Introduction to Business Ethics PDF

# Introducing Business Ethics ## What you will learn Having completed this chapter you should be able to: - Provide a basic definition of business ethics. - Describe the relationship between business ethics and the law. - Distinguish between ethics, morality, and ethical theory. - Evaluate the imp...

# Introducing Business Ethics ## What you will learn Having completed this chapter you should be able to: - Provide a basic definition of business ethics. - Describe the relationship between business ethics and the law. - Distinguish between ethics, morality, and ethical theory. - Evaluate the importance of business ethics as an academic subject and as a practical management issue in organizations. - Specify ethical challenges in different types of organizations. - Describe how globalization represents a critical context for business ethics. - Elaborate on different international perspectives on business ethics, including European, Asian, and North American perspectives. - Explain how the triple bottom line of sustainability is a key goal for business ethics. ## Key concepts and skills ### Concepts - Business ethics - Globalization - Race to the bottom - Sustainability ### Skills - Defining business ethics - Comparative analysis of business ethics. - Triple bottom line analysis ## What is business ethics? 'A book on business ethics? Well that won't take long to read!' 'You're taking a course on business ethics? So what do you do in the afternoon?' 'Business ethics? I didn't think there were any!' These are not very good jokes. However, they do immediately raise an important problem with the subject of business ethics: some people cannot even believe that it exists! Business ethics is often claimed to be an oxymoron. To say that business ethics is an oxymoron suggests that there are not, or cannot be, ethics in business: that business is in some way unethical (i.e. that business is inherently bad), or that it is, at best, amoral (i.e. outside of our normal moral considerations). To some extent, it is not surprising that some people think this way. A long list of scandals have highlighted the unethical way in which some firms have gone about their business. However, just because such malpractices take place does not mean that there are not some kinds of values or principles driving such decisions. Revelations of corporate malpractice should not therefore be interpreted to mean that thinking about ethics in business situations is entirely redundant. After all, various writers have shown that many everyday business activities require the maintenance of basic ethical standards, such as honesty, trustworthiness, and co-operation. It would also be wrong to infer that scandals involving corporate wrongdoing mean that the subject of business ethics was in some way naïve or idealistic. Instead, it can be argued that the subject of business ethics primarily exists in order to provide us with some answers as to why certain decisions should be evaluated as ethical or unethical, or right or wrong. Without systematic study, how are we able to offer anything more than vague opinions or hunches about whether particular business activities are acceptable? In a nutshell, we regard the subject of business ethics as the study of business situations, activities, and decisions where issues of right and wrong are addressed. It is worth stressing that by 'right' and 'wrong' we mean morally right or wrong, as opposed to, for example, commercially, strategically, or financially right or wrong. Moreover, by 'business' ethics, we do not mean only commercial businesses, but also government organizations, pressure groups, not-for-profit businesses, charities, and other organizations. ## Defining business ethics A good definition is an important starting point for any theory. The one we have given for business ethics is mainly a definition of business ethics as an academic subject. ## Business ethics and the law Having defined business ethics in terms of issues of right and wrong, we might quite naturally question whether this is in any way distinct from the law. Surely the law is also about issues of right and wrong? This is true, and there is considerable overlap between ethics and the law. In fact, the law is essentially an institutionalization or codification of ethics into specific social rules, regulations, and proscriptions. Nevertheless, the two are not equivalent. Perhaps the best way of thinking about ethics and the law is in terms of two intersecting domains. * The law might be said to be a definition of the minimum acceptable standards of behaviour. * However, the law does not explicitly cover every possible ethical issue in business or for that matter outside of business. In one sense then, business ethics can be said to begin where the law ends. Business ethics is primarily concerned with those issues not covered by the law, or where there is no definitive consensus on whether something is right or wrong. Discussion about the ethics of particular business practices may eventually lead to legislation once some kind of consensus is reached. But for most of the issues of interest to business ethics, the law typically does not currently provide us with guidance. ## No such thing as a free drink? - Jenna, a good friend of yours who studies at the same university, has been complaining for some time to you that she never has any money. She decides that she needs to go out and find a job, and after searching for a while is offered a job as a bartender in the student bar at your university. - She gladly accepts and begins working three nights a week. You are pleased too, not only because it means that Jenna will have more money, but also because it means you will continue to see her regularly-after all, you are a regular customer at the bar! - Jenna enjoys the extra income that the job brings. She also seems to enjoy the work. You are rather pleased with developments since you notice that whenever you go up to the bar, Jenna always serves you first regardless of how many people are waiting. - After a short while though, it becomes apparent that Jenna is not enjoying the job quite as much as she did. Whenever you see her, she always seems to have a new story of how the bar manager has mistreated her. She tells you how she has been getting the worst shifts, always getting chosen to do the least-popular jobs (like cleaning the washrooms), and being constantly reprimanded for minor blunders that seem to go uncensored for the rest of the staff. - This goes on for a short while and then one day, when you are in the bar having a drink with some of your other friends, Jenna does something that you are not quite sure how to react to. When you go up to pay for a round of four drinks for you and your other friends, she discretely only charges you for one drink. Whilst you are slightly uncomfortable with this, you certainly do not want to lose the opportunity to save some money, or even worse, to get your friend into any kind of trouble by refusing. And when you tell your friends about it, they think it is very funny and congratulate you for the cheap round of drinks! In fact, when the next one of your friends goes up to pay for some drinks, he turns around and asks you to take his money, so that you can do the same trick for him. Although you tell him to get his own drinks, Jenna continues to undercharge you whenever it is your turn to go to the bar. -This goes on for a number of visits. You are happy to get the cheap rounds at the bar but you are not 100% comfortable with what is going on. You decide to at least say something to your friend when no one else is around. However, when you do end up raising the subject she just laughs it off and says, 'Yeah, it is great isn't it? They will never notice, and you get a cheap night out. Besides, it is only what this place deserves after the way I have been treated.' ## Questions 1. Who is wrong in this situation-Jenna for undercharging you, you for accepting it, both of you, or neither of you? 2. Confronted by this situation, how would you handle it? Do nothing, or ask Jenna to stop undercharging you? If you take the latter option, what would you do if she refused? 3. To what extent do you think that being deliberately undercharged is different from other forms of preferential treatment, such as Jenna serving you in front of other waiting customers? 4. Does the fact that Jenna feels aggrieved at the treatment she receives from her boss condone her behaviour? Does it help to explain either her actions or your actions? ## Defining morality, ethics, and ethical theory In common usage, the terms 'ethics' and 'morality' are often used interchangeably. However, in order to clarify certain arguments, many academic writers have proposed clear differences between the two terms. * **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 morally acceptable courses of action. Ethical theories are the codifications of these rules and principles. According to this way of thinking, morality precedes ethics, which in turn precedes ethical theory. All individuals and communities have morality, a basic sense of right or wrong in relation to particular activities. Ethics represents an attempt to systematize and rationalize morality, typically into generalized normative rules that supposedly offer a solution to situations of moral uncertainty. The outcomes of the codification of these rules are ethical theories, such as rights theory or justice theory. ## Why is business ethics important? Business ethics is currently a very prominent business topic, and debates surrounding the subject have attracted a lot of attention from various quarters, including consumers, the media, non-governmental organizations (NGOs) and, of course, companies themselves. This attention to ethics confronts organizations whatever line of business they might be in. 1. Business has huge power within society. Business affects almost every aspect of our lives, and can even have a major impact on the democratic process of government. 2. Business has the potential to provide a major contribution to our societies. Whether in terms of producing the products and services that we want, providing employment, paying taxes, acting as an engine for economic development, or solving complex social problems, business can be a tremendous force for good. ## Ethical sex shops? 'Ethics' and 'sex shops' are two terms that are not usually found together. Many equate sex shops with a degree of seediness and exploitation that should have no place in ethical business practices. But a new breed of entrepreneurs have been challenging that assumption with the opening of a swathe of socially responsible sex shops that take a different approach. Ethical sex shops come in a variety of guises. Consider the launch in the mid-2010s of supposedly 'halal' sex shops in Turkey and Saudi Arabia, aiming to market approved products to Muslim customers that would lead to 'the improvement of the sexual relationship between husband and wife'. Others, such as Canada's sensual-intelligence.ca, focus more on eco-friendly, non-toxic sex toys, while some look to cover a range of ethical issues, including policies on everything from fair trade to diversity, and animal welfare to charitable giving. It is not just ethical products that distinguish the new breed of ethical sex shops. Many also specifically focus on providing a welcoming environment to women and other customers who are marginalized by the mainstream sex industry. For some, the whole idea of trying to marry business ethics with the business of sex might be too much of a contradiction in terms to make any real sense. There is a significant portion of society that would simply brand the whole endeavour as objectionable and obscene. ## The demands being placed on business to be ethical by its various stakeholders are becoming more complex and challenging It is critical to understand these challenges and to develop responses to them that address the demands of stakeholders but also enable firms to perform their economic role effectively. Getting this balance right remains a critical challenge for managers. ## Employees face significant pressure to compromise ethical standards More than one in four financial services professionals in the UK and the US found that more than one in four had observed wrongdoing in the workplace, while a quarter of respondents agreed that financial services professionals might need to engage in unethical or illegal conduct in order to be successful. ## Business faces a trust deficit Globally, only 18% of the general population trusts business leaders to tell the truth and just 19% trust them to make ethical decisions. Enhancing business ethics will be a critical component in restoring that trust in the future. ## Ethical fashion for ethics girls Want to buy a new pair of skinny jeans, but also care about how much the workers were paid to make them? Think there may be space in your life for an iPhone case made from upcycled fire hose and reclaimed parachute silk? Well, being ethical does not have to mean being unfashionable any more, at least not according to the Ethics Girls, a UK-based organization launched online in 2007. The Ethics Girls website seeks, as they put it, to 'set the example' in 'ethical fashion, shopping and ideas'. Unlike some ethical shopping sites, such as the Ethical Consumer organization’s online buyers’ guides (which provide detailed score cards for a wide range of products in numerous categories ), Ethics Girls do not claim to have a particularly robust research methodology. Their approach is style led rather than research led, with an emphasis on lifestyle journalism and the promotion of positive choices among young women. And perhaps more than anything, it shows the continuing transformation and maturation of the internet as a place for ethical shoppers of all kinds-and not just diehard activists-to go for advice, information, and inspiration.