business ethics

Business Dictionary: Business Ethics

Moral principles concerning acceptable and unacceptable behavior by business people. Executives are supposed to maintain a high sense of values and conduct honest and fair practices with the public.

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5min Related Video: business ethics

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Small Business Encyclopedia: Business Ethics

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Most people involved in business—whether functioning as a small business owner, employee, or chief executive officer of a multinational company—eventually face ethical or moral dilemmas in the workplace. Such dilemmas are usually complex, for they force the person making the decision to weigh the benefits that various business decisions impart on individuals (including him or herself) and groups with the negative repercussions that those same decisions usually have on other individuals or groups. LaRue Hosmer, a business ethics expert who teaches at the University of Michigan, observed that reaching a "right" or "just" conclusion when faced with moral problems can be a bewildering and vexing proposition. But he contended that businesspeople are likely to reach and act on morally appropriate decisions if they do not lose sight of the fundamental issue of fairness. Those who get sidetracked by issues of profitability and legality in gauging the morality of a business decision, on the other hand, often reach ethically skewed choices. As has been proven time and again in the business world, the legality of a course of action may be utterly irrelevant to its "rightness." In addition, any discussion of business ethics is a subjective one, for everyone brings different concepts of ethical behavior to the table. These moral standards are shaped by all sorts of things, from home environment to religious upbringing to cultural traditions.

In recent years, the issue of business ethics has garnered increased attention. Corporate research and watchdog groups such as the Ethics Resource Center and the Council on Economic Priorities point out that the number of corporations that engage in ethics training and initiate socially responsive programs has increased dramatically over the course of the past two decades, and that courses on business ethics have proliferated in America's business schools during that time as well. But observers have also noted that over that same period of time, the business world saw numerous instances of stock price pumping through corporate downsizing, punitive actions against "whistleblowers," and other practices that point to a still-prevalent emphasis on the bottom line over all other considerations in many industries.

Competitive Pressures on Ethical Principles

American society places a great emphasis on success, which in and of itself is not a bad thing. It is perfectly justifiable to want to make full use of one's talents and provide for oneself and one's family. People involved in the world of business, however, often face situations in which advancement—whether in position, influence, or financial stature—can be gained, but only by hurting other individuals or groups. Small business owners are confronted with these choices even more often than other people of the business world because of the greater degree of autonomy in decisionmaking that they often enjoy. Moreover, the ethical decisions of small business owners are likely to impact far greater numbers of people than are the ethical decisions of that business owner's employees. Very often, an employee's ethical choices (to claim credit for the work done by another, to falsify number of hours worked, etc.) have an impact on a relatively small number of people, usually co-workers or his or her employer. The ethical choices of business owners, however—whether to use inferior materials in preparing goods for customers, whether to place employees in a poor HMO, whether to lay off a dozen workers because of careless personal financial expenditures, etc.—often have far more wide-ranging repercussions.

Indeed, the pressure to make morally compromised choices on behalf of the company you lead can be quite powerful, whether the enterprise is a lone clothing store or a regional chain of record stores, especially when you feel the health and vitality of your enterprise may be at stake. As Mary Scott observed served in the Utne Reader, "companies that go public, are sold to outside investors, merge with other businesses, and feel the increased competition of businesses based less on values increasingly face an unnerving conflict between their social values and their bottom line."

Some business analysts contend that American businesses—and their leaders—are more prone to ignore ethics as a part of a decisionmaking process than ever before. Even some "good citizen" efforts undertaken by businesses are dismissed as evidence of increased marketing savvy rather than demonstrations of true devotion to ethical business standards. Other critics of modern American business practices grant that good citizen efforts, while laudable, are all too often aberrations. As David Korten wrote in Business Ethics, "all this focus on measures like recycling, cleaning up emissions, contributing to local charities, or providing day care sounds noble, but it's little more than fiddling at the margins of a deeply dysfunctional system." Korten insists that the current widespread emphasis on maximizing financial returns to shareholders—an emphasis that starts with multinational companies but filters down to smaller enterprises as well—makes it "all but impossible to manage for social responsibility."

Some economists and ethicists contend that such emphases on profitability are, in and of themselves, evidence of a set of legitimate ethical principles. Economist Milton Friedman criticized those who insisted that executives and business owners had a social responsibility beyond serving the interests or their stockholders or members, saying that such views showed "a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits, so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud." Some observers even argue that this pursuit of financial gain ultimately serves the larger community, albeit unintentionally. Economist James McKie wrote that "the primary goal and motivating force for business organizations is profit. The firm attempts to make as large a profit as it can …. Profits are kept toreasonable or appropriate levels by market competition, which leads the firm pursuing its own self-interest to an end that is not part of its conscious intention: enhancement of the public welfare." Others, of course, vigorously dispute such interpretations of capitalism and corporate duties as an outright abdication of responsibility for actions undertaken in pursuit of the best possible bottom line. Such philosophies, they argue, provide people with a veneer of ethical cover to engage in everything from ruthless downsizing to environmental degradation to misleading advertising.

ORGANIZATIONAL PRESSURES. Organizational pressures can further complicate ethics issues, especially for employees of larger firms. The small business owner can often do a great deal to shape the ethical environment in which his or her employees work (and the ethical rules under which the business itself operates), but the responsibility for imposing ethical standards in larger organizations often becomes more diffuse. But both large and small businesses sometimes impose operating systems that make it more tempting for workers to engage in acts that are questionable or wrong. As Hosmer pointed out, a business may employ an incentive system for its sales force that is so heavily commission-oriented that salespeople feel greater pressure to make bribes, or a corporate control system may be so fixated on cost controls that production managers find it impossible to fulfill orders without using inferior materials or cutting corners on workmanship. Indeed, Hosmer observed that perhaps the most powerful organizational pressure that can be placed on an employee is the pressure to do the "wrong" thing for the alleged good of the company. In such instances, the employee is presented with a choice between career and morality.

Of course, many people in business also find themselves at crossroads wherein the ethical road is clearly marked, but see at a glance that the other road looks far more inviting because of its promises of professional or financial advancement. "It is not difficult to discern right from wrong, but grasping the difference is only a first step," wrote business executive William R. Holland in Industry Week. "There must be the will, the inner discipline, the strength, and the character to do the right thing, regardless of the cost. Doing the wrong thing is to disregard the rights of others and inflict harm or grief on them."

Establishing and Maintaining Ethical Standards of Behavior in a Small Business

Entrepreneurs and small business owners wield great influence in determining the ethical philosophies of their business enterprises. Employees often follow the lead of the owner in executing their duties and attending to their responsibilities, so it is incumbent on the owner to establish a work environment that embraces moral standards of behavior. There are exceptions to this, of course; dishonest and unethical employees sometimes work in otherwise ethical companies, just as honest and ethical workers can be found in organizations with a prevailing culture of duplicity and selfishness. But a business owner or manager who wishes to establish an ethical mind set in his or her company can help the cause by being proactive.

Business experts and ethicists alike point to a number of actions that owners and managers can take to help steer their company down the path of ethical business behavior. Establishing a statement of organizational values, for example, can provide employees—and the company as a whole—with a specific framework of expected behavior. Such statements offer employees, business associates, and the larger community alike a consistent portrait of the company's operating principles—why it exists, what it believes, and how it intends to act to make sure that its activities dovetail with its professed beliefs. Active reviews of strategic plans and objectives can also be undertaken to make certain that they are not in conflict with the company's basic ethical standards. In addition, business owners and managers should review standard operating procedures and performance measurements within the company to ensure that they are not structured in a way that encourages unethical behavior. As Ben & Jerry's Ice Cream founders Ben Cohen and Jerry Greenfield stated, "a values-led business seeks to maximize its impact by integrating socially beneficial actions into as many of its day-to-day activities as possible. In order to do that, values must lead and be right up there in a company's mission statement, strategy and operating plan."

Finally, and most importantly, business owners and managers lead by example. If a business owner treats employees, customers, and competitors in a fair and honest manner—and suitably penalizes those who do not perform in a similar fashion—he or she is far more likely to have an ethical work force of which he or she can be proud. "It is perfectly possible to make a decent living without compromising the integrity of the company or the individual," wrote business executive William R. Holland. "Quite apart from the issue of rightness and wrongness, the fact is that ethical behavior in business serves the individual and the enterprise much better in the long run."

Indeed, some business owners and managers argue that ethical companies have an advantage over their competitors. Said Cohen and Greenfield, "consumers are used to buying products despite how they feel about the companies that sell them. But a valuesled company earns the kind of customer loyalty most corporations only dream of—because it appeals to its customers on the basis of more than a product…. They like how doing business with [a values-led company] makes them feel."

Further Reading:

Boroughs, Don L. "The Bottom Line on Ethics." U.S. News and World Report. March 20, 1995.

Cohen, Ben, and Jerry Greenfield. Ben & Jerry's Double Dip: Lead With Your Values and Make Money, Too. Simon and Schuster, 1997.

Dalla Costa, John. The Ethical Imperative: Why Moral Leadershipis Good Business. Perseus Press, 1999.

Di Norcia, Vincent, and Joyce Tigner. "Mixed Motives and Ethical Decisions in Business." Journal of Business Ethics. May 1, 2000.

Fandray, Dayton. "The Ethical Company." Workforce. December 2000.

Holland, William R. "Ethics in a Plain Manilla Envelope: Simple Guidelines for Doing Business Honestly." Industry Week. March 18, 1996.

Kaler, John. "Reasons To Be Ethical: Self-Interest and Ethical Business." Journal of Business Ethics. September 2000.

Lynn, Jacqueline. "A Matter of Principle." Entrepreneur. August 1995.

Reder, Alan. In Pursuit of Principle and Profit: Business Success Through Social Responsibility. G.P. Putnam's Sons, 1994.

Roleff, Tamara, ed. Business Ethics. Greenhaven, 1996.

Scott, Mary. "Bottom-Line Blues: Is Ethical Business Only a Dream?" Utne Reader. January-February 1997.

Solomon, Robert C. A Better Way to Think About Business: How Personal Integrity Leads to Corporate Success. Oxford University Press, 1999.

Encyclopedia of Judaism: Business Ethics

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The Jewish religion, based on the Torah and its revelations, was supported by the debates, sayings, and preaching of recognized authorities in successive eras. The Talmud and subsequent legal transcriptions were concerned with basic rules of conduct in transactions of all kinds (including business dealings) between every man and his neighbor.

These rules, though not all formulated in the written Scriptures, were conceived in such a fashion as to be seen to be fair and just in light of the general ethical standards of Judaism. Business which involved relationships between people was part of the religion. The result can be seen in the flexibility and ubiquity of the Jewish codes of conduct, hich are geared to meet the changing environment and the conditions of Jewish traders throughout the ages. Jews transmitted these codes and standards and practiced and (where necessary) modified them in the various lands of their dispersion.

One of their values was an appreciation of the creation of wealth through labor, on which industry and trading depend. "Six days shalt thou labor" (Ex. 20:9) is part of the Fourth Commandment. "All study of the Torah without work (some productive occupation] must in the end be futile and lead to sin" (Avot 2:2). (This raises the question as to whether unemployment is immoral.) "Great is work, for it honors the workman" (Ned. 49b).

Wealth acquired without effort, however, is frowned upon: "An estate may be gotten hastily at the beginning; but the end thereof shall not be blessed" (Prov. 20:21). On wealth gained through labor, and transferred through charitable giving to the poor and underprivileged, there is religious guidance.

The Jewish religion was concerned that business actions should be fair both to seller and buyer, and that the outcome of such transactions should be just. The laws of profiteering (hafka'at she'arim) had their origin in rabbinic enactments which were intended to prohibit the setting of prices in excess of the customarily accepted rate, even if the buyer was aware of, and agreed to, the inflated price. As defined by the scholars, profiteering included giving short measure (Lev. 19:35; Deut. 25:14-16) and/or charging interest on loans when aiding someone in distress (Ex. 22:24; Lev. 25:35-37; Deut. 23:20-21). Charging reasonable interest on a business investment however, is permissible.

The analogous concept of overreaching (ona'ah) was also based expressly on the preservation of a fair and just price. This concept, however, stemmed from a biblical prohibition (Lev. 25:14). The law was fixed that "if the price exceeded the value by one-sixth, the seller must return this part to the purchaser. If the price were higher still, the purchaser might demand cancelation of the transaction. Conversely, if the price were too low, the law applied in favor of the seller" (BM 50b).

This is reminiscent---and perhaps even a more stringent application---of the anti-inflationary price controls maintained by various countries at various times in recent years.

There were arguments as to how price control should be exercised. In the Mishnaic period, fixed prices were set by a recognized authority; later, in the talmudic era, market commissioners supervised only measures, not prices. Authority to determine prices was subsequently given not only to the courts, but also to local community representatives. According to Rashi, "the townspeople are authorized to fix prices and measures and workers' wages, which they may enforce by punishment [i.e., fines]." Doubts were even expressed as to whether price inspectors were necessary, on the assumption that competition between merchants would stabilize prices.

Various measures were invoked to check profiteering and inflation. For example, it was forbidden to hoard produce brought to the market, since this might cause prices to rise and affect the poor; nor was it permitted to export essential products, since this might also lead to a shortage and raise prices. Today, in Israel, legislative measures fix prices and combat profiteering in essential commodities through laws enforceable by imprisonment, fine, or the closing down of a business. Similarly, other laws regarding property control maximum rents, protect tenants by limiting the right of eviction to specific causes, and bar the artificial manipulation of price levels by a monopoly or cartel These secular laws embody the rabbinic view.

Tsedek (fairness and justice) is the motivation of Jewish business conduct. One must not defraud or cheat people in business (Lev. 19:13, 25:14); mislead a man even verbally (Lev. 25:17); or vex the stranger and do him injury in trade (Ex. 22:20).

Ḥesed (goodness), however, was an added dimension to these guiding principles, and goodness did not just concern itself with sticking to the letter of the law; it went beyond it in the spirit of the Torah's ethical wisdom, as is found in the Tenth Commandment: "You shall not covet your neighbor's house ... nor anything that is your neighbor's" (Ex. 20:14). Enlarging on this general precept, the rabbis said: "Do not covet another man's possessions, even if you are willing to pay for them." In the light of this interpretation, it would be hard to find ethical justification for many of today's industrial mergers.

Business is concerned with the integration of men, machines, and markets, with money as the binding cement. On the employment and treatment of labor, biblical Judaism was unambiguous (see Labor Laws). It believed in the need and value of work; it also believed in the fair treatment of a worker: not to delay payment of his wages (Lev. 19:13) in those days meant paying him daily. Bondsmen had to be treated humanely (Lev. 25:39ff.) and never in a harsh, unfeeling manner (see Slavery). Today, trade unions undertake these responsibilities without the benefit of religious direction, but from early times trade unions were recognized in Jewish law (BB 8b).

There were also conditions obligating the Jewish workman who, perceived as a servant of God, had the right to terminate his contract but not to strike. The worker's right to contract out his labor was based on an interpretation of Leviticus 25:55, that no one could acquire ownership of a person; a strike, on the other hand, was considered an attempt to change the terms of a contract. This view was modified by Rabbi Avraham Yitsḥak Kook and others at the beginning of the 20th century, but the strike was given legitimacy only as a means of forcing an employer either to submit a grievance or demand to arbitration, or to adhere to a decision reached through arbitration.

From ancient times, Jews have been closely associated in people's minds with moneylending and, in the modern age, with banking and high finance. On money, and particularly on loans, there were safeguards which even today can be found in civil law. The Torah (Deut. 23:20-21; Lev. 25:35-37, etc.) added a moral dimension. Loans were originally given for charitable purposes and not for commercial gain: no creditor might therefore exact repayment in the seventh year (Deut. 15:2). Ezekiel (18:13) also condemns the taking of interest, and one who never lent on interest deserves praise (Ps. 15:5). Similarly, no one must condemn a poor man when he cannot pay back a loan (Ex. 22:24).

The Bible, however, is specific (if discriminatory) about the Jewish position on moneylending and interest. The injunction that it is forbidden to lend on interest to a Jew "waxen poor or of failing means"---or to participate in an agreement involving interest either as a guarantor, witness, or writer of the contract---is to be found, for example, in Leviticus 25:35-37. This injunction does distinguish between the Jew and the non-Jew, however, since, although repeated in Deuteronomy 23:20 ("You shall not lend on interest to your brother"), the following verse says, "Unto a foreigner you may lend upon interest."

Whatever the economic rationale may be for this distinction, the rabbis considered that for Jews the verse had a moral implication---that of Charity (tsedakah), but charity with a difference, as expressed by Maimonides in his Mishneh Torah (Yad, Mattenot Aniyyim 10:7-14): "The highest degree, exceeded by none, is that of a person who assists the poor man by providing him with a gift or a loan, or by accepting him into a partnership, or by helping him find employment---in a word, by placing him in a situation where he can dispense with other people's aid." The adoption of this attitude toward aid for Third World countries is an interesting recent development, and the concept may even be extended to politically motivated "caring capitalism."

Jewish law does not approve of the restraint of trade by Jews in community or inter-community transactions, and countervailing measures are listed, short-term and long-term, which can be taken against the boycott weapon, namely, preventing the free exchange of goods. These include organizing consumers not to buy even if religious practices are embarrassingly involved---for example, when Sabbath observance is hindered by extortionate monopoly pricing.

Jewish communities may not place any restrictions on foreign wholesale trade activities, however, in contrast to certain Arab countries which have long practiced discrimination against Jews. The rabbinic policy is laid down by several authorities, including Asher Ben Jehiel (Rosh) and Jacob Ben Asher.

When finding ethical solutions to modern problems, Judaism looks for solutions that will, if at all possible, reflect biblical morality and rabbinic guidance. If such solutions are not available, because the issues are entirely new and the religion offers no precedent, then, at the very least, the ad hoc practices of secular law or institutions should not conflict with the ethical principle of tsedek (fairness and justice) on which Jewish law is based. Ideally, however, the Jewish code of behavior in a changing world should draw upon the further element of ḥesed (goodness).

Philosophy Dictionary: business ethics

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The branch of ethics that analyses problems and dilemmas created by business practices: for example, the social responsibilities of the firm, the proper limits of acceptable competition, the weighing of conflicting obligations to stockholders and clients, and the extent and limits of company loyalty.

Columbia Encyclopedia: business ethics

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business ethics, the study and evaluation of decision making by businesses according to moral concepts and judgments. Ethical questions range from practical, narrowly defined issues, such as a company's obligation to be honest with its customers, to broader social and philosophical questions, such as a company's responsibility to preserve the environment and protect employee rights. Many ethical conflicts develop from conflicts between the differing interests of company owners and their workers, customers, and surrounding community. Managers must balance the ideal against the practical-the need to produce a reasonable profit for the company's shareholders with honesty in business practices, safety in the workplace, and larger environmental and social issues. Ethical issues in business have become more complicated because of the global and diversified nature of many large corporations and because of the complexity of government regulations that define the limits of criminal behavior. For example, multinational corporations operate in countries where bribery, sexual harassment, racial discrimination, and lack of concern for the environment are neither illegal nor unethical or unusual. The company must decide whether to adhere to constant ethical principles or to adjust to the local rules to maximize profits. As the costs of corporate and white-collar crime can be high, both for society and individual businesses, many business and trade associations have established ethical codes for companies, managers, and employees. Government efforts to encourage companies to adhere to ethical standards include President Clinton's Model Business Principles (1995), in a program overseen by the Dept. of Commerce.

Bibliography

See M. Clinard and P. Yeager, Corporate Crime (1980); R. Berenbeim, Corporate Ethics (1987); C. Walton, The Moral Manager (1988); P. Baida, Poor Richard's Legacy (1990).

Wikipedia: Business ethics

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Business ethics is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing.^[1] Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).^[2] Businesses can often attain short-term gains by acting in an unethical fashion; however, such behaviours tend to undermine the economy over time.

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

Overview of issues in business ethics

General business ethics

This part of business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a company's main purpose is to maximize the returns to its shareholders, then it should be seen as unethical for a company to consider the interests and rights of anyone else.^[3]
Corporate social responsibility or CSR: an umbrella term under which the ethical rights and duties existing between companies and society is debated.
Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept.
Ethical issues concerning relations between different companies: e.g. hostile take-overs, industrial espionage.
Leadership issues: corporate governance.
Political contributions made by corporations.
Law reform, such as the ethical debate over introducing a crime of corporate manslaughter.
The misuse of corporate ethics policies as marketing instruments.

See also: corporate abuse, corporate crime.

Ethics of accounting information

Main article: accounting ethics

Creative accounting, earnings management, misleading financial analysis.
Insider trading, securities fraud, bucket shops, forex scams: concerns (criminal) manipulation of the financial markets.
Executive compensation: concerns excessive payments made to corporate CEO's and top management.
Bribery, kickbacks, facilitation payments: while these may be in the (short-term) interests of the company and its shareholders, these practices may be anti-competitive or offend against the values of society.

Cases: accounting scandals, Enron, WorldCom

Ethics of human resource management

The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee.

Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness. See also: affirmative action, sexual harassment.
Issues arising from the traditional view of relationships between employers and employees, also known as At-will employment.
Issues surrounding the representation of employees and the democratization of the workplace: union busting, strike breaking.
Issues affecting the privacy of the employee: workplace surveillance, drug testing. See also: privacy.
Issues affecting the privacy of the employer: whistle-blowing.
Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery,^[4] indentured servitude, employment law.
Occupational safety and health.

All of the above are also related to the hiring and firing of employees. An employee or future employee can not be hired or fired based on race, age, gender, religion, or any other disciminatory act.

Ethics of sales and marketing

Main article: marketing ethics

Marketing, which goes beyond the mere provision of information about (and access to) a product, may seek to manipulate our values and behavior. To some extent society regards this as acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps strongly with media ethics, because marketing makes heavy use of media. However, media ethics is a much larger topic and extends outside business ethics.

Pricing: price fixing, price discrimination, price skimming.
Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law.
Specific marketing strategies: greenwash, bait and switch, shill, viral marketing, spam (electronic), pyramid scheme, planned obsolescence.
Content of advertisements: attack ads, subliminal messages, sex in advertising, products regarded as immoral or harmful
Children and marketing: marketing in schools.
Black markets, grey markets.

Cases: Benetton.

Ethics of production

This area of business ethics usually deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.

Defective, addictive and inherently dangerous products and services (e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing, bungee jumping).
Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading
Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health.
Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects.

Ethics of intellectual property, knowledge and skills

Knowledge and skills are valuable but not easily "ownable" as objects. Nor is it obvious who has the greater rights to an idea: the company who trained the employee, or the employee themselves? The country in which the plant grew, or the company which discovered and developed the plant's medicinal potential? As a result, attempts to assert ownership and ethical disputes over ownership arise.

Patent infringement, copyright infringement, trademark infringement.
Misuse of the intellectual property systems to stifle competition: patent misuse, copyright misuse, patent troll, submarine patent.
Even the notion of intellectual property itself has been criticised on ethical grounds: see intellectual property.
Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess.
The practice of employing all the most talented people in a specific field, regardless of need, in order to prevent any competitors employing them.
Bioprospecting and biopiracy.
Business intelligence and industrial espionage.

Cases: private versus public interests in the Human Genome Project

Ethics and Technology The computer and the World Wide Web are two of the most significant inventions of the twentieth century. There are many ethical issues that arise from this technology. It is easy to gain access to information. This leads to data mining, workplace monitoring, and privacy invasion.^[5]

Medical technology has improved as well. Pharmaceutical companies have the technology to produce life saving drugs. These drugs are protected by patents and there are no generic drugs available. This raises many ethical questions.

International business ethics and ethics of economic systems

The issues here are grouped together because they involve a much wider, global view on business ethical matters.

International business ethics

While business ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade.^[6] Many new practical issues arose out of the international context of business. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields include:

The search for universal values as a basis for international commercial behaviour.
Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP and [Corruption rankings].
Comparison of business ethical traditions from various religious perspectives.
Ethical issues arising out of international business transactions; e.g. bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.
Issues such as globalization and cultural imperialism.
Varying global standards - e.g. the use of child labor.
The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries.
The permissibility of international commerce with pariah states.

Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.

Ethics of economic systems

This vaguely defined area, perhaps not part of but only related to business ethics,^[7] is where business ethicists venture into the fields of political economy and political philosophy, focusing on the rights and wrongs of various systems for the distribution of economic benefits. John Rawls and Robert Nozick are both notable contributors.

Theoretical issues in business ethics

Conflicting interests

Business ethics can be examined from various new perspectives, including the perspective of the employee, the commercial enterprise, and society as a whole. Very often, situations arise in which there is conflict between one or more of the parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas, it would be bad for the company, society, or vice versa. Some ethicists (e.g., Henry Sidgwick) see the principal role of ethics as the harmonization and reconciliation of conflicting interests.

Ethical issues and approaches

Philosophers and others disagree about the purpose of a business ethic in society. For example, some suggest that the principal purpose of a business is to maximize returns to its owners, or in the case of a publicly-traded concern, its shareholders. Thus, under this view, only those activities that increase profitability and shareholder value should be encouraged, because any others function as a tax on profits. Some believe that the only companies that are likely to survive in a competitive marketplace are those that place profit maximization above everything else. However, some point out that self-interest would still require a business to obey the law and adhere to basic moral rules, because the consequences of failing to do so could be very costly in fines, loss of licensure, or company reputation. The noted economist Milton Friedman was a leading proponent of this view.

Some take the position that organizations are not capable of moral agency. Under this, ethical behavior is required of individual human beings, but not of the business or corporation.

Other theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholders, and that these duties consist of more than simply obeying the law. They believe a business has moral responsibilities to so-called stakeholders, people who have an interest in the conduct of the business, which might include employees, customers, vendors, the local community, or even society as a whole. Stakeholders can also be broken down into primary and secondary stakeholders. Primary stakeholders are people that are affected directly such as stockholders, where secondary stakeholders are people who are not affected directly such as the government. They would say that stakeholders have certain rights with regard to how the business operates, and some would suggest that this includes even rights of governance.

Some theorists have adapted social contract theory to business, whereby companies become quasi-democratic associations, and employees and other stakeholders are given voice over a company's operations. This approach has become especially popular subsequent to the revival of contract theory in political philosophy, which is largely due to John Rawls' A Theory of Justice, and the advent of the consensus-oriented approach to solving business problems, an aspect of the "quality movement" that emerged in the 1980s. Professors Thomas Donaldson and Thomas Dunfee proposed a version of contract theory for business, which they call Integrative Social Contracts Theory. They posit that conflicting interests are best resolved by formulating a "fair agreement" between the parties, using a combination of i) macro-principles that all rational people would agree upon as universal principles, and, ii) micro-principles formulated by actual agreements among the interested parties. Critics say the proponents of contract theories miss a central point, namely, that a business is someone's property and not a mini-state or a means of distributing social justice.

Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards, as in the case of multinational companies that operate in countries with varying practices. The question arises, for example, ought a company to obey the laws of its home country, or should it follow the less stringent laws of the developing country in which it does business? To illustrate, United States law forbids companies from paying bribes either domestically or overseas; however, in other parts of the world, bribery is a customary, accepted way of doing business. Similar problems can occur with regard to child labor, employee safety, work hours, wages, discrimination, and environmental protection laws.

It is sometimes claimed that a Gresham's law of ethics applies in which bad ethical practices drive out good ethical practices. It is claimed that in a competitive business environment, those companies that survive are the ones that recognize that their only role is to maximize profits.

Business ethics in the field

Corporate ethics policies

As part of more comprehensive compliance and ethics programs, many companies have formulated internal policies pertaining to the ethical conduct of employees. These policies can be simple exhortations in broad, highly-generalized language (typically called a corporate ethics statement), or they can be more detailed policies, containing specific behavioral requirements (typically called corporate ethics codes). They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters.

An increasing number of companies also requires employees to attend seminars regarding business conduct, which often include discussion of the company's policies, specific case studies, and legal requirements. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct.

Many companies are assessing the environmental factors that can lead employees to engage in unethical conduct. A competitive business environment may call for unethical behavior. Lying has become expected in fields such as trading. An example of this are the issues surrounding the unethical actions of the Saloman Brothers.

Not everyone supports corporate policies that govern ethical conduct. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment.

Others believe that corporate ethics policies are primarily rooted in utilitarian concerns, and that they are mainly to limit the company's legal liability, or to curry public favor by giving the appearance of being a good corporate citizen. Ideally, the company will avoid a lawsuit because its employees will follow the rules. Should a lawsuit occur, the company can claim that the problem would not have arisen if the employee had only followed the code properly.

Sometimes there is disconnection between the company's code of ethics and the company's actual practices. Thus, whether or not such conduct is explicitly sanctioned by management, at worst, this makes the policy duplicitous, and, at best, it is merely a marketing tool.

To be successful, most ethicists would suggest that an ethics policy should be:

Given the unequivocal support of top management, by both word and example.
Explained in writing and orally, with periodic reinforcement.
Doable....something employees can both understand and perform.
Monitored by top management, with routine inspections for compliance and improvement.
Backed up by clearly stated consequences in the case of disobedience.
Remain neutral and nonsexist.

Ethics officers

Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of this new role was a series of fraud, corruption and abuse scandals that afflicted the U.S. defense industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-industry initiative to promote and ensure ethical business practices. The DII set an early benchmark for ethics management in corporations. In 1991, the Ethics & Compliance Officer Association (ECOA) -- originally the Ethics Officer Association (EOA)-- was founded at the Center for Business Ethics(at Bentley College, Waltham, MA) as a professional association for those responsible for managing organizations' efforts to achieve ethical best practices. The membership grew rapidly (the ECOA now has over 1,100 members) and was soon established as an independent organization.

Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991, which set standards that organizations (large or small, commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Although intended to assist judges with sentencing, the influence in helping to establish best practices has been far-reaching.

In the wake of numerous corporate scandals between 2001-04 (affecting large corporations like Enron, WorldCom and Tyco), even small and medium-sized companies have begun to appoint ethics officers. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities, making recommendations regarding the company's ethical policies, and disseminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. This trend is partly due to the Sarbanes-Oxley Act in the United States, which was enacted in reaction to the above scandals. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions.

The effectiveness of ethics officers in the marketplace is not clear. If the appointment is made primarily as a reaction to legislative requirements, one might expect the efficacy to be minimal, at least, over the short term. In part, this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior, a culture and climate that usually emanates from the top of the organization. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behaviour: a more systemic programme with consistent support from general management will be necessary.

The foundation for ethical behavior goes well beyond corporate culture and the policies of any given company, for it also depends greatly upon an individual's early moral training, the other institutions that affect an individual, the competitive business environment the company is in and, indeed, society as a whole.

Business Ethics as an Academic Discipline

As an academic discipline, business ethics emerged in the 1970s. Since no academic business ethics journals or conferences existed, researchers published their papers in general management outlets, and attended general conferences, such as the Academy of Management. Over time, several peer-reviewed journals appeared, and more researchers entered the field. Especially, higher interest in business topics among academics was observed after several corporate scandals in the earlier 2000s. As of 2009, sixteen academic journals devoted to various business ethics issues existed, with Journal of Business Ethics and Business Ethics Quarterly being considered the leading A+ outlets.^[8]

Religious views on business ethics

Main article: Religious views on business ethics

The historical and global importance of religious views on business ethics is sometimes underestimated in standard introductions to business ethics. Particularly in Asia and the Middle East, religious and cultural perspectives have a strong influence on the conduct of business and the creation of business values.

Examples include:

Islamic banking, associated with the avoidance of charging interest on loans.
Traditional Confucian disapproval of the profit-seeking motive.^[9]
Quaker testimony on fair dealing.

Related disciplines

Business ethics should be distinguished from the philosophy of business, the branch of philosophy that deals with the philosophical, political, and ethical underpinnings of business and economics. Business ethics operates on the premise, for example, that the ethical operation of a private business is possible -- those who dispute that premise, such as libertarian socialists, (who contend that "business ethics" is an oxymoron) do so by definition outside of the domain of business ethics proper.

The philosophy of business also deals with questions such as what, if any, are the social responsibilities of a business; business management theory; theories of individualism vs. collectivism; free will among participants in the marketplace; the role of self interest; invisible hand theories; the requirements of social justice; and natural rights, especially property rights, in relation to the business enterprise.

Business ethics is also related to political economy, which is economic analysis from political and historical perspectives. Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses from economic activity, and is the resultant distribution fair or just, which are central ethical issues.

References

^ "Ethics the easy way". H.E.R.O.. http://www.hero.ac.uk/uk/business/archives/2003/ethics_the_easy_way5043.cfm. Retrieved 2008-05-21.
^ "Miliband draws up green tax plan". BBC. 2006-10-30. http://news.bbc.co.uk/1/hi/uk/6095680.stm. Retrieved 2008-05-21.
^ Friedman, Milton (1970-09-13). "The Social Responsibility of Business is to Increase Its Profits". The New York Times Magazine. http://www-rohan.sdsu.edu/faculty/dunnweb/rprnts.friedman.html.
^ Hare, R. M. (1979). "What is wrong with slavery". Philosophy and Public Affairs 8: 103–121.
^ ethical theory and business (Beauchamp)
^ Enderle, Georges (1999). International Business Ethics. University of Notre Dame Press. pp. 1. ISBN 0-268-01214-8.
^ George, Richard de (1999). Business Ethics.
^ "Serenko, A. and Bontis, N. (2009). A citation-based ranking of the business ethics scholarly journals. International Journal of Business Governance and Ethics 4(4): 390-399.". http://foba.lakeheadu.ca/serenko/papers/IJBGE040405_PUBLISHED.pdf. Retrieved 2009-10-21.
^ http://www.stthom.edu/academics/centers/cbes/jonachan.html

External links

This article's external links may not follow Wikipedia's content policies or guidelines. Please improve this article by removing excessive or inappropriate external links.

EthicsWorld, the gateway to resources on corporate ethics and public sector governance.
Podcast interview with Dov Seidman of LRN - Ethical Business Cultures at DishyMix
Business Ethics in Knowledge@Wharton, the Wharton School's online business journal.
Business ethics section from the website of the Markkula Center for Applied Ethics
Economics and Economic Justice in the Stanford Encyclopedia of Philosophy
Commerce with a conscience. Dame Anita Roddick (The Body Shop founder) asks: Can business deliver social change?
The Conference Board Ethics Program
Baylor University's Hankamer School of Business Annual Business Ethics Forum
Grant Thornton IBR Corporate Social Responsibility: a necessity not a choice.

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