Business Ethics-Does it Pay

Abstract

This study investigates the UK and US companies who had codes of ethics/conduct/Principles and those who explicitly said they did not. This study relies on the data which was available from various secondary sources like Annual report of companies, Ratings given by different agencies to name a few. We divided companies into two cohorts – who had code of ethics and without it. We have done an extensive research and filtered companies from the list of 581 companies. We then tried to find relationship between financial and non financial parameters. We have tried to relate both and show its effect on the companies. The above figure clearly shows that the companies who are better able to manage its stakeholders i.e. Customers, employees and investors are better able to increase the financial impact in the form of increase of lower costs, premium price products etc. to name a few. The findings that we have got are also testimony to this fact. On the other hand, we have looked onto the financial performance in the form of EVA, MVA, ROCE and P/E ratio volatility. The results we have got clearly favours the companies which have a code of ethics in the form of higher MVA, EVA, ROCE and lesser P/E volatility as compared to others which doesn’t have it. Thus, it is important for companies to better able to manage its code of ethics in place in order to have greater growth on all aspects. Keywords:Businessethics,Companies,EVA,MVA.