What Is Business Ethics?
According to John Donaldson (1989), ‘Business ethics in short can be
described as a systematic study of moral (ethical) matters pertaining to business,
industry or related activities, institutions or practices and beliefs’.
In defining business ethics Laura Nash (1990) observed that the moral
standards of business are not different to that of an individual.
‘It is the study of how personal moral norms apply to the activities and goals
of commercial enterprise. It is not a separate moral standard, but the study of how the
business context poses its own unique problems for the moral person who acts as an
agent of this system’.
Similar view was voiced by Strenberg (1994). He also opined that ethics
mainly refers to distributive justice in deciding the business activities.
‘Business ethics applies ethical reasoning to business situations and activities.
It is based on a combination of distributive justice – that is, the issuing of rewards for
judgment that is placed on all activities’.
Organizational ethics refers to the rightness of the decisions and behaviors of
individuals and the organizations of which they are a part. The definition of Buchholz
and Rosenthal (1998) highlights this.
‘Business ethics is the study of moral standards and how they apply to the
systems and organizations through which modern societies produce and distribute
goods and services, and to the people who work in these organizations’.
In interpreting business ethics, Carroll and Buchholtz (2001), view that the
concept of business ethics has become relative and includes grey areas of right and
wrong.
‘Organizational ethics is concerned with good and bad or right and wrong
behavior and practices that take place within a business context. Concept of right and
wrong is increasingly being interpreted today to include the more difficult and subtle
questions of fairness, justice and equality’.
In defining business ethics C.S.V. Murty (2006) observed that ‘moral
principles that define right and wrong behavior in the world of business. What
constitutes right and wrong behavior in business is determined by the public interest
groups, and business organizations, as well as an individual’s personal morals and
values’.
According to Stanford Encyclopedia of Philosophy (2008), ‘Business
ethics (also corporate ethics) is a form of applied ethics or professional 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 entire organizations’.
In simple terms, Business ethics/corporate ethics are practically concerned
with the entire gamut of functions of an organization which scrutinizes and sets the
codes related to the moral/ethical principle to find the solutions to the problems faced
by an employee in specific and the organization in general.
From the above definitions, which echo similar views on ethics with minor
shades of difference, it can be concluded that business ethics are related to-
morally right and wrong behavior,
in the business context,
including questions of fairness, justice, and equity,
that which require application of moral standards by persons in the
organizations, and
the moral standards that are not separate, but derived from society.
1.2 Ethical Decision Making
The ethical decision making and behavior of individuals in the organization
are influenced by various factors which can be classified into three major headings
namely: a) Intrinsic variables, b) Extrinsic variables and c) Moral issue related
variables (Sunil Kumar Maheswari and M P Ganesh, 2006). Ethical decision making
process can be viewed as a system influenced by several components as given under:
Ethical issues (ethical dimension in a given problem or opportunity),
Principle(s) guiding ethical decision making,
Managerial concerns in an organization,
Environmental factors like culture, legal frameworks etc., and
Personal characteristics of decision maker (Suja S. Nair, 2009)
Ethical issues
Within an organization, one would find a broad spectrum of ethical issues
based on the functions of a business organization like Strategy Management, Financial
Management, Human Resource Management, and Marketing Management and
Production Management.
Corporate Strategy issues like selection of the type of plant, technology,
decisions like reconciling the expectations of different stakeholders in
formulating and developing strategies, the role of business in society and in
the economy, corporate social responsibility, and ethical issues at the
individual level in organizations.
Finance and Accounting issues like insider trading, hostile takeover, acquiring
non-performing assets through surplus funds, fixing swap ratio in favor of a
big acquiring firm, green-mailing and transfer pricing. Value maximization
of the owners, has its limitations and is often in conflict with the traditional
concept of morality. Moreover, Delloitte fraud survey (2014) revealed that
bribery, corruption and cyber frauds are more frequently happen in financial
industry.
Human Resource Management issues related to dealing with unions and labor
negotiations; responsibilities to employees like safety and occupational health
hazards, managing cross cultural teams, workforce diversity, gender equality,
privacy of employees, impact of new technology on employees and their
families, fair compensation, proper working environment, enforcing ethical
standards in the work place, resolving conflicts of individual employee values
and of organizations through systematic training, creating an equitable and
empowering corporate culture etc.
Marketing Management issues, often culture specific, such as marketing of
baby milk in developing countries, misleading or deceptive advertisements,
the effect of advertising on children, bait and switch, puffery, the connection
between packaging and the environment, whether the poor really pay more,
etc.
Production and Operations Management issues like impact of technology on
employees, process safety, quality of production, pollution, etc.
Another way of categorizing ethical issues is:
Monetary issues like dumping, price fixing, bid rigging, embezzlement and
expense account padding.
Behavioral issues like corporate espionage or leakage of sensitive information
to business rivals, discrimination and harassment.