introduction to business ethics

What is meant by ethics?
- Consists of moral principles governing the right and wrongs of human conduct
- Is about the principles of right and wrong accepted by individuals or social groups
- A code of behaviour considered morally correct
- Code of moral principles that guide the action of people and groups
- Ethical behaviour is doing what is morally right

Business ethics
Business ethics are the principles and standards that:
- Define acceptable conduct in business
- Should underpin decision making

An alternative definition is: ”the moral values which govern business behaviour and restrains companies from pursuing the interest of the shareholder at the expense of all other considerations”

- Some activities might be profitable and legal but nevertheless are considered to be unethical
- An ethical decision is one that is both legal and meets the shared ethical standards of the community

Is ethics the same as the law?
- No - although the law should reflect the ethical views of society there are certain activities permitted by law which some individual or groups in society or individual might regard as unethical.
- Ethical considerations are about what is right and what is wrong
- The law is about what is lawful and what is unlawful

The following business activities are legal but might pose ethical dilemmas for individuals:

Profiting from gambling
Selling goods manufactured by low wage in developing countries
Engaging in the fur trade
Experimenting on animals

Is it the same as corporate social responsibility?
- There is clearly an overlap between CSR and business ethics
- A socially responsible firm should be an ethical firm
- An ethical firm should be socially responsible

However there is a distinction:

- CSR is about responsibility to all stakeholders and not just shareholders
- Ethics is about morally correct behaviour

Ethics - decision models
- When faced with an ethical question, what guides our decision making? There are different ways of looking at the issue:

Moral principles
- Evaluate decisions on whether it is consistent with accepted moral principles

Utilitarianism
- Looks at decisions from the perspective of who gains
- What is good for the greatest number is right
- The test is whether or not it is consistent with the greatest happiness of the greatest number?

Justice model
- The test is does it distribute benefits and penalties in a fair and equitable way?

Human rights
- People have fundamental human rights and liberties - consent, privacy, conscience, free speech, fair treatment, life, safety
- The test is: does it violate human rights?
- An ethically correct decision is one that best maintains the human rights of those affected
- Decisions that violate human rights are unethical

Individualism
- Is it in the individual’s best interest?
- This is the ethics of self interest

Spectrum of firms
- It would be naïve to believe that all business organisations behave in an ethical, moral way
- We can classify firms in terms of their ethical stance in the following ways:

The amoral firm
- Seeks to win at all costs
- Anything is acceptable

The legalistic firm
- Will obey the law but no more than that

The responsive firm
- Accepts that being ethical can pay off
- Ethical behaviour is enlightened self interest

The ethically engaged firm
- Wants to do the right thing
- Has a code of ethics
- But ethical behaviour is not fully integrated into the culture

The ethical firm
- Ethics are a core value and permeate the whole organisation