Editorial: Business and Ethics, or Business Ethics

M Daud Ahmed
Editor, July 2015

Does anyone care about what is happening on Mars or other planets except Earth? It may be interesting to many of us, but the response is yes for a group of scientists only. However, all living species have interests in, and care about, the Earth and its atmosphere. The notion of care has introduced the concept of values, principles, ethics, morality, social responsibility, environmentalism, sustainability, etc. to keep the world a better living place for current and future generations. While all the species depends on each other for their survival, but they do not engage in trade and exchange except we humans. Thus, the evolution of business systems that deal with production and terms of trade also involves all natural resources. The jurisdiction of a company has gradually spread from local to regional to global, and is increasingly influencing the living conditions of all the species, and will continue to do so in the future.

While the key objective of a business is to increase the shareholders’ wealth, its significance in keeping this world liveable is undeniable. Current technological advances can and have enabled a business to become a global entity almost instantly from its inception, with the ability to create a huge impact on the industry. One of the prime responsibilities of sustainable businesses is to safeguard society and the environment while contributing to the economic advancement. Contemporary business operations have introduced immense changes in organisational models and also created tension among various stakeholder groups. To mitigate the tensions caused by corporate activity, adapting to a high standard of ethical behaviour is crucial at the individual, corporate, industry sector, and societal level.

A company’s leaders must create a working environment where employees are required to deal with all aspects of the business, including stakeholders, in an ethical manner. This imposes an obligation to supply safe products, protect the environment and enhance the standard of living in society as a whole. For this reason, ethics should be considered as the platform for efficiency, productivity, profitability and legal safety of business. Ethical practices enhance new opportunities, improve our lives, and expand relationships with stakeholders, both inside and outside of the organization. Therefore, attention to the ethical culture should be the first and foremost priority for any business.

It is significant that the principles of business ethics have been crucial to driving sustainable and successful businesses. While management science has introduced numerous best practice models, methodologies, and frameworks for developing business strategies and for tactical and operational planning, an increasing number of enterprises are driven by aspirational, ethical practices. This commitment combines market-driven best practice, an increasingly rigorous regulatory framework, and innovative leadership.

Ethical behaviour is closely aligned to corporate social responsibility (CSR), which in one sense is ‘ethics in action’. CSR can generate substantial benefits for a company in terms of attracting customers and employees, boosting sales and profits, enhancing a company’s reputation and hence protecting business success/sustainability. As a sustainable business management practice, CSR needs to extend beyond its current manifestation and include a focus on sustainable social development. In embracing this challenge, it will align itself with the critical issues facing our planet; issues identified in the UN’s Sustainable Development Goals to be discussed in Paris at the end of this year. The challenge for 22nd-century enterprises is to recognise that equity, awareness for sustainability, people’s participation and social cohesion are powerful factors for an organisation. These aspects intensify the social acceptance of an organisation, and protect its social legitimacy.

This issue of The New Zealand Journal of Applied Business Research (NZJABR) Volume (13), Issue (1) features four articles focussing on diverse themes: the impact of the public policy of and significance of board audit committee, and marketing cooperation between family-owned businesses within the wine industry.

The first article entitled ‘The New Public Management and Tertiary Education: A Blessing in Disguise for Academics’, by Dr Sue Yong, examines the tensions involved in the expanding roles of academics due to the demands placed upon them by accreditation bodies, government funding agencies, students and employers, as well as the ever-changing and competitive education landscape occurring both locally and globally. The imposition of the New Public Management Framework is discussed, with the study describing how market and government pressures have shaped the way in which higher education institutions have responded. In recent decades, some higher education institutions (HEIs) in developed countries have undergone significant change through the commodification of education under new public management (NPM). While NPM has brought many benefits in resource management, together with accountability, efficiency and market service orientation, it has also resulted in stress and uncertainty amongst professionals, requiring a sustainable approach.

The second article entitled ‘Accountability for Business Ethics in the Context of Financial Markets Authority’s Corporate Governance Principles,' by Dr Murugesh Arunachalam and Andrea McLachlan, delineates the meaning of accountability for business ethics with a view to understanding how accountability for business ethics acquires meaning in the Governance Principles document. This study indicates the manifestation of a strong sense of traditional accountability to shareholders, but significant gaps regarding accountability towards non-equity stakeholders. Accountability in relation to business ethics starts with the establishment of a code of business ethics, communicating the expectations for ethical behaviour, followed by measuring unethical behaviour, taking steps to deal with unethical behaviour, and finally, reporting on all aspects of the entity’s affairs. To enhance accountability for business ethics, the authors recommend the enactment of codified laws to provide sound legal backing for non-financial aspects of corporate governance.

The third article entitled ‘The Impact of Audit Committee Characteristics on Firm Performance: Evidence from Pakistan,' by Dr Rafique Qaiser and Abdullah Al Mamun, examines the relationship between audit committee features and a firm’s financial performance. Drawing on the agency and stewardship theory, this study suggests that companies with more than three audit committee members and a non-executive audit committee chairperson can provide higher economic value-addition. It also observes that age, qualification, and financial expertise of the audit committee chair are related to strengthening financial reporting standards, managing risk, and improving corporate financial performance. However, the independent status of an audit committee chair is negatively related to performance.

The last article entitled ‘Enhancing wine marketing through cooperation between family winegrowing businesses in New Zealand,' by Dr Paul Woodfield and Professor Pieter Nel, explores how medium-sized family wine companies can cooperate at the firm level through the marketing function in the New Zealand wine industry. Such an approach can be positive if the principles and attitudes that drive the integrity and legacy of a family winery are replicated into the culture of the cooperative relationship. There is clearly a need for New Zealand family-owned wine businesses to approach marketing and cooperation innovatively. This article concludes that cooperative marketing is an option for wineries that are big enough to be taken over, but small enough to cooperate with other wineries to market their brands and intensify their economies of scale.