business ethics - introduction

What is business ethics?

Business Ethics is a relatively new, but increasingly important, part of Business Studies. The question, or problem, is this:

A business is expected to achieve its objectives, usually to make a decent profit for the owners/shareholders. In doing so, it may need to overlook the wishes of others.

For example, it could lie about the benefits of its products in order to get more revenue. It could skip important safety checks to save costs. What should the business do?

To some extent, this is an area already covered by Business Law. When society largely agrees, a law can be passed to stop behaviour the society disapproves of. For example, discrimination against women is illegal (it wasn’t always so).

What Business Ethics Covers

Business Ethics looks at areas that are too new, or too controversial, for society to agree on. For example, the medical business is increasingly controversial. The pharmaceutical businesses concentrate their (very expensive) research on illnesses that afflict rich people, because rich people (or the government of a rich country) can afford to buy these new treatments when they are launched on the market. This means too little research is done into illnesses (like malaria) that primarily affect poor people and poor governments. Is this right?

So, we can have profit-maximising businesses that don’t worry too much about who gets in their way; or we can have ethical businesses that are very careful with people get in their way, but which don’t make very much profit. This is the contrast, the trade-off that we are faced with.

Or is it? Increasingly, there is thought about a middle way. Consumers in developed countries are increasingly aware of ethical issues, and some are prepared to pay for it.

For example, BodyShop was one of the first businesses to build on this trend, and made their market niche largely out of the fact that their products are kinder to the world than are competing products. Why buy from BodyShop? Because their products aren’t tested on animals. So, the ethical nature of the product becomes part of the unique selling point ("USP") of the product and central to the Marketing of that product. In other words, there is no conflict between ethics and profit, because an ethical stance is part of the profit-making process.

Since then, many businesses in all sorts of markets have followed this line. Washing powders, for example. BP is trying to portray the oil business as environmentally friendly. Other businesses have been pushed in this direction by adverse publicity. Triumph, a Swiss makers of bras, was forced to abandon an investment in Myanmar (Burma ) because of widespread opposition to a dictatorial and unpleasant government. And Nike (and others) have been widely criticised for using cheap labour in developing countries, which is what you would expect from a profit-maximising business.

One difficult question is ‘what sort of things count as ethical question?’ There is no agreement on this, hence the difficulty. Take the example above. Some people might say well-done to Nike for creating jobs in a very poor part of the world where jobs are desperately needed. But other people have said that it is unethical to exploit very poor people, and to make them work in poor conditions for low wages, especially when the business could afford to pay them more.