We may affirm that there is a cost for those who choose to live ethically in the midst of a world where fraud, tampering, theft, industrial espionage, corruption, bribes, conspiracy, tax evasion, embezzlement and unfair competition proliferate. The issue of business ethics has gained great relevance today, not only from research or journals that have proliferated views on this subject, but also because the economic and business reality itself shows it almost daily in the media. Both from the political and economic perspective, social responsibilities, the headlines on benefits due to fraud, bribery, corruption, privileges, unfair competition, have had as a result in many European countries the claim that somehow a stop should be put to these problems, which have irrupted heavily for several decades. Business ethics need not be a brake on economic benefit of companies, but it gives the business organization, even by using an Ethical Code, the social legitimacy it needs to be able to operate on the natural and business environment. The attitude of a company’s senior management that reflects the observance of the business ethics both by the managers’ own actions and by the policies applied within the company, by the decisions that are made, and the tasks that are set, by the adopted policies and the way in which the disciplinary sanctions and regulations are highly important for a clear grasp of the role played by ethics in business and regarding the good functioning of an organizationethics, fraud, management, social responsibility

Alexandru Trifu

English

Research Papers in Economics

ALEXANDRU TRIFU  Points of view 
 
An. Inst.Cerc.Ec.„Gh. Zane”, t. 20, i. I, Iaşi, 2011, p. 73-77 
 
APPROACH REGARDING THE INFLUENCE OF BUSINESS ETHICS 
ON CORPORATE GOVERNANCE 
Assoc. Prof Alexandru Trifu Ph. D.
1 
 
Abstract 
We may affirm that there is a cost for those who choose to live ethically in the midst of a world where 
fraud, tampering, theft, industrial espionage, corruption, bribes, conspiracy, tax evasion, embezzlement and 
unfair competition proliferate. The issue of business ethics has gained great relevance today, not only from 
research or journals that have proliferated views on this subject, but also because the economic and business 
reality  itself  shows  it  almost  daily  in  the  media.  Both  from  the  political  and  economic  perspective,  social 
responsibilities, the headlines on benefits due to fraud, bribery, corruption, privileges, unfair competition, have 
had as a result in many European countries the claim that somehow a stop should be put to these problems, 
which have irrupted heavily for several decades. 
Business  ethics  need  not  be  a  brake  on  economic  benefit  of  companies,  but  it  gives  the  business 
organization, even by using an Ethical Code, the social legitimacy it needs to be able to operate on the natural 
and business environment. The attitude of a company’s  senior management that reflects the observance of the 
business ethics both by the managers’ own actions and by the policies applied within the company, by the 
decisions  that  are  made,  and  the  tasks  that  are  set,  by  the  adopted  policies  and  the  way  in  which  the 
disciplinary sanctions and regulations are highly important for a clear grasp of the role played by ethics in 
business and regarding the good functioning of an organization.   
Key words: ethics, fraud, management, social responsibility. 
 
1. Social responsibility as moral responsibility 
 
Responsibility  represents  the  obligation  to  answer,  to  account  for  something,  to 
show your awareness towards the social obligations. In this sense, a formal definition of 
the social responsibility stipulates the manager’s duty to choose and apply those sections 
that might contribute to the wellbeing of the society in consensus with the interest of the 
society and of the organization he/she manages.  
The social responsibility is thought to be a company’s constant obligation, beyond the 
legal  obligations  or  those  imposed  by  the  economic  constraints,  to  follow  long-term 
objectives that are useful for the community. The company believes that it is responsible not 
only  towards  the  clients,  the  suppliers,  the  employees,  the  government  authorities,  the 
creditors, the local communities, and the public opinion. The manager’s mere claim of the 
need for social responsibility and ethical deeds in their organizations is not enough. Neither 
the  good  nor  the  anticipated  effects  result  from  these  claims.  The  whole  organizational 
culture will uphold the social responsibility and will have to reward and strengthen its ethical 
deeds. 
Therefore, the approach of the issues related to social responsibility must be framed and 
correlated with the social and cultural environment of the respective time span, country and 
organization. As well as this, mention must be made that social responsibility in business 
becomes  reality  when  the  persons  involved  accept  the  established  line  of  conduct  and 
behaviour.    
The most important issue that must be taken into account, regardless of the type of 
business,  is  the  achievement  of  the  public  interest  and  of  the  social  responsibility  of  a 
business, that is to combine the company and employees’ private interest, with the general 
one of the society and of the economy as a whole, a desideratum that represents the basic 
condition for the existence and functioning of all economic entity.  
Well understood responsibility encourages loyalty. Loyalty and mutual support spread 
as far, and in all the directions as the businesses, both within the organisations and outside 
                                                 
1 Assoc. Prof , Ph. D. ,,Petre Andrei” University - Jassy, Romania, 13 Grigore Ghica Vodă Street, 
700469, Iasi, Romania 
trifu.alex@gmail.com 74  Alexandru Trifu 
 
 
them. The duty and the moral obligations spread among the colleagues, the staff, the clients 
and the suppliers, considering that all of them need honoured contracts and understanding. 
Loyalty has become, at present, an intrinsic quality of the developed activity, rewarded, at 
different rates by the managers of the trade companies, firms…  
Any company holds some responsibility on the economic and social level. This point of 
view is currently accepted by all the “actors” of the business world. Still, the measure in 
which this responsibility is divided between the two planes is perceived differently. As far as 
the economic side is concerned, there are two approaches taken into account, mainly
2: 
2. The classical approach – the firms exist to bring benefits to the owners or to reduce 
transaction costs. Milton Friedman sustained that the main responsibility managers have, is 
to manage their business so as to maximize the owners’, and respectively the shareholders’ 
benefit; these ones, in their turn, are concerned only about the financial outcomes. In our 
opinion, any “social good” paid by the company undermines the market mechanisms: “the 
social goods” shall be paid by the shareholders (the profit diminishes), by the employees 
(salaries decrease), or by the clients (through price increases). In this last case, sales could 
drop and the company might encounter difficulties.    
2. The socio-economic approach- profit maximization is any company’s reason to be; 
obviously corroborated with the ensurane of its survival.  
Arguments in favour of this statement:  
  trade companies are legal bodies registered in a country that have to comply with the 
laws in the country in which they operate; which is why they are not responsible only to the 
shareholders;  
  the  time  horizon  of  a  company’s  existence  is  a  long  one,  so  it  must  follow  the 
economic outcomes on the long term and, for this purpose, it will also accept some social 
obligations  (such  as  the  lack  of  pollution,  thee  lack  of  discrimination)  and  the  costs 
incumbent on them;  
  Experience has shown that the companies are not mere economic institutions, but 
they also get involved in politics, in sports (sponsorship), they sustain the national or local 
authorities etc.  
The modern concept of business ethics
3 refers to the problem of the social responsibility 
of the businesses, to the setting of an appropriate o rganizational culture, which should take 
into account not only the need of increasing the profit, or the shareholders and associates’ 
incomes but also the adequate fulfilment of a society’s needs, of all the social conditions at 
work within a society. The modern concept of the business ethics concerns the issue of the 
businesses’  social  responsibility,  the  setting  of  an  adequate  organizational  culture,  that 
should take into account not only the need of increasing the profit, the shareholders and 
associates’ income, but also the achievement of all the social conditions that act within a 
society.    
 
2. Business Ethics 
 
Business ethics must find answers to the following more significant questions:  
  Where does responsibility towards the society start and where does it end?  
  What behaviour rules should govern businesses and their managers?   
  Is it good that businesses place the shareholders’ interests before the requirements of 
the society?  
Still, the most difficult situation is to be found in practice, related to the management 
of the company, is the one related to the existence and the working out of the so-called ethical 
dilemmas.  Our assertion is  related to  the natural  decision-making process,  inherent  to  all 
                                                 
2 Ţigu, Gabriela  Etica afacerilor în turism, Editura Uranus, Bucureşti, 2003, p.21. 
3 See Crăciun, Dan ( 2005)–Business Ethics. A Short Introduction, ASE Publishers, Bucureşti, chapter 7. Approach regarding the influence of business ethics on corporate governance   75 
 
individuals,  especially to the managers, of making the difference between  good and bad, 
which is highly difficult to measure and define. We must also take into account the fact that 
the ethical dilemmas appear when we talk about relating the economic performance to the 
social ones and to achieve, as much as possible, a balance within the company, or when 
reality is different or repeals what the managers have designed and outlined with reference to 
the ways to follow and the solutions conceived a priori, between what is thought and what it is 
in fact.     
What stands out actually is one practical issue which is extremely difficult to solve, 
since life has always shown that things that are ethical for someone may seem unethical for 
someone else.
4 
As a matter of fact, the dilemma to be found within the relation  responsibility/ 
morality – entails the shift of the emphasis in the discourse related to the business person’s 
behaviour code from “morals” to the ethics of responsibility.   
Its working out depends, in our opinion, on a reverse- kind of thinking, just like in 
management games, being based on the following fundamental questions:   
a. Who would win and how much?  
        b. Who would lose and how much?  
The most common ethical  issues  found in  corporate practice are:  the employee’s 
interest  conflicts,  the  gifts,  the  benefits,  sexual  harassment,  unauthorized  payments,  the 
employee’s private space, environment issues, the labour safety, the pricing policy, all kinds 
of discriminations, etc.  
There are numerous  cases  in  which employees  of various companies  show unethical 
business behaviour. For example:  
  giving  illegal  commissions  to  obtain  confidential  information  about 
competing companies;  
  illegal traffic with goods found in the state’s monopoly;  
  running unauthorized activities;  
  using false or illegally obtained documents;  
  the cases of tax avoidance, underground economy;  
  misleading the State’s control authorities; 
  Using goods of illegal origin, etc.  
The managers have to name all the people and the groups  inside and outside the 
organization that have connections, commitments, shares or interests to achieve or to turn to 
good account  the company’s performance.   
   When  identifying  the  situational  factors  that  influence  the  ethical  behaviour,  the 
organization holds the central place. People learn the moral values during the first years of 
childhood, at home or in society, but also in their organizational environment. The policies 
and the behaviour codes, the corporate culture may promote high esteem granted to the 
employees, while the inside groups influence the ethical behaviour, through the support and 
the perspectives they offer to the members. The written rules together with the corrective 
measures, although useful for the promotion of an ethical climate for the whole organization, 
cannot always guarantee good results.   The emotional elements involved in the socializing 
process within an organization may be even more beneficial, since they encourage the ethical 
behaviour and create the framework for the correction of the illegal acts and prevent the 
infringement of the corporate norms.     
Managers  must  know  what  is  forbidden,  must  observe  the  legal  stipulations  and 
promote fair trade practices with the business partners. The general economic environment 
encourages,  through  competition,  a  behavior  standard  all  those  who  aim  at  obtaining 
competitive advantages in their field of activity should subscribe to.  
                                                 
4 Synthetic idea revealed in  Daft, R., (1988)-Management, The Dryden Press, New York. 76  Alexandru Trifu 
 
 
a) All these things were known and tolerated, because while everything is fine there are 
no  reasons  to  complain.  Who  can  deny  that  there  was  misuse  and  abuse  as  well  as 
complacency? Ultimately, what  existed and was  evident was  the fraud and deceiving the 
shareholders. 
b) Many are flying the flag of the law of corporate honesty, raising voices of sanctions, 
although the creation of value for shareholders and the financial benefit on the short term as 
basic commandments for the corporations have been defended until recently. Not to mention 
the investment banks as luxury players that encouraged the purchase of such shares. 
c) It is true that the controls have failed, but we would say that what actually failed is a 
more important thing: ethical behavior. We are focused on the example of Enron, which had 
found a firm responsible for auditing their accounts, which lets itself seduced by the tens of 
millions of dollars it received from Enron, to hide the illegal practices of hiding the losses. 
Also, their balance sheets showed fictional income of over 600 million dollars, which they 
later tried to explain saying they had recalculated and it was wrong, because their desire to 
make money urged them to go to tax-heavens that facilitated it, just as easy as it would be to 
safeguard the money of the drug traffickers and terrorists.  
d) It is also believed, that the existence of some formal ethical codes is not enough. The 
managers themselves, we think, must be models of ethical behavior.  
In Mathematics and in Physics there are “correct” and safe answers; unfortunately this 
does not happen in the field of management too, which refers to activities that involve taking 
into account numerous factors.  
If we have a look at a managerial decision from the perspective of a mathematic model, 
we shall  see that the result depends  on a series  of variables:  people change, competition 
increases, goods, circumstances and financial situations change. Therefore, the results are also 
insecure.  
 
Conclusions 
 
The  incapacity  or  the  lack  of  political  will  to  assume  the  responsibility  generates 
multiple effects that place business ethics in a critical situation. An environment which is 
hostile for the business will give birth to  atypical behaviour, endangering the system of 
ethical  values.  The  red  tape,  the  corruption,  the  exaggerated  fiscal  laws,  the  lack  of 
stimulating sectorial policies etc. are the enemies of the free economy and of the social 
relations in different communities. This is, for example, what unethical behaviour, which 
damages the organization and the society seriously, means generally speaking, leading to the 
appearance  of  some  scourges  created  by  the  modern  life  (crime,  abuses,  discrimination, 
drugs, intercession, corruption, etc), to the impairment of the human condition (moral and 
material distress), etc.   
The  interest  for  ethical  behaviour  is  focused  in  keeping  firm’s  (organization’s) 
competitivity and personnel’s trust for the activities and tasks done. 
We consider that, where appears a lack, a breach, of implementing efficient  business 
ethics  within  an  organization,  the  way  of  fraud,  malfunctioning  and  even  corruption,  is 
opened, because managers, owners, are first of all, human beings, with subjective perceptions 
and mental representations. 
 
 
 
 
 
 
 
 Approach regarding the influence of business ethics on corporate governance   77 
 
 
 
 
References 
 
 
Baylis, Charles A. (1958). Ethics: The Principles of Wise Choice. New York: Henry Holt. 
 
Bowne, Borden P. (1895). The Principles of Ethics. New York: Harper & Brothers. 
 
Crăciun, Dan (2005)-Business Ethics. A Short Introduction, ASE Publishers, Bucureşti. 
 
Daft, R., (1988) Management, The Dryden Press, New York. 
 
Facione,  Peter  A.,  Scherer,  Donald  and  Attig,  Thomas.  (1991).  Ethics  and  Society. 
Englewood Cliffs, NJ: Prentice Hall. 
 
Spinoza, B., (2001)-Etica (Ethics),Antet Publishers, Bucureşti.  
 
Tierney, E.(1999) –Etica în afaceri(Ethics in Business), Rentrop & Straton Publishers, 
Bucureşti. 
 
Ţigu, Gabriela (2003) Etica afacerilor în turism, Editura Uranus, Bucureşti.  
 
Velasquez, Manuel G. (1982). Business Ethics: Concepts and Cases. Englewood Cliffs, 
NJ: Prentice-Hall. 
 
 

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