1.1 Background to the Study
Nowadays, performance and productivity have taken on a new meaning that appears to be beneficial in many aspects of life, widening the gap between developed and developing countries. One of the most crucial principles in every firm is employee performance. As a result, improving and enhancing organizational and employee performance should be one of the most important problems facing every organization. Organizations require ongoing performance improvement in order to survive and flourish, and human resources are seen as their most valuable assets, and they are assumed to be the source of all change and innovation in the workplace. Performing organizational responsibilities and obligations in accordance with set standards and criteria in such a way that the objectives are most likely to be realized is dependent on a variety of factors. The objectives, their clarity and understandability, the availability of facilities and tools, the preparation of favorable organizational conditions and atmosphere, and the presence of a competent leader who is acceptable to the employees are just a few of the necessary components for achieving peak performance.
Researchers, managers, and other stakeholders throughout the world have been studying the performance of organizations, according to (Makinde, Omidiji, Uhuaba, Ogunsola, and Asikhia (2021)). The degree to which firms have gone to explore solutions to develop and improve their performance levels reflects the level of importance that has been ascribed to organizational performance. Improved strategic procedures, enhanced employee incentives, and establishing an ethical climate in the organization are some of the ways that have been advocated by organizations.
Previously, commercial firms in many nations were indicted for unethical acts, but the picture is changing now that business ethics is becoming more widely recognized. In a similar spirit, the twin themes of values and corporate ethics have recently taken center stage in management debates (Onyeaghala, 2015). Values and ethics determine corporate culture, dictate how politics and power will be employed, and define the organization's social responsibilities. Ethics scandals have become almost typical in today's world (Tamunomiebi and Orianzi, 2019).
Researchers and business organizations have recently focused a lot of attention on ethical leadership, corporate governance, corporate performance, and corporate reputation. This is the result of corporate corruption at companies like Arthur Anderson, Enron, Worldcom, Tycon, Qwest, Adelphia, and Satyam (Goel & Ramanathan, 2014). These corporate crises have heightened public concern about ethical awareness and management in the business world (Trevino &Brown, 2005). Enron, for example, rose to become the seventh largest company in the United States of America over a 15-year span. Because the corporation has a 65-page long code of ethics, the stakeholders never anticipated that the senior executives might be involved in immoral practices.
Similarly, before its demise, Satyam of India was known around the world for its corporate governance and corporate social responsibility policies. In addition, the company received a number of accolades. Despite these commendable accomplishments, Satyam failed. Management's overstatement of the firm's cash balance by over one billion dollars, the addition of 13000 ghost employees on its payroll, and the withdrawal of ghost employees' paychecks by the company founders all contributed to the company's demise (Goel & Ramanathan, 2014). Many organizations in Nigeria are rife with unethical activities in the conduct of business (Eluka &Chukwu, 2013). For example, Nigeria, a developing country in Sub-Sahara Africa, has seen an upsurge in the number of corporate failures. In Nigeria, there have been reports of corporate failures owing to unethical business activities by executives. In 1997, the Nigerian banking sector came close to collapsing, with twenty-six commercial banks failing as a result of financial irregularities. Cadbury Nigeria Plc., one of Nigeria's biggest food and beverage companies, was hit by a financial scandal in 2006. Cadbury Nigeria Plc's financial statements and records were faked, putting all parties at risk.
1.2 Statement of the Problem
According to Onyeaghala (2015), the levels of unethical behavior in most businesses stink to high skies. According to research, all businesses are prone to unethical behavior on the part of their personnel. Dishonesty, lack of trust, contempt, fraud, and unfairness are all growing more common. Substandard, false, and contaminated goods are on the rise, while cheating, inflation, and pricing wars, as well as stockpiling to create artificial scarcity and unhealthy competition, are all on the rise. Fraudulent contract awards of all kinds, ten percent kickbacks, witch-hunting, and bribery are all rampant among Nigerian firms. Workers work on unsafe and hazardous conditions, they are hired and fired, paid anything and at any time.
Several studies have been carried out on the impact of ethics on performance of businesses. Some of those studies have been done by (Ezeanyim & Ezeanolue E.T (2021), Abubakar, Abdul-qadir & Yauri (2021), Enuoh, Okoh, Iheanacho, Pepple (2020), Sumlin, Hough, & Green (2021), Olayemi, Okonji, Gbadamosi & Oghojafor B.E (2020)). These studies have been carried out in different countries and location and have produced varied and conflicting results. There is seemingly no convergence on the impact of ethics on performance of businesses.
According to Khalaf (2020), corporate ethics has become a growing concern for a variety of reasons, including the rise of issues and ethical concerns in the private and public sectors, as well as the poor performance of some organizations due to an increase in administrative corruption cases. Furthermore, business ethics has become a challenge for some companies seeking competencies to improve their financial performance without considering the solution to the unemployment problems of some segments of society, such as minorities, women, and the disabled, which conflicts with society's desire for equal opportunities and the resolution of unemployment problems.
According to Khalaf (2020), the modern perspective sees that adhering to ethical standards improves the organization's reputation, which leads to a good relationship with long-term financial return. Previous research has indicated that appropriate business ethical behavior and practices lead to good corporate performance. One of the tasks of the board of directors, according to Aguguom (2020), is to ensure proper accounting information disclosure.
According to Aguguom 2020, large organizations are more likely to follow business ethical practices in their operational activities, possibly because these high-capitalized companies value their image and reputation, and do not want to lose their competitive leading position in the industry, market share, or the risk of attracting negative consequences (Okere, Njoku & Okere, 2020). Appropriate business ethical standards appear to be directly linked to achieving stakeholder performance expectations. According to Nwankwo, Orga, and Abel (2019), less employee dedication has disastrous effects for an organization. Underperformance as a result of absenteeism, tardiness, a negative attitude toward work, and resignation are among them. Employees' lack of commitment results in bad performance since they do not work to their full potential, which has a negative impact on the organization's performance. Employees are the pivot on which the organization's growth, survival, and achievement of its goals are predicated. If they fail to meet these objectives, the company will be doomed. (Oguntoke, Binuyo, Egwakhe, Akinlabi, (2021)) stated that these unethical acts have resulted in a loss of public trust and a decrease in competitiveness.
This has necessitated this research as to how business ethics can be used by businesses as a tool to improve performance.
1.3 Objective of the Study
The main objective of the study is to find out the effect of organizational ethics on the performance of manufacturing companies in Lagos State Nigeria.
The specific objectives of the study are to:
i. determine the effect of commitment on the market share of manufacturing companies in Lagos State Nigeria.
ii. examine the effect of work attitude on the profitability of manufacturing companies in Lagos State Nigeria.
iii. find out the effect of team work on the competitive advantage of manufacturing companies in Lagos State Nigeria.
1.4 Research Questions
The questions below were set out:
i. What is the effect of commitment on the market share of manufacturing companies in Lagos State Nigeria?
ii. What is the effect of work attitude on the profitability of manufacturing companies in Lagos State Nigeria?
iii. What is the effect of team work on the competitive advantage of manufacturing companies in Lagos State Nigeria?
1.5 Hypothesis of the Study
The research hypotheses for this study include:
H0: Employee commitment has no significant effect on market share of manufacturing companies in Lagos State Nigeria.
H0: Work attitude has no significant effect on the profitability of manufacturing companies in Lagos State Nigeria.
H0: Team work has no significant effect on the competitive advantage of manufacturing companies in Lagos State Nigeria.
1.6 Significance of the Study
A study like this is significant, as it is capable of adding to the present knowledge of the relationship between organizational ethics and performance and the recommendations of this study will be of benefit to various stakeholders such as the management of the companies, shareholders and investors of the company as well as the academic community:
Board of Directors and Top-level Management: The recommendations of this research will help them to place more importance on the role of organizational ethics for their organization, which will improve the performance of their organization and, make it attractive to investors.
Potential Investors: The research will be of benefit to potential investors in decision making about investment in companies.
Shareholders and Investors: The study will also assist shareholders in the determination of businesses to invest in.
Researchers and Academics: The information and recommendations will be useful to future researchers who may want to work in this area or do further researcher where some recommendations are made for further research which will form basis of new research.
Financial Analysts and Consultants: Also, this study will be of great help to analysts and consultants as they can utilize it in their consultancy and advisory services organizational ethics and financial performance of firms.
1.7 Scope of the Study
The scope of this study is on the effect of organizational ethics and performance of manufacturing companies in Lagos state Nigeria. The study would focus of manufacturing companies as the manufacturing companies are one of the biggest contributors to the Nigerian GDP and most of them are situated in Lagos state.
The population for this study is the manufacturing companies in Nigeria. The sample selected for this study is the manufacturing companies, which is one of the largest sectors of the economy. The company to be used is PZ Cussons. The reason for the use of these company is because it is one of the largest producer of manufacturing products in Nigeria. Information obtained from them can be used to generalize the sector.
The sample method adopted for selecting the representatives of the population is the non-probability judgmental sampling technique. The non-probability judgmental sampling technique is a sampling technique used by a researcher in selecting samples from the population of study based on his judgment that will be adequate to carry out the research.
The geographical coverage covered by this research is Lagos. Data will be collected from the respondents using primary data through the aid of a well-structured questionnaire.
The data analysis and interpretations of this work were carried out in Babcock University, Ilishan Remo Ogun State Nigeria.
1.8 Operationalization of Variables
The relationship between organizational ethics and performance are correlated. We need to derive the first equation that says:
Y will represent the performance, which is the dependent variable
X will represent the organizational ethics, which is the independent variable
Y = (y1, y2, y3)
y1 = Market Shares
y2 = Profitability
y3 = Competitive Advantage
X = (x1, x2, x3)
x1 = Commitment
x2 = Work Attitude
x3 = Team Work
y1 = f(x1)
y2 = f(x2)
y3 = f(x3)
The regression equations based on the hypotheses formulated are expressed as follows:
y1 = α0 + β1x1 + ei ---------------------------------------------------------------------- eq. (i)
y2 = α0 + β2x2 + ei ---------------------------------------------------------------------- eq. (ii)
y3 = α0 + β3x3 + ei ---------------------------------------------------------------------- eq. (iii)
1.9 Operational Definition of Terms
Financial Performance: Financial performance is firm’s ability to generate new resources, from its daily procedures, for a certain time period. Financial performance may also refer to the firm’s ability to make good use their resources in an effective and efficient manner for achievement of the firm’s objectives and goals (Warsame, 2016).
Market Share: This is the portion of the market controlled by the company.
Organizational Ethics: Organizational ethics is the ethics of an organization, and it is how an organization responds to an internal or external stimulus
Teamwork: This refers to the combined action of a group towards achieving a goa.
Competitive advantage: This relates to a condition that puts a company in a favourable or superior business position.