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Business Ethics
Business ethics is the study of appropriate business policies and practices regarding potentially
controversial subjects including corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics,
but at other times business ethics provide a basic guideline that businesses can choose to follow
to gain public approval.

Business ethics ensure that a certain basic level of trust exists between consumers and various
forms of market participants with businesses. For example, a portfolio manager must give the
same consideration to the portfolios of family members and small individual investors. These kinds
of practices ensure the public receives fair treatment.

For another example, consider the matter of quality control for a company that manufactures
electronic components for computer servers. These components must ship on time, or the parts
manufacturer risks losing a lucrative contract. The quality-control department discovers a
possible defect, and every component in one shipment faces checks.

Unfortunately, the checks may take too long, and the window for on-time shipping could pass,
which could delay the customer's product release. The quality-control department can ship the
parts, hoping that not all of them are defective, or delay the shipment and test everything. If the
parts are defective, the company that buys the components might face a firestorm of consumer
backlash, which may lead the customer to seek a more reliable supplier.

Basic Concept of Business Ethics:

The basic concepts of business ethics are involved with three different types of moral or ethical
issues. Some concepts focus on the issues covering the function of business within the
environment where the business activates i.e. political, economic, legal and other social factors.
Other concepts focus on the corporate issues, i.e. the issues pertaining to the functioning of a
certain business or company. While the other concepts focus on the individual issues, i.e. the
issues pertaining to the conduct or behavior of individuals within a business or company. In this
discussion the following concepts will be briefly explained:

Businesses as a "Corporate Entity”

Business Ethics considered as “Good”

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Unethical Business Practices

Moral Rights

The Concept of Justice

Businesses as a "Corporate Entity":

Business corporations in most of the nations are considered legally as entities or persons, i.e. the
rights and liabilities legally applicable to persons or citizens are also applicable to business
corporations.

The eventual objective of individual ethics is developing a set of ethical standards which can be
held as acceptable after considering everything carefully in a particular situation. These individually
accepted ethical standards can also be applied to different situations such as personal, social and
even in a business. Most of the consumers agree that a business should follow the same moral
standard while interacting with an individual customer as well as interacting with all customers
locally, nationally or globally.

Business Ethics considered as "Good":

Business ethics considered as "Good" requires containing and following a norm of moral values
keeping the expectations and rights of people ahead of the profit maximization of business. A
business’s main goal is to make a profit but peoples’ rights and expectations should not be
ignored. Good business ethics is beneficial for businesses in the following three ways:

It Discourages the breaking of laws in business activities.

It assists businesses to avoid steps for which the company may come under costly civil lawsuits.

It demotivates companies to engage in actions which can damage the image of the company.
Good business ethics helps to improve businesses profitability as following ethical values prevents
loss of revenue and company reputation.

Though moral standards are something which goes beyond the legal requirements, some of them
are ascertained by the legal system. There are various laws against fraudulence, stealing, killing,
sexual harassment, and so on.
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Unethical Business Practices:

Many big companies have been fined a large amount of money for following unethical business
practices. Unethical business practices go far beyond functions breaking the law. Many renowned
companies are engaged in unethical and questionable practices without breaking any laws. They
follow practices just to increase their profits ignoring the rights of the consumers, such as, giving
less in quantity or quality, selling old or low-quality products with free gifts, etc.

The businesses have to make a profit but not at the cost of moral or ethical values. Businesses are
ethically responsible for their activities as individuals are responsible for theirs.

Moral Rights:

Generally, a moral right refers to a person’s claim to something. When a person is entitled to a
right, he or she is able to make a decision whether or not to claim such right without anyone’s
permission. The entitlement of moral or ethical rights implies that others have particular duties
towards the person bearing the right.

Negative rights enforce duties on other people not to interfere in your activities which are right for
or important to you. For example, your right to make your own decisions or right to express your
own opinion about anything.

Positive rights generate duties on others to give something to the person bearing the right. They
state that others must contribute some benefits to the bearer of the right. For example, education,
you have the right to educate yourself. If you are eligible to get yourself admitted to a varsity to get
an education on a specific subject or do a specific course, the varsity has to provide you the
benefit of education.

The Concept of Justice:

The concepts of justice are based on ethical principles that determine just means of allocating
benefits and burdens to all people of the society. The following beliefs are utilized to distribute the
benefits and burdens in a just or fair way to the people of the society.

Egalitarianism states that all human beings are equal. According to this belief, all the benefits and
burdens of the society should be circulated according to this principle:

“Every person should be given exactly equal shares of a society’s or a group’s benefits and
burdens.”
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Utilitarianism states that a just society’s laws and institutions promote the best overall or average
welfare of its members. According to this belief, the greatest benefits for all, and the society should
be organized in such a way that its wealth is allocated to meet everyone’s basic needs.

Socialist justice, states “work burdens should be distributed according to people’s abilities, and
benefits should be distributed according to people’s needs.”

It is focuses on equal justice for everyone whether they are poor, middle class or rich.

Capitalist justice states that a person should receive the benefits proportionate to his or her
contribution to the society.

Libertarian justice states that the free market is naturally just, and that redistributive taxation
breaches the property rights of people. This belief is founded on two principles: Principle 1
(Principle of equal liberty) and Principle 2 (Difference principle) both referring how everyone is
responsible for one’s own future not regarding of what happens.

Every business person should follow the business ethics properly because studies prove that
ethically correct business becomes profitable in the long run.

Ethical Theories in Business

Business ethics are often discussed today, especially in light of corporate scandals. Often, that
discussion focuses on professional conduct or illegal practices. Ethics touch many elements of
business. These days, many consumers select products based on ethical considerations. Buyers
trust that the companies with which they conduct business are responsible and moral.

Enron was one of the largest energy producers in the world when it was discovered that Enron had
been using unethical and illegal accounting practices. These accounting practices enabled
executives to grossly overstate the value of Enron. After getting caught, the company was forced
to declare bankruptcy. It all happened because of a lack of ethical leadership.

Ethical Leadership and Decision-Making

Ethical conduct is an integral component of how we view leadership. Most people expect their
leaders to be models of ethical behavior. The leadership at Enron was most certainly not ethical. It
can be difficult to understand what makes leaders behave unethically to the point of collapsing a
large company.
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In making ethical decisions, there are three approaches: ethical egoism, utilitarianism and altruism.
Ethical egoism is the belief that the highest good is to be self-serving regardless of others. On the
other end of the spectrum, altruism is the belief that the highest good is to help others. The
executives at Enron seemed to be making ethical decisions based on ethical egoism.

Governance and Compliance

Governments will often step in to regulate ethical standards. In U.S. history, companies operated
as monopolies across industries such as steel and oil. This enabled the monopolistic companies to
set very high prices while dangerously reducing quality. Antitrust laws were enacted and a federal
agency was developed to protect consumers from such unethical business practices.

It is important to understand that many practices are not only morally unethical, but they are also
illegal. Certain professions are legally bound to ethical standards, such as lawyers, accountants
and doctors. Acting unethically in these professions is known as malpractice. One example would
be insider trading, where an investor might use nonpublic information to reap higher-than-normal
profits.

Corporate Social Responsibility

Even when regulations are in effect, ethical considerations are often not black and white. There is
considerable debate about whether corporations should focus on anything other than shareholder
profits. A common thought in business is the belief that maximizing shareholder value is the most
ethical goal. Some ethical theories state that corporations must consider benefits for a wider net of
stakeholders and not merely shareholders.

Increasingly, ethical theories in business are addressing the topic of corporate social responsibility.
There is increasing pressure for companies to develop practices and products that benefit the
environment or society. This includes business practices that do not require compliance and that
will benefit entities other than the company.

Weighing Consumer Safety

Consumer safety is a major factor in considering ethical theories in business. This includes product
safety and liability, advertising practices and sales or pricing tactics. Unethical business practices
have the potential to seriously harm consumers. For example, fake pharmaceuticals that are not
tested for quality are not only unethical, they pose a serious threat to public safety.
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There are many established laws across the world to protect consumers from fraud and other
injury. Unfortunately, innocent consumers are often targeted for fraud by unethical businesses.

Professional Conduct Standards

It is not only highly visible leaders that are expected to behave according to high ethical standards.
Many professionals are bound to ethical codes because of the nature of their work. Professionals
working in medicine, law, accounting and financial advising, for example, are all subject to strict
ethical conduct. These professions usually deal with very sensitive or privileged information.

Malpractice in these professions can result in being forced out of the profession. A lawyer that
knowingly misrepresents a client can be disbarred from practicing law.

Employee Relations and Standards

Labor laws have not always existed as we know them today. Everything from child labor to the
number of hours spent working per day required considerable ethical consideration. Discrimination
in hiring and firing spurs major ethical debate today. Some people believe that hiring for “cultural
fit” is a form of discrimination, while others find nothing wrong with hiring very similar employees.

Whistleblowing is defined as exposing information about unethical or unsafe conditions within an

organization. Individuals who “blow the whistle” must carefully consider the implications and
possible retaliation. It can be easy to ignore unethical behavior in the workplace, but some ethical
theorists believe that employees must whistleblow when they encounter unethical behavior.

The grossly unethical practices at Enron were exposed through whistleblowing. One employee
whistleblower is all it took to bring down the world’s sixth-largest energy company.

Conditions in the Supply Chain

Consumers are becoming more aware of working and environmental conditions all over the world.
Globalization and the internet have provided transparency into global supply chains. There are
consumers who specifically seek out products that are produced using fair trade practices. Terms
like "blood diamond" have been coined to shame industries away from sourcing materials in
unethical ways. Blood diamonds are diamond gemstones that have been sourced from conflict
zones where bad actors may have profited from the transaction.
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Sweatshop labor and "slash and burn" agricultural practices are other concerns among ethically
minded consumers. It is clear that more consumers expect end-to-end ethical conduct from
companies.

Current Ethical Considerations

Faster paces of market changes across the world mean that ethical considerations may not always
be a priority. For example, tech companies aspire to grow as rapidly as possible, but there is
considerable debate as to whether large technology companies are monopolistic.

There are increasing pushes to make it a standard practice to make ethics and values central to
every company. That is no simple feat for companies that are developing services and products in
brand new and unregulated industries. Rapid changes in technology and business are creating
entirely new considerations for ethical theories in business.

Ethical Dilemma
An ethical dilemma (ethical paradox or moral dilemma) is a problem in the decision-making
process between two possible options, neither of which is absolutely acceptable from an ethical
perspective. Although we face many ethical and moral problems in our life, most of them come with
relatively straightforward solutions.

On the other hand, ethical dilemmas are extremely complicated challenges that cannot be easily
solved. Therefore, the ability to find the optimal solution for ethical dilemmas is critical to everyone.

Every person can encounter an ethical dilemma in almost every aspect of his life, including
personal, social, and professional.

How to solve an ethical dilemma?

The biggest challenge of ethical dilemma is that it does not offer an obvious solution that would
comply with ethical norms. Throughout the history of humanity, people always faced ethical
dilemmas, and philosophers aimed and worked to find solutions to the problems.

By far, the following approaches to solve an ethical dilemma were deduced:

Refute the paradox (dilemma): The situation must be carefully analyzed. In some cases, the
existence of the dilemma can be logically refuted.

Value theory approach: Choose the alternative that offers the greater good and the lesser evil.
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Find alternative solutions: In some cases, the problem can be reconsidered, and the new
alternative solutions may arise.

Examples of ethical dilemmas

Some examples of thical dilemmas examples include:

Taking credit for others’ work

Offering a client a worse product for your own profit

Utilizing inside knowledge for your own profit

Ethical dilemmas in business

Ethical dilemmas are especially significant in professional life as they frequently occur in the
workplace. Some companies and professional organizations (e.g., CFA) adhere to their own codes
of conduct and ethical standards. Violation of the standards may lead to disciplinary sanctions.

Almost every aspect of the business can become a possible ground for ethical dilemmas. It may
include the relationships with the co-workers, management, clients, and business partners.

The people’s inability to determine the optimal solution for ethical dilemmas in the professional
setting may result in serious consequences for businesses and organizations. The situation may
be common in companies that value results the most.

In order to solve ethical problems, companies and organizations should develop strict ethical
standards for their employees. Every company must demonstrate its concerns regarding the
ethical norms within the organization. In addition, the companies may provide ethical training for
their employees.

ETHICAL DECISION MAKING IN BUSINESS

Making good ethical decisions requires a trained sensitivity to ethical issues and a practiced
method for exploring the ethical aspects of a decision and weighing the considerations that should
impact our choice of a course of action. Having a method for ethical decision making is absolutely
essential. When practiced regularly, the method becomes so familiar that we work through it
automatically without consulting the specific steps.

Following are the steps that can help in reaching ethical decisions:
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1.RECOGNIZE AN ETHICAL ISSUE

Recognizing an ethical issue requires you to ask some questions to yourself that is how it will affect
the others. We may ask the question like could this decision or situation be damaging to someone
or to some group or does this decision involve a choice between a good and bad alternative, or
perhaps between two “goods” or between two “bads”.

2. GET THE FACTS

This step involves taking different facts into consideration that might affect the decision or trying to
gather unknown facts.e-g what are the relevant facts of the case or what facts are not known?
What are the options for acting? Have all the relevant persons and groups been consulted? Have I
identified creative options.

3. EVALUATE ALTERNATIVE ACTIONS

This step involves evaluating the different possible decisions that one might wants to take and then
deciding at the best possible action. It would involve:
• Which option will produce the most good and do the least harm? (The Utilitarian Approach)

• Which option best respects the rights of all who have a stake? (The Rights Approach)

• Which option treats people equally or proportionately? (The Justice Approach)

• Which option leads me to act as the sort of person I want to be? (The Virtue Approach)

4. MAKE A DECISION AND TEST IT

It involves after evaluating different approaches which decision would suit best to the given
situation. It would involve asking questions to yourself like to consider all these approaches, which
option best addresses the situation?

5. ACT AND REFLECT ON THE OUTCOME

This is the step that should be taken after making the decision that is How can my decision be
implemented with the greatest care and attention to the concerns of all stakeholders or How did my
decision turn out and what have I learned from this specific situation. (Manuel Velasquez, 2015)
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FEATURES OF ETHICAL DECISIONS

Following are the features of ethical decisions:

LEADERSHIP

The culture of an ethical business starts from the top of the organizational chart. For a business to
be ethical, its leaders at the top level must demonstrate ethical practices. The true test of this
leadership is in the decision-making process when there is a choice between what is ethically
responsible and what will result in profit or gain. When the culture is solid at the top of the
organization, it trickles down to all lower areas in organization.

VALUES

An ethical business has a core value statement that describes its mission. Any business can
create a value statement, but an ethical business lives by it. It communicates this mission to every
employee within the structure and ensures that it is followed. The ethical business will institute a
code of conduct that supports its mission and is followed by every employee.

INTEGRITY

Integrity is an important characteristic of an ethical business. The ethical business adheres to laws
and regulations at the local, state and federal levels. It treats its employees fairly, communicating
with them honestly and openly. It demonstrates fair dealings with stakeholders and other related
concerns.

LOYALTY

Solid relationships are a cornerstone of an ethical business. Employees who work for a loyal
employer want to maintain the relationship and will work harder toward that end. Vendors and
customers will remain loyal to a business that is reliable and dependable in all situations. An
ethical business stays loyal to its partnerships even in challenging times. The result is a stronger
relationship when emerging from the challenge.

CONCERN

An ethical business has concern for anyone and anything impacted by the business. This includes
customers, employees, vendors and the public. Every decision made by the business is based on
the effect it may have on any one of these groups of people, or the environment surrounding it.