Ethical business practices are conduct standards related to moral judgments applicable to people engaged in commerce related positions (Gitman, 2012). Shareholders and stakeholders are two different groups of investors that have a vested interest in the success of a company. Shareholders are investors who are not employed by the company, but have purchased shares (stock) in a company with hopes of their investment growing. Stakeholders are customers, employees, owners, creditors, vendors, who actually do the work of the company, or have direct economic impact on the company’s success (Gitman, 2012).
Ethics plays a large role in the success or failure of a company. For instance, if a company purposely records profits or losses in its financial statements in order to show a more favorable image to its shareholders rather than the actual financial data, shareholders will lose confidence in the company and sell their shares. Also, if stakeholders are treated unfavorably or not paid on time, turnover and inability to secure credit will also affect the company’s bottom line. Some argue that executives have only the duty of pleasing its shareholders, because that group provides much of the cash that is needed for operations (Gitman, 2012). However, if stakeholders are displeased with operations, an important cog in the wheel is missing and will ultimately cause the company to fail.