Topic 1 Why the Study of Business Ethics

Introduction

In 2001, investors and the American public were shocked when Enron, the energy trading company created off the books partnerships to hide debts and losses. With Enron’s disgrace other business scandals involving major companies surfaced thus bringing to light the need for businesses to become more accountable for their actions and to be more transparent in their operation and dealings with stakeholders.

Thus the study of Business Ethics is an important topic for students to understand and become agent for change as they graduate and enter the corporate world.

Business enterprises today are moving away from the expected traditional way of doing business and are moving towards standards of responsibilities in terms of business conducts. Today, businesses are expected to play their part as members of the community and are expected to abide by the norms, values and standards of respects, integrity and quality. Businesses have realized that improved business performances, profits and economic progress comes to those who effectively and efficiently foster sound and reasonable expectations of their primary stakeholders such as; Customers, employers, suppliers, investors, and the environment as well as managers and owners. (Johnson and Abramov, 2004)

 

What is business Ethics?

Business ethics is the study of business situations, activities and decisions where issues of right and wrong are addressed.

When discussing right and wrong, we mean morally right and wrong as opposed to commercially, strategically or financially right or wrong. Business ethics not only refers to commercial business but government organizations, pressure groups, not-for-profit business, charities and other organizations. (Crane and Matten, 2007).

When ethics relates to business situation, business activities and business decisions, what factors do you look at? 

Many everyday business activities require the maintenance of basic ethical standards, such as honesty, trustworthiness and co-operations. Business activities would be impossible if corporate directors always lied, if buyers and sellers never trusted each other or refuse to help each other.

Business activities require decisions.  Business ethics provides us with some answers as to why certain decisions should be evaluated as ethical or unethical, or right or wrong. Some examples of Business Decisions; How to manage employees fairly? Or what constitute deception in advertising etc.?

 

Business Ethics is not Oxymoron.

Given the above explanation we can therefore say, Business Ethics is not Oxymoron. There are good reasons to suggest that there is a need for business ethics. It is important to stress that by the right and wrong we mean morally right and wrong. Here we would be looking at; commercially; strategically; financially; not only in commercial businesses but also government organization, pressure groups, non-profit organization, charities, and other organization.

 Business Ethics and the Law

Are ethics and law the same thing? Some may say yes, that the law is also about the issue of right and wrong however, if we look closely at ethics and law, they are distinctively not the same. For example; there is no law preventing you from being unfaithful to your wife or husband, boyfriend or girlfriend however, others may perceive these actions as unethical.

Let us look at another example; For example the law prescribes whether we should drive on the right or left lanes of the road. Although this decision is not an ethical issue, we all know that if we do not follow the traffic laws of driving on the particular side of the road, we would have chaos on the road because we decided not to follow the law thus for this reason, it is often said that business ethics is about the grey areas of business ethic or where values may be in conflict, meaning many questions raised about law and ethics are equivocal (not having one clear or definite meaning or intention) (Crane and Matten, 2007).

 Defining Morality, Ethics and Ethical Theory

The words morality and ethics at time are often used interchangeably thus it is important to understand the two terms. (Crane and Matten, 2007)

Morality is concerned with the norms, values and beliefs embedded in social processes which define right and wrong for an individual or a community.

Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for a given situation. These rules and principles are called ethical theories.

Oxford Advance Learner’s Dictionary define ethics as “the moral principles that control or influence a person’s behaviour; professional/business/medical ethics. In another word ethics is the system of moral principles or rules of behaviour.

Why is Business Ethics important?

Below is an abstract taken from; “A Publication of the Good Governance Program”. International Trade Administration Washington D.C. 2004.

Businesses around the world are designing and implementing business ethics programs to address the legal, ethical, social responsibility, and environmental issues they face. By addressing these issues in a systematic way, enterprises can improve their own business performance, expand opportunities for growth, and contribute to the development of social capital in their markets. They can realize specific business benefits, such as:

 • Enhanced reputations and good will

 • Reduced risks and costs

 • Protection from their own employees and agents

 • Stronger competitive positions

 • Expanded access to capital, credit, and foreign investment

 • Increased profits

 • Sustained long-term growth

 • International respect for enterprises and emerging markets

Enterprises that excel in these areas create a climate of excellence for their employees, shareholders, and communities, and contribute to the economic wellbeing of their countries.

The Relevance of Globalization for Business Ethics

(Crane and Matten, 2007) Today business ethics is particularly relevant when discussing globalization given the integration and intertwining of economies and the increase conduct of business across international boundaries with the focus on three main areas; Culture, Law and Accountability.

Cultural Issues – As business enterprises enters new markets and engage in international business operations they face new and diverse challenges, sometimes contradicting ethical issues and demands. Examples; moral values which were taken for granted in their home country are being questioned in the host country, such as racial and gender issues.

The issue of advertising a product using a young bikini clad woman on a billboard maybe acceptable in some countries however, the same promotion may not be acceptable in others. The norms and values of the society have to be taken into considerations.

Legal Issues – As businesses move their operations from the home country to another country, the issue of laws can surface such as operating within the legal jurisdiction of the host country and what is legally right in the home country may not be legally right in the host country. Managers can no longer rely on the legal framework on whether certain business practices are right or wrong and this is where business ethics comes in. (Crane and Matten, 2007)

Accountability Issues – Multinational corporations are becoming the main actors in the global market and they tend to own, control and influence much of the information that is disseminated around the globe. They supply global products, they create jobs and employment, and they pay taxes to the government and influences government in decision making. With the acceleration in MNC operations globally, there is increasing demand for more accountability.

As noted by Johnson and Abramov (2004) Business enterprises today are expected to meet standards of responsible business conduct that go beyond what had been expected traditionally. Although people more often than not still speak of business in terms of products, jobs, and profits, it is understood and accepted across the globe that a business enterprise remains a member of its community. The pursuit of profits and economic progress is not a license to ignore community norms, values, and standards of respect, integrity, and quality.

Sustainability: A Key Goal for Business Ethics?

There are vast challenges faced on the global front by business enterprises and MNC such as; environment issues in term of pollution and wastages, water and food shortages, deforestation, erosion of culture due to tourism, labour exploitation etc.

Sustainability has become the key word on any development agenda and with the development and standards set to guide business enterprises in their pursuit for excellence and accountability, business ethics in any form need to be cultivated and natured to meet the challenges of the 21^st century and beyond.

Given the above explanation, we can see why the study of business ethics is important and as we progress further with the course; Ethical Practices in Business, we may gain further knowledge and the insight into this important subject.

 

Sources:

Crane, Matten, (2007) Business Ethics; Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford.

Nickel, McHugh, McHugh, (2005) Understanding Business 7^th Edition, McGraw-Hill

Johnson, Abramov, Business Ethics 2004, “A Publication of the Good Governance Program”