European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.8, No.31, 2016 128 Business Ethics in SMEs under the Shelter of Corporate Governance- A Way Forward Saniya Mehboob MPhil Scholar at IoBM, Karachi, Pakistan Kashif Hashmi Visiting Professor at IoBM, Karachi, Pakistan Abstract This paper revolves around three basic concepts that are corporate governance, corporate responsibility and business ethics. These three concepts are correlated and interconnected with each other. These three dimensions of governance may lead to a healthy business environment and can maximize profits when implemented the framework. In addition, this paper also discusses the framework of corporate governance, problems faced by SMEs and the concept of social responsibility. Organizations can fulfil the role of the facilitator when the suggested framework is practiced in the organization. Keywords: Business Ethics, SMEs, Corporate Governance EL Codes: G30, L70 1. Introduction SMEs play a crucial role for the countries in development phase as they provide a number of job opportunities to the individuals & hence boost up economic activity, resulting in poverty reduction. However, the basic problems faced by entrepreneurs is getting access to finance, building up connections to the international level & getting appropriate knowledge & access in technology. The main issue behind the bulk of problems is that these companies do not run under proper governance. With the growing trend of SMEs, competitiveness within the sector is getting tough, therefore there is a prior need to inject the strategies of corporate governance to strengthen the competitiveness of small and medium- sized enterprises. Corporate governance is important if developing countries take serious steps for meeting the challenges faced by these companies. This document incorporates the need to develop a governance system or framework that is based on incentives, to encourage companies to adopt good governance practices through tax incentives and the allocation of the annual trophy. This document recommends that the rooms of small and medium-sized enterprises should be backed up and empowered in order to strengthen the concept of business ethics from the perspective of corporate governance (Fassin, Rossem, & Buelens, 2011) CG has important implications for the prospects of a growing economy. CG practices to lessen the risks for investors, to attract capital investment and improve business performance. Especially at the time of rapidly increasing competition and mobility of capital, corporate governance has become an essential element in the industrial competitiveness of countries ( Spanos, 2005) Risk is also an eminent factor that entrepreneurs face while setting up their business. These companies and individuals should be encouraged and empowered by the government bodies for sustainable development and for achieving market focused results, resulting in productive and ethical business environment. 1.1 Importance of SME’s in developing countries According to one of the literature reviews, a general observation is that approximately 80 percent small and medium enterprises jobs were associated with the services sector in the year 1990 that raised to 82 percent in the year 1999. Manufacturing sector where-ever garbs 15 percent of the total SME jobs, and hardly four percent jobs were associated with the primary section of SMEs. Further, same literature suggests that upon the available evidences, SMEs provide greater than 70 percent of job opportunities in the market. Nearly seven percent SMEs shuts down or go bankrupt each year whereas, about eight percent new firms come into existence each year that comprises of five to nineteen. Apart from this, about six percent of the SMEs increases their job share in the market and raise employment opportunities. (Sinha, 2003) 1.2 Most pressing problems faced by SMEs 1.2.1 Lack of technical support Currently, most of the small and medium enterprises are dependent on old and obsolete technologies. Coupled with this is that there is lackness in technical skills required to produce quality products. Most of the SMEs does not have knowledge of upgraded technology and opportunities regarding their business. This disadvantage is a major obstacle on the way to modern technology based SME system. It is associated to the inability of small and medium-sized enterprises to bring required equipment and facilities for the purpose of research and development.