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Business Ethics and Corporate Governance


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Chapter 3 : The Ethical Organization and its Corporate Code

The Ethical Organization - An overview

Characteristics of an ethical organization

Corporate moral excellence
Stakeholders Corporate governance
Definition of corporate code
Development of corporate code
Implementation of corporate code

Chapter Summary

In this chapter we discussed the characteristics of an ethical organization and the development and implementation of a corporate code. Three theories are commonly used to judge the ethical nature of organizations: theory of corporate moral excellence, ethics and stakeholder theory and ethics and corporate governance.

According to the first theory, the culture and values of an organization play an important role in developing an ethical organization. The second theory states that the behavior of the management towards its stakeholders plays a pivotal role in building an ethical organization. And according to third theory, good governance is necessary for building an ethical organization.

Organizations frame corporate codes that lay down ethical standards for employee behavior. The development of a corporate code involves identifying the key behavior, reviewing the codes containing the key behavior, communicating by distributing copies of the code and, finally, updating the codes according to the laws and regulations. Once the code is developed, it has to be implemented. An approach proposed for implementing the corporate code involves organizational structure, coordination, motivation and communication.

If an organization develops a corporate code to guide the behavior of its employees, and if the company's'Espoused and Values in practice are aligned then the organization can be termed as ethical organization.

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