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Business Ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral problems that can arise in business; and any special duties or obligations that apply to persons who are engaged in commerce. It looks at various business activities and asks, "Is this ethically right or wrong?"
Some typical topics within business ethics include deception in advertising, covert monitoring of employee computers and telephones, insider trading, intentional disinformation, ponzi schemes, employee rights, confidentiality, job discrimination, affirmative action, drug testing, bribery, political contributions, price discrimination, product churning, unethical labour practices, retail price maintenance, environmental issues, collusion, grey marketing, patent and copyright enfringement, tort law, negligence, product liability, sexual harassment, accounting accountability, tax avoidance, numerous sales techniques, covert marketing research, product placement, planned obsolescence, business intelligence gathering, industrial espionage, undercover marketing, kick-backs, sex in advertising, spamming, telemarketing, payola, pyramid schemes, black market, competitive raiding, corporate crime, union busting, predatory pricing, hostile take-overs, creative accounting, child labour, and whistle blowing. In the United States, the recent financial scandles with well-known companies such as Enron, Anderson, and Tyco have heightened concern about corporate ethics.
Business ethics is also related to the philosophy of business which deals with the philosophical, political, and ethical underpinnings of business and economics. The philosophy of business deals with matters such as what, if any, the social role of business should be; individualism vs. collectivism; free will; enlightened self interest; invisible hand theories; and natural rights.
It is also related to political economy, which is economic analysis from a political and historical perspective. Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses.
Business ethics is an aspect of applied ethics. It takes ethical concepts and principles and applies them to specific business situations. As with political economy, but unlike the philosophy of business, business ethics is a normative discipline. It makes specific judgements about right and wrong. It makes claims about what ought to be done and what ought not to be done. While there are some exceptions, business ethicists are usually less concerned with the foundations of ethics (metaethics), or with justifying basic ethical principles, and more concerned with practical applications.
Business ethics can be examined from various perspectives, including the employee's, the commercial enterprise's, and society's. Very othen, situations arise in which there is conflict among these perspectives, such that serving the interest of one party is a detriment to one or more of the other's interests. For example, a particular behaviour may be good for the employee, whereas, it is bad for the company, society, or vice versa. Some ethicists (e.g., Henry Sidgwick) see the role of business ethics as the harmonization and reconciliation of these conflicting interests.
Philosophers and others disagree about the role of a business in society. For example, some suggest that the role of business is to maximize returns to shareholders, and only those activities that increase profitability and shareholder value should be encouraged. Some would even suggest that in a competitive business environment, the only companies that will survive are those that recognize that their principal role is to maximize profits. However, self interst 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 both in fines and company reputation (for example, see Milton Friedman).
Other theorists contend that a business has moral duties that extend well beyond serving the interests of its stockholders or simply obeying the law, with responsibilities to so-called stakeholders, people who have an interest in the conduct of the business, which might include employees, customers, vendors, even society as a whole. They would say that stakeholders have certain rights with regard to how the business operates.
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 the less stringent laws of the developing country in which it does business? To illustrate, United States law forbids companies from giving 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.
Many companies have formulated internal policies pertaining to the ethical conduct of employees. These policies can be simple exhortations in broad, highly-generalized language, or they can be more detailed, containing specific behavioral requirements. They are generally meant both to set forth the company's expectations and to offer guidance on how to handle some typical ethical problems that arise in the course of doing business. It is usually hoped that having such a policy will lead to greater ethical awareness and consistency in application.
An increasing number of companies also requires employees to attend classes regarding business conduct, which often include discussion of the company's policies, specific case studies, and legal requirements. Some companies even require employees to sign agreements stating that they will abide by the company's rules of conduct.
Not everyone supports corporate policies that govern ethical conduct. Some claim that many ethical problems are better dealt with by giving individuals discretion, allowing them to use their own judgment. Some believe that the main purpose of corporate ethics policies is really in order to limit the company's legal liability or to curry public favor. In case of a lawsuit the company can claim that the problem would not have arisen if the employee had only followed the code properly.
Sometimes there is dissonance between the company's code of ethics and the actual practices of the company. The code might say one thing; however, whether it is explicitly sanctioned by management or not, the established practice can be quite different, which makes the code a sham, at worst, and a public relations tool, at best.
To be successful, most ethicists would suggest that an ethics policy should be:
Since 2002, many companies have appointed ethics officers. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities. They are particularly interested in uncovering or preventing fraudulent and illegal actions. This trend is partly due to the Sarbanes-Oxley Act in the United States. 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 the Sarbanes-Oxley Act, one might expect the efficacy of such positions to be minimal, at least in the short term. This is because, in part, ethical business practices emerge from a corporate culture. A corporate culture usually eminates from the board of directors and general mangement, and it trickles down throughout the entire organization. By itself, the appointment of an officer to oversee ethics will do little to create a culture of ethical business behaviour: a more systemic programme will be necessary.
Obviously, the foundation for ethical behavior goes beyond corporate culture and the policies of a specific company, for it also depends greatly upon an individual's early moral training, the other institutions that affect an individual, and, indeed, society as a whole.
Judaism has an extensive literature and legal code on the accumulation and use of wealth. The basis of these laws is the Torah, where there are more rules about the kashrut (fitness) of one's money than about the kashrut of one's food. These laws are developed and expanded upon in the Mishnah and the Talmud.
There are sections on business ethics in all the major codes of Jewish law, including the Mishneh Torah (12th century) and the Shulkhan Arukh (17th century.); a wide array of topics on business ethics are discussed in the responsa literature.
Rabbi Yisrael Lipkin Salanter (19th century), founder of the Mussar movement in Eastern European, taught that just as one checks carefully to make sure their food is kosher, so too should one check to see if their money is earned in a kosher fashion. (Chofetz Chaim, Sfat Tamim, chapter 5).
Christianity has an extensive literature on the accumulation and use of wealth. The basis of this theology is the Old Testament and the New Testament.
Islam has an extensive literature and legal code on the accumulation and use of wealth. The basis of these laws is the Quran, and they are amplified in the Hadith.
Libertarians and others believe that a business is property, and that a person has certain rights over his property, including the right to dispose of it as he sees fit. They contend that a business is not a social arrangement or association whereby people contract with one another in order to promote social justice, but that it is someone's property. A person who voluntarily exchanges his labor for wages does not thereby gain rights over the owner's use of his property, in this case, the business enterprise, much as the business owner does not get to tell the worker how to spend his wages, which is property belonging to the worker.
Libertarian socialists, sometimes known as left-anarchists, hold that, as Proudhon said, "Property is theft" -- that is, in reference to the ownership of productive resources, property is not the right to use, but the right to keep others from using. Advocates of this philosophy therefore hold the "institution of property", as they sometimes call it, to be immoral in itself, so the accumulation of wealth that includes productive resources, especially land, is also immoral. This means that no business can really be ethical, since the very foundation of business as we know it is private property.
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