Manual for Azerbaijan companies Rena Safaralieva

 

Regulation of behavior  

 

Religion. In many communities behavior is regulated by religious principles. Theology states that ethics is 

based on “the supreme moral”, which is delivered to people by the Lord, Allah, or Buddha, for instance,  

and that the Almighty God is the ultimate judge of human behavior.  

 

Philosophy. Philosophy offers a variety of ethical theories, which we shall not dwell upon here, but will 

satisfy ourselves with mentioning two basic approaches to ethical theories.

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  Relative ethics takes into 

account consequences (the ends) or conditions and methods (the means). It states that there are no 

absolute standards applicable in all situations, and that morality depends upon the individual (“You have 

to do whatever is good for you”), conditions (“Stealing can be justified, if you can not earn your living 

otherwise”) and society (“Cannibalism is moral in a society of cannibals”). In its extreme form, relative 

ethics can justify anything, because “this is a right thing to do” or “because everybody does it”. Absolute 

ethics judges the morality of the act itself. Absolutism is a very simple theory, easy to grasp even by 

young children. However, this advantage is offset by a very serious disadvantage - in its extreme form, 

absolute ethics can lead to intolerance, because absolute ethics evaluates only the morality of an act itself. 

For example, Christian missionaries propagated religion and Communists the ideas of a happy future by 

fire and sword and very often against the wish of their intended beneficiaries.  

 

The law. The law, similar to ethics, establishes a set of rules and norms, regulating behavior of a society 

as a whole and of individuals in particular. One might then ask: if ethics establishes a set of rules and 

norms, what is the difference between the law and ethics?  

 

The answer is very simple – the law sets out what must be done, while ethics tells us what should be 

done. 

 

One must comply with the law and if he/she does not, there are repercussions to face, at least, in a society 

governed by the rule of law. Ethical compliance is voluntary and is based on a system of values, shared 

by individuals or groups of people, united under various principles. For example, we can refer to an 

ethical system shared by a certain social class or a group of people, living in a certain geographic area, 

belonging to a certain profession or even a family. Norms of different groups may significantly vary. One 

such contradiction is very well illustrated by phenomenon of “whistleblowers”, discussed in Chapter VI.  

 

In clear contrast to ethics, the law is applicable to all. Legal rules establish minimum requirements, while 

ethical decisions are boundless. This is a philosophical and rather general approach.  

 

Unwritten moral rules. Every society is governed by its own verbal or unwritten code of moral norms, 

learned by people in the process of “socialization” in a family, with friends, in religious institutions, 

social groups, including the workplace, or in the process of formal education. In Islamic religion, in 

addition to “shariat” or Islamic law, social life is regulated by “adat”, a verbal code of rules of behavior, 

many of which can be traced back to pre-Islamic moral norms and sometimes even contradict Islamic 

norms (for example, the custom of blood feud in the Caucasus

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).  

 

Code of conduct/ethics. In many countries, the state and business entities establish their own ethical 

standards in internal documents, which are called business ethics codes or codes of conduct for the areas 

where state regulation is insufficient or too lenient from the perspective of business owners or managers. 

Some countries have also adopted codes of conduct for public officials to regulate their conduct  

 

Codes shall satisfy a number of requirements. Firstly, codes shall be in full compliance with the national 

legal framework. Secondly, codes shall impose more strict and detailed standards, as compared with the 

legislation in force. Thirdly, codes shall take into account the specifics of a company’s activities. And last 

                                                 

2

 G. P. Lantos, An Advanced Instructional Module in Case Studies in Business Ethics by M. M. Jennings, West Publishing 

Company, 1993, pp.12-14 

3

 Islam, Encyclopedic Dictionary, Main Editing Bureau of Eastern Literature, Nauka Publishing House, Moscow, 1991, pp.13.  

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but not least, punishment for ethical violations shall be determined by a company’s management, if the 

law does not stipulate otherwise. Chapter VI of this book discusses codes of conduct in detail.  

  

At first glance, one might think that such business ethics codes are similar to the Soviet administrative 

regulations for enterprises and agencies. There is no reason to deny a certain similarity. However, there is 

also a significance difference. Firstly, each company designs its own code which reflect the peculiarities 

of its activities, while the above referenced Soviet regulations were designed by regulatory agencies and 

circulated downwards to all enterprises of a certain industry. On the contrary, businesses are free to set 

their own standards, provided they abide by the law. For example, businesses are entitled to decide on 

their own whether to perform health checks or random alcohol or drug tests of their employees. Secondly, 

in addition to establishing the obligations and duties of employees and the punishment for failing to fulfill 

these duties, codes also contain provisions defending rights of employees. Codes serve as an instrument 

to facilitate relationships with management, customers, partners, and other stakeholders.  

 

Why should business strive to be ethical? 

 

Since the Code of Hammurabi, written in the 2

nd

 millennium B.C.,  businesses were governed by the 

principle “buyer, beware!” Why since the middle of the 20th century  have more and more efforts been  

taken to introduce ethical principles and norms into business practices? Is it not the role of  business to 

make money, while the role of the state is to ensure social justice by means of taxation and social 

programs? The answer is very simple – tough market competition, the development of civil society and 

state regulation made businesses—mainly in the Western countries—realize  that the “law of the jungle” 

is no longer applicable. Businesses cannot make money at any cost, without considering the interests of 

other market players, because any business functions within a broader social setting and depends on the 

society it serves.

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 Besides, business has realized that certain short term benefits might become quite 

detrimental in the long run. Dismissal of ethics may yield immediate benefits, but might cause damage in 

the long term.  

 

Western mass media recently covered a scandal involving KPMG, one of the biggest transnational audit 

companies, in which  KPMG assisted Xerox, in return for payment, in the falsification of its revenues for 

1997 -2000 in the amount of 6 billion dollars, which made Xerox look more attractive in the eyes of 

investors.

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Let’s discuss some reasons why companies benefit from ethical behavior.  

 

Firstly,  a company’s reputation might be damaged so seriously that a company can be driven out of  the 

market. For example, every force majeure event in Baku (e.g.,a heavy snowfall, earthquake, civil 

disorder) reveals that Azercell, a major cell phone company cannot cope with the increased volume of 

traffic in such a way as to provide reliable service to customers under such extraordinary circumstances. 

As a result of its inability to provide adequate service to its customers, Azercell’s reputation suffers and 

every such event results in a corresponding increase of customers for their competitor,  Bakcell.  

 

Secondly, a company violating ethical principles cannot have a good governance system. For example, 

Barmek’s entrance into the Azerbaijan market was followed by a scandal and the unexpected ousting of 

Siemens from this market. Barmek is regularly criticized by mass media for numerous violations of the 

rights of consumers (for example, for their general cut offs of power for residential areas, including to the 

residences of diligent payers). As a result, customers who cannot afford to pay are joined by those who do 

not wish to pay. It would be interesting to see how many customers this natural monopolist will be able to 

keep, should a competitor enter the market.  

 

Thirdly, reputation is very important for potential investors. For example, the population of Azerbaijan 

does not trust banks with their savings, because people remember the epidemic of bankruptcies in the 

banking sector a few years ago. There are only a few local banks that are making efforts to gain 

                                                 

4

 R. C. Solomon,  Business Ethics in Companion to Ethics, edited by P. Singer, Blackwell Publications Ltd Publishing House., 

1991- 93, p. 358  

5

 N.Ismailova, N.Aliev, One More Auditing Company Is Accused of Fraud, Echo, 15 February, 2003. 

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