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Business ethics (also known as corporate ethics) is a type of applied ethics or professional ethics that looks at ethical principles as well as moral or ethical issues that emerge in the workplace. It applies to both people and huge companies and encompasses all aspects of business activity.
Business ethics has both normative and descriptive dimensions. As a business practice and a professional specialty, the field is mostly normative. Academics utilize descriptive approaches to try to understand business behavior. The breadth and number of business ethical challenges reflect the coupling of profit-maximizing behavior with non-economic concerns.
During the 1980s and 1990s, both within big firms and within academia, there was a surge in interest in business ethics. For instance, the majority of large corporations today highlight their adherence to ethical standards and social responsibility charters.
Adam Smith remarked that “people of the same trade rarely come together, even for leisure and recreation,” but if they do, the conversation always culminates in a plot against the public or some other scheme to raise prices. Governments use laws and regulations to direct business activity in the way they see fit.
Ethics governs areas and aspects of behavior that are not under governmental regulation. The growth of huge corporations with limited contacts and sensitivity to the communities in which they operate spurred the development of formal ethical regimes.
Corporate frauds/crime is viewed as ‘illegal acts or omissions, punishable by the State under administrative, civil or criminal law, which are the consequence of purposeful decision making or egregious negligence inside a legitimate formal institution. Corporate crimes are also committed by people who are legally able to speak for a corporation or company.
Salespeople, agents, and anybody else having the authority to act on behalf of a corporation, including presidents, managers, directors, and chairmen, are included in this group. Antitrust crimes, fraud, environmental damage in violation of environmental legislation, exploitation of labor rules, and failing to maintain a fiduciary responsibility towards shareholders are all examples of corporate criminal behavior in most jurisdictions.
Activities carried out by an individual or company in a dishonest or illegal manner with the intent of benefiting the perpetrator individual or company. Corporate fraud schemes are defined by their sophistication and financial impact on the company, other employees, and third parties, and they extend beyond an employee’s supposed function.
Corporate fraud is difficult to detect and prevent. By adopting effective regulations, a system of checks and balances and physical protection, a corporation may limit the extent to which fraud can take place. It’s regarded as a white-collar crime.
White Collar Crimes
White-collar crime is classified into two categories by Marshall Clinard and Richard Quinney: occupational crime and corporate crime. Infractions committed by corporations and their officials for the profit of the corporation are included in the first category. Vandalism and employee theft are the two most prevalent and conspicuous forms of workplace crime.
The second type of crime is described as one done “in the course of engagement in a lawful occupation,” and it encompasses transgressions involving people from all walks of life. This bi-polar difference is useful to some extent, but it is unreliable; the category of occupational crime should be narrowed such that it does not include blue collar crimes. However, the apparent distinctions between organizational and professional crime could be considered to be “distinctions without a difference.”
Some of the Biggest Corporate Frauds
Satyam Computers Scandal
The fourth-largest IT services company in India, Satyam Computers, was founded by B. Ramalinga Raju, who also serves as its CEO. On January 7, Raju revealed that Satyam Computers had been falsifying its financial records for years, overstating revenues and inflating profits by $1 billion, in one of the largest corporate frauds in India’s history.
In Sanskrit, Satyam means “truth,” but Raju’s admission — along with his departure — demonstrates the company had been feeding investors, shareholders, clients, and staff a continuous diet of asatyam (or lying), at least in terms of its financial performance.
The Tatra agreement and the Bofors deal were both signed at the same time. Although the Bofors scam was exposed within a few years, the Tatra defense scam continued to rob India for another 15 years until it was raised by an honest Chief of Staff of the Indian army, General V K Singh, who attempted to stop the looting.
In the acquisition of components for Tatra trucks, the backbone of the army’s artillery and transportation wings, top executives of BEML Limited, a Bangalore-based company, and the defense ministry have syphoned off at least Rs. 750 crore in bribes and commissions over the last 15 years.
Uber has a history of creating controversy. The company has faced numerous allegations of sexual harassment in recent years, and concerns have been raised about its business strategy of “stopping at nothing.” It is stated that the latter observed it employing illicit technology to elude law enforcement, steal drivers from rivals, and eavesdrop on users.
The main issue, however, turned out to be allegations about the “bro” culture at Uber, which prompted CEO Travis Kalanick to step down in June 2017. The allegations included claims that top staff employees visited a brothel in Seoul and cracked sexist comments.
The claims had an impact on the price of the company’s shares, which at the time were traded privately, even if some of them were unfounded. Uber hired Dara Khosrowshahi as its new CEO in order to improve its reputation and foster a new culture as it prepared for an initial public offering (IPO). When it went public in May 2019 at a price of $45 per share, its market value was $69.7 billion.
Finally, it may be stated that the globe has evolved into a borderless global village. The desire to establish internationally acknowledged corporate governance principles has been expressed in the private, public, and government sectors. The framework for corporate governance is not only crucial for the long-term success of businesses, but it is also critical for national governance.
It’s also worth noting that, in order for ethics to work in an organization, the vision statement, mission statement, core values, general business principles, and code of ethics must all be in sync. Corporate management’s willingness to adopt an ethical code of conduct has a number of advantages.