For Research : Corporate Performance

Companies can improve the concerns of ethical issues to gain a competitive advantage, get greater satisfaction from stakeholders, and acquire better corporate performance (Anonymous, 1997). The reputation for an organization is a valuable asset, and now firms have realized that high ethical principle provides superior corporate performance (Nixon, 1993).

The successful shared ethical value gives a long-term perspective to firm’s employees, consumers, communities, regulators, and investors. Employees will be please to go to work, consumers will have the strong desire to buy, communities will feel proud and supportive, regulators will hope to enable the law rather than limit it, and investors are willing to buy the stocks (Akers, 1990). Thus, corporate performances on long-term survival and growth, financial reputation, and HR result are going to be improved because stakeholders are satisfied for shared ethical values in the firm.

Growth. Corporate growth can be measured by the company’s growth in sales. Ruf and Muralidhar (2001) indicated a positive relationship between ethics and corporate growth. Many companies are pursuing the growth in sales to get profits. Ethics is a competitive advantage for a corporation. Good brand image and greater employee commitment are the elements for a company’s sales growth. As a result, the firms’ ethical practice will also bring the growth of a corporation. Financial Performance. Many evidences show that ethical issues have a positive relationship with corporate financial performance. Return on assets and return on sales are the items that researchers measure whether the firm’s financial performance is good or not (Goll, 2004). Researcher Verschoor (1998) tested the link between overall financial performance and its commitment to ethics among the 500 largest pubic corporations in the U.S. Verschoor (1998) reported the companies committed to ethics had higher financial performance than those who did not. Reputation. Higher corporate reputation builds up higher trust between firms and their stakeholders. Higher reputation comes from excellent ethical practice (Zadek, 1998).

Highly ethical firms like IBM and Texas Instrument get the great reputation from their stakeholders. A superior corporate reputation is an intangible asset for a firm. Great reputation makes its stakeholders (customers, suppliers, government, financial institutions, unions, competitors, local communities, and the public) satisfied for what they invest. Investors are more willing to trust their investments with firms that enjoy superior reputations due to lower perceived risks and potentially enhanced marketing opportunities.

Overall Satisfaction. A company, which is focusing on ethical principles, usually creates a good environment for its employees. In a good corporate environment, employees are allowed to think that they want to become the” best” among all the employees, exhibit the “best” behavior in the firm, and even behave “better” all the time (Nixon, 1993). To be able to create a good corporate culture and environment, human resource department has to go through reward system, code of ethics, communication, and training to make sure that employees are aware of the importance of ethical behavior. By implementing ethical practice, this can help employees understand that ethical behavior is good for them and the company. For this reason, it will increase employees’ satisfaction by implementing the ethical issues. To test the overall satisfaction, international relationships between superiors, subordinates, and colleagues are also important in an organization.