Abstract

Firms assume ethical business practices only add costs to the firm. However, business ethics actually add value for customers and result in increased profitability and performance for the firm. Organizations are nowadays concerned with managing their corporate image. There is strong positive correlation between people’s perceptions of a company and pro-corporate supportive behaviour. In this study, past researchers on corporate image were incorporated to create a platform for framework which identifies the variables of relationship between corporate image and customer loyalty cum profitability.

CHAPTER ONE

INTRODUCTION

1.1      Background of the study

Business ethics has to do with the study of light and wrongs, acceptable and unacceptable, just and unjust practices that is practiced in business organization with a view to promoting mutual understanding and corporate image within and outside the company. Ethical behavior contributes to the good reputation of a firm and to other parties being ready to trust it, and promotes employees commitment to the the success of the firm. In recent times, it has been observed that business activities causes a lot of hazards such as air pollution, toxic waste especially in the manufacturing companies, thus, it has become morally just that such persons to whom such harm is been cause are compensated in one way or the other. Business ethics play paramount roles in enhancing corporate image and profitability. When a business is morally ethical in what it produces and its services to its environment e.g. it is morally acceptable that marketing communication should be truthful and informative in every aspect, do not promise your customers what you know your product will not be able to do. All this will create an atmosphere of sincerity and will in turn affect corporate image and profitability of the company. But an ethical minded organization will help to promote good will, good image and enhanced profitability of the organization. A well grounded ethical theory must accommodate all the following four conditions. It must show reasonable consistency, a good ethical theory or principle must be consistence with the facts irrespective of whom or what is involved. For example, if a manager that says bribery is wrong but shift position when his relation is liable for the act, then something is certainly wrong with such an ethical position. D ue to constantly changing competitive environments, business organizations must find new methods to meet competition other than the traditional ways of better products (most consumers believe that competitive products are fairly equal in terms of quality), more services associated with a sell (more companies are finding that providing more and more services negatively affect profitability), or lower prices (competing on price results in erratic market share and unstable profits). Business organizations are responding to these challenges today by establishing partnerships and more collaborative relationships with their customers (Dertouzos, Lester and Solow 1989). Relative to these relationships there has been much discussion in the last several years regarding ethical practices by business organizations. For the most part, it has been assumed that organizations would do what was right for both their customers and their employees in the interest of long-term positive relationships. Unfortunately, we have learned the difficult lesson that such behavior is not always the norm. Unethical – and illegal – activities by such companies as Enron, WorldCom and Adelphi have shaken the foundation of trust that has formed the basis of marketplace relationships between companies and stakeholders. While there has been a greater focus on business ethics as a result of these companies’ activities, questions are still asked regarding the financial return related to developing processes that insure absolute adherence to high ethical standards in organizations. Ethics could be seen as a constraint on profitability. This view indicates that ethics and profit are inversely related (Bowie 1998). There are probably times when doing the right thing reduces profits. A more positive view, however, is that there is a positive correlation between an organization’s ethical behaviors and activities and the organization’s bottom line results. In fact, a reputation for ethical business activities can be a major source of competitive advantage. High standards of organizational ethics can contribute to profitability by reducing the cost of business transactions, building a foundation of trust with stakeholders, contributing to an internal environment of successful teamwork, and maintaining social capital that is part of an organization’s market-place image. The importance of business ethics to an organization has been discussed from differing viewpoints. Some managers consider ethics programs in their organizations to be very expensive activities that are only societally rewarding. Examples from the business community, however, suggest that companies viewed as ethical by the companies’ stakeholders (i.e., customers, employees, suppliers, and public) do enjoy several competitive advantages. These advantages include higher levels of efficiency in operations, higher levels of commitment and loyalty from employees, higher levels of perceived product quality, higher levels of customer loyalty and retention, and better financial performance (Ferrell 2004). The link between ethics and profitability has been studied for several years. A study summarized 52 research projects examining the correlation between ethics and profits (Donaldson 2003). The results were encouraging for those supporting a positive linkage between the two variables. Of the 52 studies examined, 33 studies indicated a positive correlation between corporate ethics programs and profitability, 14 studies reported no effect or were inconclusive, and five indicated a negative relationship.  An ethical view or judgment must show consistency with such a view come rain or shine. A good ethical theory does not discriminate. It calls a spade a spade irrespective of whose ox is good. Managers should always think of groups that are adversely affected before arriving at the final decision. This is because some of these groups are customers, competitors, shareholders, employees, suppliers, creditors and the society at large (Nwaoke, 2013). Ethics is important in business especially for managers who lead other people because if managers do not lead by proper ethics, people working under them are likely to follow the same path that enters the organizations. Organisations are understandably concerned with managing their Corporate Image. This shows that there is a strong positive correlation between how people perceive an organization and the pro-corporate supportive behavior. Corporate images are perceived as the mental pictures of an organization. It is the sum total of these perceived characteristics of the corporation that we refer to as the corporate image. Every organization has its image whether the organization does anything about it or not. Corporate image is formed based on the stakeholders’ perceptions of specific company actions as well as associated industry and nation issues. An organization’s image to a large extent influences stakeholder’s reactions to specific corporate actions and products. Oxford Advanced Learner’s Dictionary (2000) defined corporate as “connection with a large business company” Form brunt (1996) defined corporate image as “the overall estimation in which a company is held by its constituents through perceptual representation of an organization’s past actions and future prospects when compared with other leading rivals. According to Rayner 2 (2003), corporate image confers clear-cut advantages and privileges on companies. It proves difficult to imitate, at the same time, it creates responsibilities. Whereas, the obligations that managers and the organization owe must meet the personal standards of the employees, the quality standards of customers, the ethical standards of the community and the profitability standards of the investors. Therefore, organizations sustain their corporate image by building strong and supportive relationships with all of their constituents- i.e. customers, suppliers, investors, community, government, e.t.c. (Formbrun, 1996). It is like a virus that enters into your computer, it destroys the system very quickly, unlike ethical minded organization, will have employees of high integrity and are committed to their work practices, quality goods and services, builds customers trust and confidence on the long run and has an optimal performance. 

1.2      STATEMENT OF THE PROBLEM

This project is meant to address the following factors that affect business. They are as follows: 

1.     The growing problem arising from toxic substances that are caused to the society as a result of companies activities. In most organizations when carrying out their production activities; they hereby dump some toxic substances such as oil spills, chemicals, dumping of refuse, production waste which in turn become poisonous and therefore bring about environmental pollution. When business environment is being polluted, such as land, rivers and lake thereby rendering the community individuals jobless, because farm on lands and fishes and fishes in the waters. The impact of such environmental degradation result in low farm product, lost of livestock, diseases, loss of livelihood, limitation of economic activities, food shortage, polluted water, etc. 

2.     The growing rate of the production of sub-standard (low quality) goods and services, various companies produce substandard goods, the life blood of any organization depends on its quality products and services, misrepresentation in advertisement, exploration and inferior goods are some of unethical practices carried out in business organizations. 

3.     The growing of business not showing concern to their customers’ needs through the distribution of inferior goods and services that are beneficial to the company’s image and societal value; some business organizations show no or less concern for their customers; they fail to recognize the fact that customers are the sources of business therefore the need to have value for his or her money for him to be satisfied. 

4.     The failure of business organizations not seeing corporate social responsibility as an obligation to be fulfilled. When business organization refuses to carry out their obligation to the society in which their obligation to the society in which they operate is like cutting the hand that feed them. If the society they operate in refuses to harbor them, raise war against them or refuse to patronize them, it thereby brings loss of investment and properties and not achieving their goals and objectives. 

1.3     PURPOSE OF THE STUDY 

The main purpose of this research work is to determine the impact of business ethics on corporate image and profitability of the organization and:       

i.             To determine the effect of environmental pollution on profitability     

ii.            To examine the effect of substandard goods and services on corporate image  

iii.          To determine the effect of ethical practices on productivity 

1.4      RESEARCH QUESTIONS 

The following research questions were formulated in the research work       

i.             To what extent does environmental pollution affect productivity? 

ii.            To what extent does substandard goods and services affect corporate image?  

iii.          To what extent does ethical practice affect productivity? 

1.5      HYPOTHESIS FORMULATION 

The hypothesis formulated here are as follows: 

Ho:   There is no significant relationship between substandard goods, services and corporate image 

Hi:    There is a significant relationship between substandard goods, services and corporate image 

Ho:   There is no significant relationship between environmental pollution and profitability 

Hi:    There is a significant relationship between environmental pollution and profitability 

Ho:   There is no significant relationship between ethical practices and productivity 

Hi:    There is a significant relationship between ethical practices and productivity.

1.6      SIGNIFICANCE OF THE STUDY

Image has to do with the impression in the public consciousness. it is the desire of every organization to have a good image. For corporate entity especially, the image of banks and bankers appear to be at its lowest ebb at present. 14 It is imperative that a way to turn around the declining image of banks be found very urgently. It is from this standpoint that this study becomes very important in the crusade to restore the lost glory of banking in Nigeria. The study is also of immense importance to bring to the awareness of the public and management of banks he role image management play in bank performance using First Bank and Union Bank of Nigeria. It will also help to understand the strategies the banks adopt in building, managing and promoting a favourable corporate image. The management of these banks will benefit from this study as it will review and explain the circumstances and factors which contribute to the image management problems. The recommendation of the end of the study will enable the management to take adequate measures that will forestall the reoccurrence of these problems. Finally, the study will be of great significance to both the banking sector, customers of the banks, the general public and the students for academic purposes who wish to carry out studies on the subject matter in the future.

1.7      SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the impact of business ethics on corporate image and profitability in an organization. but in the cause of the study, there were some factors which limited the scope of the study;

a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study   

b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities

1.8 OPERATIONAL DEFINITION OF TERMS

Business ethics

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