Ethical Behavior and Ethical Practice Case


EthicalBehavior and Ethical Practice Case

Importanceof Ethical Behavior to a Company

Ethicalbehavior in the corporate environment and management is the practiceof acting in the acceptable ways that are consistent with the bestvalues of the society. The values of the society and the expectationsof the environment towards business organizations create a need for acompany to act ethically. Embracing ethical behavior is therefore anecessity in the balancing of a corporate image in the society(Ferrell et al, 2014). While the business cannot separate itself fromthe outside environment, practicing ethical behavior is the best wayis to remain in line with the expectations of the society. Thediscussion on this topic will present the reasons why it is importantfor a company to practice ethical behavior.

Oneof the reasons why a company should practice ethical behavior is togain the trust of the internal environment players. For the internalenvironment, a firm should gain the trust of the management,employees and shareholders. By practicing ethical behavior, a firmcreates trust among its employees. The result of this trust is thedevelopment of a strong sense of commitment by employees towards thecompany. According toFerrell et al (2014), thisleads to the development of loyalty towards the company, andadherence to the organizational goals. At the same time, the companygains the trust of the shareholders, who feel confident that theirinvestment is being utilized ethically, and for the best reasons.This leads to the achievement of the organizational goals through theconcerted efforts of the players of the internal environment such asemployees and the management.

Inaddition, a company should practice ethical behavior to create andretain a good corporate image. A good corporate image is createdthrough the summation of how a firm interacts with the society andthe external environment (Tricker &amp Tricker, 2012). Specifically,a company creates a good corporate image through the interaction withcustomers, suppliers, the government and the general public. Byacting ethically in its dealings, the company gets known by theplayers in the external environment as a good company, and an ethicalorganization (Ferrell et al, 2014). For example, if a computercompany respects suppliers by making honest payments, the supplierswill promote the firm’s image to other players such as othersuppliers of electronics the firm sells.

Anotherimportant reason why a company should practice ethical behavior isthe creation of an ethical culture that guides the firm. Themanagement of an organization largely depends on the practices of themanagement and the employees. According toJones and Parker (2005), agood culture of honest, loyal and performance-driven organization isgenerated through a practice of ethical behavior. For example, if amanager exits a firm and a new one is employed, the new manager willtake the practices that are formed in the culture of an organization.If the organization practices ethical behavior, the new manager willdefinitely merge with the culture. The creation of ethical culturegives a strong reason why a company should practice ethical behaviorat all times.

Profitsand generation of income is another important reason why a companyshould practice ethical behavior. This is because ethical behaviorguides the company to practice things that matter towards thecompany’s financial performance (Ferrell et al, 2014). For example,ethical behavior will guide the management to make decisions of thebest employee to employ and the best product to produce. As a result,the unethical subjective decisions are eliminated, thereby keepingthe company to its planned profitability guidelines.

Inaddition, practicing ethical behavior is important because it saves acompany financial consequences of unethical acts. Ethical behaviorsaves a company from financial losses that may come from unethicalpractices by its employees or management (Tricker &amp Tricker,2012). In most cases, the consequences of unethical practices lead tofinancial losses due to lawsuits and settlement of damages. Forexample, if Volkswagen had practiced ethical behavior, they would nothave got the financial consequence of recalling the vehicles.

Moreimportantly, practicing ethical behavior creates the confidence andtrust of the investors (Ferrell et al, 2014). This happens when acompany acts in the right ways, despite having opportunities ofacting otherwise. As a result, the past, the current and thepotential investors gain have confidence in the company’soperations, management and plans. This leads to the development ofloyalty among investors towards the company. The confidence ofinvestors is very important because they provide funding of thecompany’s products, projects and expansion plans.

TheVolkswagen Case Discussion

Therecent crisis at Volkswagen illustrates the importance of ethicalpractice and the consequences of unethical practice. In brief,Volkswagen violated the ethical expectations and the Clean Air Actguidelines of manufacturing cars environmentally friendly cars(DW,2015).Volkswagen acted unethically by improperly installing EngineControl Unit (ECU) software that violated the Clean Air Act (DW,2015).What was more unethical is allowing the sale of such cars since 2008without informing the buyers and portraying the engines asenvironmentally efficient.

Inmy opinion, this was very unethical of the company, despite havingled in the environmentally friendly manufacture of cars. However,their action of recalling cars is a show of good reaction andinspires the confidence of the users in the company. Recalling ofcars to correct possible defects makes the company a responsible firmthat is ready to be accountable for its mistakes. According toJones and Parker (2005), acompany should be accountable for its actions, despite them beingunethical or hurting its previous image.

IfI was the manager, the first thing to do is to admit the existence ofthe unethical practice in the manufacture of the cars. It is becauseof this assertion that I feel that the former CEO of the companyacted in the right way. Admitting the mistakes creates a sense ofaccountability and responsibility for the actions of the company.While this is an admission of an unethical behavior, it is still acourageous act of showing that the firm still believes in the idealsof ethical behavior.

Inthe coming days and months, I would organize organizational trainingsfor employees and engineers about ethical standards and globalexpectations of the cars produced. This will take care of theinternal environment. To impress the external environment, I wouldorganize events and forums that portray the company’s commitment toethical behavior. The current messages of messages to people advisingthem about the status of the Volkswagen diesel information is alsogood and would continue (VolkswagenDiesel Information, 2015). However,this will benefit the company by showing the resentment to theprevious organizational mistakes.


Ethicalbehavior is an important aspect of the corporate culture andmanagement practice in organizations. A company should practiceethical behavior because it promotes trust and confidence ofemployee, investors and shareholders as well as the general public.In addition, practicing ethical behavior is important to create agood corporate image, creates a good culture, reducing losses andtherefore promoting profits. The case of Volkswagen presents anillustration of the importance of ethical behavior by showing theconsequences of unethical practice. To correct the mistakes of thecompany, responsibility and accountability through honest actionsthat inspires the confidence of all people. These reasons and thereview of the case show why a company should practice ethicalbehavior.


DW,2015, Autoexpert: `A conscious breach of US law`,Retrieved From,&lt November, 2015

Ferrell,O.C., Fraedrich, J., &amp Ferrell,L. (2014). BusinessEthics: Ethical Decision Making &amp Cases. Stamford,CT: Cengage Learning

Jones,C., &amp Parker, M. (2005).&nbspForBusiness Ethics: A Critical Text.London: Routledge

Tricker,B., &amp Tricker R. I. (2012). CorporateGovernance:Principles, Policies and Practices.Oxford: Oxford University Press

VolkswagenDiesel Information, 2015, VolkswagenDiesel Information, RetrievedFrom, &lt 01 November, 2015