Business Ethics: Definition and Types

• Ethics are values that form the basis of human relations
• Ethics define the quality of essence of being morally good, evil, or wrong
• Ethics are fundamental principles and practices for improving the level of wellbeing of humanity
• Ethics are the natural and structural process of acting in line with moral judgments, standards, and rules

Business Ethics

• Business ethics studies business situations, activities, and decisions where issues of right and wrong are addressed
• Raymund C. Baumhart defined business ethics as the ethics of responsibility
• He stated that a businessman must promise that they will not knowingly cause harm

Types of Ethical Issues (Manuel G. Velasquez, 2011)

• Systemic ethical issues need to be addressed through coordinated actions of different social groups

Systemic Ethical Issues Examples

• Sourcing materials from regions with child labor issues

• Addressing gender inequality within a workforce and supply chain

• Engaging in lobbying activities to promote policies that align with corporate values

• Prioritizing short-term profits over long-term sustainability initiatives

• Corporate ethical issues can and should be solved within a company

Corporate Ethical Issues Examples

• How a company handles cases of workplace harassment or discrimination

• A company's transparency regarding its environmental impact reporting

• A company's engagement in community outreach programs

• A company's use of ethical marketing practices, avoiding misleading or deceptive advertising

• Individual ethical issues need to be resolved through individual decision making and behavioral change

Individual Ethical Issues Examples

• An individual acting equitably and treating everyone with respect
• An individual being truthful and transparent in their actions
• Whether a behavior violates any laws or regulations
• How an individual's decisions align with their own ethical principles

Four Major Theories of Ethics

• Utilitarian Ethics bases choices on the ability to predict the consequences of an action
• The choice that yields the greatest benefit to the most people is the ethically correct one
• A company choosing to shut down a money-losing factory to remain profitable and protect more jobs is an example

Types of Utilitarianism

• Act Utilitarianism focuses on the effects of individual actions
• Act Utilitarianism subscribes to the definition that a person performs acts that benefit the most people
• This is applied regardless of personal feelings or societal constraints, such as laws
• Examples include justifying killing Hitler to stop a war and save lives or stealing bread to help a homeless man
• Rule Utilitarianism focuses on the effects of types of actions
• Rule Utilitarianism takes the law into account and is concerned with fairness
• A Rule Utilitarian seeks to benefit the most people through the fairest and most just means available
• It could be believing that lying, cheating, stealing, and breaking the law are always wrong
• It could also mean believing that triage rules are justified to quickly decide which patients to treat first in an emergency department
• Deontological Ethics says people should adhere to their obligations and duties when engaged in decision making
• A person will follow obligations to another individual or society because upholding their duty is ethically correct
• Actions are based on a set of moral rules or duties that are considered inherently right or wrong
• A deontologist will keep promises, follow the law, and be consistent since decisions are based on individual duties
• Examples include the Ten Commandments, paying suppliers on time, and honesty
• Virtue Ethics judges a person by their character rather than by an action that may deviate from their normal behavior
• It takes into account the person's morals, reputation, and motivation when rating unusual behavior
• It emphasizes focusing on the kind of people/organizations to be and ethical examples rather than following rules
• Examples include compassionate employees, good nurses, and individuals who make an effort to return money they forgot to pay
• Ethical Relativism is the theory that morality is relative to the norms of one's culture
• If an action is right or wrong depends on the moral norms of the society in which it is practiced
• An action may be morally right in one society but morally wrong in another
• An action is morally wrong/right for someone, if and only if that person's culture believes it is wrong/right
• Companies may market products differently depending on the country's cultural norms and standards
• Nestlé received criticism for marketing infant formula in developing countries with poor hygiene

Cognitive and Moral Development

• Cognitive and moral development, is also known as moral reasoning
• Moral reasoning stems from the field of cognitive developmental psychology and moral psychology
• Moral reasoning refers to the cognitive process of how a person reasons about ethical situations
• Lawrence Kohlberg defined six hierarchical stages of cognitive and moral development

Moral Responsibility

• Moral responsibility is making judgments about whether a person is morally responsible for their behavior
• It is holding others and ourselves responsible for actions and the consequences of actions
• Moral responsibility is one's moral duty or moral obligation
• Moral responsibility is associated with wrongdoing and concerned with who is to blame and punished for wrong actions
• An example of a person exposing someone to a highly contagious desease

Three Components of Moral Responsibility

• The person caused or helped cause the injury, or failed to prevent it when they could or should have.
• The person did so, knowing what they were doing.
• The person did so of their own free will

Right

• Rights that are established by a society are protected and given the highest priority
• Rights are ethically correct and valid when a large population endorses them
• Individuals may bestow rights upon others if they have the ability and resources to do so
• A right is a person's entitlement to something such as legal, social, or freedom
• A moral right (human right) is an entitlement that every human being possesses like freedom of expression

Code of Ethics

• A code of ethics outlines an organization's guidelines and best practices for maintaining honesty, integrity, and professionalism.
• It is an aspirational document that describes the values and beliefs of the company
• Apple's ethics mission statement is called "Ethics and Compliance" stating the company conducts business ethically & honestly
• Their code ends with the quote from CEO Tim Cook "We do the right thing, even when it's not easy"

Code of Discipline

• A code of discipline is a set of guidelines that defines how employees should behave and how to address misconduct
• It sets out the rules and regulations that the individual must follow
• The code serves as a guide for employees in varying circumstances
• Violations by employees may be dealt with a corresponding punishment or sanction