Literature Review and Theoretical Generalizations of the Ethics Role in Business and Management: Family Business as a Case Study

Abstract

The article contains the results of the analysis of the world’s scientific achievements and theoretical generalizations regarding the functions of ethics in business organizations, the range of its application in management, and its role and place in ensuring the effectiveness of the company’s economic activity. This study considers ethics not as an obstacle to business development that requires additional resources but as a relationship based on trust and cooperation that determines the firm’s strategy and competitive advantages. The article summarizes approaches to integrating ethics into management practice and considers the taxonomy of management ethics in organizations. Using the example of a family business, the article identifies general mechanisms for reconciling ethical principles and economic efficiency of a company so that care about ethical responsibility has a favorable impact on fulfilling the main mission – making a profit. The ethical practices of family and non-family businesses are compared. Although family businesses do not always have a formal code of ethics, they are more likely to model ethical behaviour through their actions; family values and their transmission from generation to generation play a significant role in shaping ethical practices in this business; family businesses become more involved in social activities and feel responsible to the community; their image and reputation are an absolute priority. Based on the theory of legitimacy, the article examines the concept of socio-emotional wealth using the example of the family business, which includes values related to emotions and non-financial aspects of business that meet the emotional needs of the family (identity, ability to influence the family and perpetuate the family dynasty). The article considers ethics an integral element of a company’s social capital. It summarizes the approaches and stages of ethical policy formation, through which ethical standards are specified and implemented through formal and informal rules and procedures established by individuals and organizations. While forming an ethical policy, it is important to start from the components of the company’s context (culture, values, internal regulations), choose a business model that is consistent with values and ethical principles, and formalize the procedures for the transition from individual ethical behaviour of managers (loyalty, honesty, ethics, fidelity) to the creation of collective ethics (dissemination of these values within the company). The article provides recommendations for the successful integration of ethical policy: coordination between ethics and corporate image, between ethics and company performance, and coordination of mechanisms for formalizing ethics and corporate culture.