?s simple correlation coefficient for the variables.? The above coefficient shows a relatively strong inverse relationship. It means, the greater the value of X (Employees? theft), the less the value of Y (Profits).? The probability of this correlation occurring is 79%, which is significant.? Based on this, it is right to say that employees? theft affect the profits of organisations.
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Ubuntu CC
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Mean = R13483.00
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Median = R 13442.00
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Mode = R12938.00
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r = -0.97
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The Pearson?s simple correlation coefficient shows a relatively strong inverse relation between the profits and the employees? theft.? The greater the value of employees? theft, the lower the profits will be.? The probability of this correlation occurring by chance is 50%, therefore profits are affected by employees? theft.
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Hypothesis 2
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Employees? theft affects equally different industries.
Employees? theft does not affect different industries equally.
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Ubuntu CC
Percentage
Centro Internet Caf?
Percentage
Profits
R 112,482.00
93%
R 39,083.00
85%
Theft
R 8,891.00
7%
R 6,924.00
15%
Total
R 121,373.00
100%
R 46,007.00
100%
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Table 2: Employees? theft Vs Profits
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Centro Internet Caf?: Theft Vs Profits
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Ubuntu CC: Theft Vs Profits
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The information gathered indicates that the Information Technology industry (15%) is far more affected by employees? theft than the leisure industry (7%).? The new developments in the technology industry might be the cause as employees are always keen to possess the latest technologies.? However, the leisure industry lacks innovation. Employees are not going to steal the same items all the time.
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5.2 Questionnaire data analysis
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The data collected from the questionnaire indicate that 37% of employees do not know what ethics is.? This is probably the result of lack of information.?
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69% of employees admitted that they use the organisation?s equipments for their own purposes.? The reason for that is probably because 81% of them are not happy with their earnings.
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A huge 92% would like to have a say in the decision making of their organisation.? Maybe because 46% of the personnel believe that their organisation does not have a good reputation in the community within which it operates.
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However, 56% of employees think that their organisation has a good reputation.? 73% say so, because of the good quality of products and services that they offer.? 69% think it is thanks to their low prices, while 74% of them say that the explanation is in their professionalism.
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A disappointing 8% indicates that the good reputation may find its roots in the contribution to the development of the community.? This need to be addresses since staff members assume that their employers are not doing enough for the community.
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6. RECOMMENDATIONS
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6.1 Management
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?? Set a code of corporate conduct for everyone within the organisations.? The management should make sure the personnel believe in that code in order to adhere to it.
?? Enforce the application of the code of ethics within the company to guarantee an ethically sound environment in the organisations.
?? Consider reward systems for the employees who show strict conformity to the code of corporate conduct.
?? Ensure that the organisations comply with the principles of corporate governance and corporate social responsibility.
?? Organise workshops to keep everyone within the company in touch with the new developments in ethics, corporate governance and corporate social responsibility.
?? Addressing some of the issues affecting the community within which they operate.
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6.2 Personnel
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?? Show compliance with the code of corporate conduct.
?? To inform the management when an unethical behaviour is noticed.
?? To avoid making use of the organisation?s equipment for personal purposes.
?? Be an example of ethical behaviour at workplace
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7. CONCLUSION
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Ethics has become part of business. As long as an organisation wants to be successful in the long run, it has to abide to ethical principles.? In today?s business environment, compliance with ethics makes business sense.? Companies are making sure that they have code of ethics and directors in addition to the whole personnel team must respect it.? Huge amounts of monies are being invested for the company?s compliance with ethics and corporate governance.? Though, the corporation should emphasise more on the personnel believing in the code of ethics rather than in setting them just to comply with the law and be in conformity with the government agencies.
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Organisations? objectives should be set to be achieved ethically.? When setting objectives, all the stakeholders contributing to their achievement and making their resources available should be considered to keep them motivated and interested in achieving them.? The ethical attitude within the firm could make it easier or more difficult to reach the entity?s goals.? Objectives should therefore be revised depending on the company?s having the means to achieve them ethically or not.
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?REFERENCES AND SOURCES
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Anon. (2003). Business ethics benefits. Available from: http://www.cobalt-solutions.com/index_files
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Brooks, L.J. (2004). Business & professional ethics for directors, executives & accountants. 3rd edition. USA: Thomson South-Western
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Cory, J. (2001). The ethical revolution of minority shareholders. USA: kluwer academic publishers
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De George, T. (1989). Moral issues in business. In: Malachowski, A. (ed) Business ethics: critical perspectives on business and management, vol.1. London and New York: Routledge
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Gandolfo, C. (2004).? Ethics comes before profit, pore tells bankers.? Available from:http://www.catholic.net/belief_and_business/template_article.phtml.? (Accessed 23 May 2007)
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Roussow, D. (ed) (2002). Business ethics in Africa. Oxford University Press
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Wydburd, G. (1998). Limits to competition. In: Malachowski, A. (ed) Business ethics: critical perspectives on business and management, vol.2. London and New York: Routledge
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Worcester, R. (2007). Why an ethical business is likely to produce a success story. Available from: http://www.telegraph.co.uk/money/main.jtml. (Accessed 17 May 2007)
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ANNEXURE
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ETHICS QUESTIONNAIRE
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The information received in this questionnaire is strictly confidential and will be treated as such.
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This questionnaire aims at assessing the beliefs of employees on ethical values within the business.
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????????????????? 1. Current Position
Please indicate with an X
Managerial
Consultant
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????????????????? 2. Duration of employment
More than 6 months
Less than 6 months
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??????????????????????? 3. Do you know what ethics is?
Yes
No
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??????????????????????? 4. Do you think using business?s equipments for personal ??????????????????????????????????? purposes is acceptable?
Yes
No
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????? 5. How do you feel about your earnings?
Very satisfied
Satisfied
Dissatisfied
Very dissatisfied
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????? 6. Would you like to have a say in the decision making of the ???? business?
Yes
No
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??????????? 7. Do you think your organisation has a good reputation in ???????????????????? the ??????????? community?
Yes
No
??????????? 8. If the response in the previous question is yes, what in ??????????????????????? your opinion are the reasons?
Reasons
Yes
Unsure
No
Quality products/Services
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Low prices
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Professionalism
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Contribution to the development of the community
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LIST OF TABLES
Table 1: Stolen goods value and profits of Ubuntu CC and Centro Internet Caf? for the period August 2006 to April 2007.
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Table 2: Employees? theft Vs Profits
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Business Ethics Through Film, BUAD 609 Xavier University MBA Program By Brett Dickson, Leah Busam, Andy Doster & Kenny Rod newparadigmbusinesssolutions.com
Video Rating: 4 / 5
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