BUSINESS ETHICS

                                 BUSINESS ETHICS

 

INTRODUCTION— Business ethics defines how a company integrates core values – such as honesty, trust, respect, and fairness – into its policies, practices, and decision-making. Business ethics is, in part, the attempt to think clearly and deeply about ethical issues in business and to arrive at conclusions that are supported by strongest possible arguments. Ethical principles are the rules of conduct that derive from ethical values.

For example– honesty is a value that governs behavior in the form of principles such as: tell the truth, don’t deceive, and don’t cheat

Business   ethics   is,   in   part,   the   attempt   to   think   clearly   and   deeply   about   ethical   issues   in   business   and   to   arrive   at conclusions   that   are   supported   by   strongest   possible   arguments. It is widely dismissed as irrelevant by researchers in these fields because of its failure to recognize the existing financial and legal structures of the corporation, which are built largely on a contractual foundation. Hence, a common framework could increase the relevance of business ethics research and create mutual benefits.

Simply put, ethics involves learning what is right or wrong, and then doing the right thing — but “the right thing” is not nearly as straightforward as conveyed in a great deal of business ethics literature. Most ethical dilemmas in the workplace are not simply a matter of “Should Bob steal from Jack?” or “Should Jack lie to his boss?”

 

ROLE OF ETHICS IN BUSINESS–The role of ethics and social responsibility has increased tremendously over the past decade for the majority of corporations. In the past, corporations have probably not paid enough attention to doing what is socially responsible because there were no strict government guidelines to follow. Even though the United States is a rule-based country, corporations have in past years managed to mishandle corporate standards.

Ethics and social responsibility forces corporate employees at senior levels to stop and examine their activities in an effort to reduce violating the law. If executives are able to identify unethical practices then they will do ‘the right to set preventive measures or disciplinary actions to employees who are not in compliance with the corporation’s standards. Executives, who have good ethics, will take ownership and will set the example to managers and employees

When business people speak about “business ethics” they usually mean one of three things:

(1) avoid breaking the criminal law in one’s work-related activity;

(2) avoid action that may result in civil law suits against the company; and

(3)  avoid actions that are bad for the company image.

Businesses are especially concerned with these three things since they involve loss of money and company reputation. In theory, a business could address these three concerns by assigning corporate attorneys and public relations experts to escort employees on their daily activities. Anytime an employee might stray from the straight and narrow path of acceptable conduct, the experts would guide him back. Obviously this solution would be a financial disaster if carried out in practice since it would cost a business more in attorney and public relations fees than they would save from proper employee conduct. Perhaps reluctantly, businesses turn to philosophers to instruct employees on becoming “moral.” For over 2,000 years philosophers have systematically addressed the issue of right and wrong conduct. Presumably, then, philosophers can teach employees a basic understanding of  morality  will keep them out of trouble.

 

HOW TO DISCUSS ETHICS—It is impossible to discuss business ethics as a branch of academia without taking a look at the relationship between business ethics and public image. Each corporation has a particular public image, which represents the way in which the public views the corporation. Wal-Mart, for example, has a terrible public image. Toyota, on the other hand, has a very positive one. These public images are the result of a number of different things, but they are primarily the result of the way in which a corporation acts with respect to the different things around it.
A corporation’s environmental policy, the way they treat their employees and the way they treat the communities they exist in are all part of their overall behavior and this in turn is the principle factor in determining their public image. As proof of this, you will notice that even though Wal-Mart makes products that have a decent quality and an extremely low price, they still have a negative public image.
Since public image is largely a result of company behavior, business ethics play a large role in determining public image since they determine behavior. And public image is important to success in most cases, which is one of the reasons as to why business ethics are important to a company’s overall success

Companies can take a wide variety of approaches to how to discuss ethics,for example like Kathleen Edmond, the Chief Ethics Officer at Best Buy, who created an open blog for company employees on ethical lapses and related issues.

Discussing ethical issues encourages students to explore their own and others’ values. It also enables them to develop their argumentation skills.

Ethical behavior is merely making good business decisions based on an established “code of ethics“. Entrepreneurs should establish a written code of ethics that can serve as a framework for decisions to be made by the entrepreneur as well as the employees. In developing this code of ethics you should consider the following items:

 

1. Identify your general principles that would lead to fair business practices.

2. Check with your industry association for basic standards to review

3. Allow for the fact that ethical questions do not always have a unique, faultless answer.

4. Write out specific statements that will assist you and others in making day-to-day ethical decisions.

5. Apply your code of ethics to a written policy and procedure manual identifying the major rules for operating your business.

6. Train your employees (and family members) to make ethical decisions about the business.

 

 

 

 

 

 

USE DECISION-MAKING SKILLS FOR ETHICAL DECISIONS–

The day-to-day operations of a business require everyone to make decisions all the time. Practice in developing a code of ethics and then applying it to situations is important to establishing an ethical business image.

Consider how the decision-making process will help you improve the success of your business:

1. Define the problem requiring a decision. Often we jump to conclusions about a situation without even taking time to clarify the problem

2. Consider alternative solutions to the problem. There is always more than one solution to any problem. Practice thinking about possibilities before taking action.

3. Identify the consequences of alternative solutions. There are many different consequences possible for choosing different alternatives. Entrepreneurs need to think about both the short-term and long-term consequences likely to result from their decisions.

4. Collect information if you do not have enough to make the right decision. This is where a company policy and procedure guide may help employees check out their approach to a problem.

PROMPT 1—J.Craig Smith stressed ethics and responsibility to employees and to community.The creation of the endowed chair of business integrity in his name resulted from his familys concern about a loss of integrity within the current generation of business people.

According to me currently there are ethical issues involving business practices.

ETHICAL ISSUES AND EXAMPLES–We’ll find lots of examples of business ethical decisions and dilemmas in areas such as, Advertising, Personal selling, Suppliers Contracts and  Pricing

 

Let’s take one of the above – suppliers.

A business cannot claim to be ethical firm if it ignores unethical practices by its suppliers – e.g.

-Use of child forced labour

-Production in sweatshops

-Violation of the basic rights of workers

-Ignoring health, safety and environmental standards

 

An ethical business has to be concerned with the behaviour of all businesses that operate in the supply chain – i.e.

-Suppliers

-Contractors

-Distributors

-Sales agents

 

 

PRESSURE FOR BUSINESS TO ACT ETHICALLY–Businesses and industries increasingly find themselves facing external pressure to improve their ethical track record.  An interesting feature of the rise of consumer activism online has been increased scrutiny of business activities.
Pressure groups are a good example of this. Pressure groups are external stakeholders they

-Tend to focus on activities & ethical practice of multinationals or industries with ethical issues

-Combine direct and indirect action can damage the target business or industry

 

Direct consumer action is another way in which business ethics can be challenged. Consumers may take action against:

-Businesses they consider to be unethical in some ways (e.g. animal furs)

-Business acting irresponsibly

-Businesses that use business practices they find unacceptable

Consumer action can also be positive – supporting businesses with a strong ethical stance & record.  A good example of this is FAIR TRADE.

 

IS ETHICAL BEHAVIOUR GOOD OR BAD FOR A BUSINESS— You might think the above question is an easy one for businesses to answer? Surely acting ethically makes good business sense? As with all issues in business studies, there are two sides to every argument:

The advantages of ethical behaviour include:

-Higher revenues – demand from positive consumer support

-Improved brand and business awareness and recognition

-Better employee motivation and recruitment

-New sources of finance – e.g. from ethical investors

The disadvantages claimed for ethical business include:

-Higher costs – e.g. sourcing from Fairtrade suppliers rather than lowest price

-Higher overheads – e.g. training & communication of ethical policy

-A danger of building up false expectations

 

 

 

 AN EXAMPLE OF ETHICS IN MY DAILY LIFE — One of my slippers gave out today, on the way out the door heading to the airport. Luckily the cobbler guy, in addition to giving an excellent stich to my slipper at a good price, he also had reasonably-priced slipper which he  happily offered for me.

For some strange reason, it always comes as a shock to me when a slipper gives out. The odd thing is that I usually cannot remember how old the disappointing slipper actually is. I honestly cannot tell you whether the lace that gave out today is 4 months old or a year old or four years old. Nor do I know what brand it was, or where I bought it. So — setting aside, for a moment, its trivial price — I have no idea who I would complain to if I thought the slipper had given out sooner than it ought to have.

Given this lack of accountability, one has to wonder just what it is that motivates makers of slippers (or other small, cheap, anonymous products) to rise above the bare minimum in terms of quality. Shoe or slippers are not, presumably, a highly-regulated industry. So they could presumably get away with using cheap raw materials, keeping costs down and profits high.

One obvious answer is “ETHICS.” The people who make slippers presumably have some pride in their work, and want people to be satisfied with their designs, and feel that it’s their responsibility to produce a decent product.

Another answer might have something to do with supply chains. Maybe I can’t easily hold the maker of my slipper accountable, but the store I bought them at can. Maybe the purchasing agents for the store I bought them at asks lots of tough questions and demands access to technical specifications for slippers before buying. I hope that’s the case. But that just pushes the question one link higher up the supply chain. Why does the purchasing agent care, given how likely consumers are to express their disappointment, in the event that they are dissatisfied? Again, the likely answer here is “ETHICS” a big part of which is the simple motivation to do a good job and treat people fairly.

 

CONCLUSION— Ok, so this is a trivial little example. But it seems to me that it points to an important lesson. People too often think of the word “business ethics” as implying an attempt to define and achieve saintly behaviour in business. And that’s a mistake. What we’re really talking about are reasonable constraints, and reasonable standards of achievement, in the world of commerce. We’re all out there, trying to make a living, and there are better and worse ways to do that. And whether you’re manufacturing slippers or complex financial instruments, the starting point has to be basic pride in a job well, and fairly, done i.e there must be ethical issues involved in business practices.

There are many more ethical issues in business and some of them are so common that they even crop up on a daily basis. Making ethical choices is sometimes the hardest thing, especially when the one losing out is you or your business, yet, for the greater good and for the sake of differentiating humanity from animal kind, one has to look at business as well as personal ethics and evaluate them from time to time. For example, if all businesses just looked at current profits and production and ignored the call of the environment, the person losing out on all this is man and his society. Looking at all the ethical issues in business and finding the optimal solutions for them, by taking well-thought out and rational decisions based on all possible parameters will help everyone, the society, the consumer, the environment and more importantly, even the business

 

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