The Nature of Business Ethics

Ethics:

 the principles of conduct governing an individual or a group.

 the study of morality

Personal ethics: the rules by which an individual lives his or her personal life.

Accounting Ethics: the code that guides the professional conduct of accountants

Morality

the standards that an individual or a group has about what is right and wrong, or good and evil.

Moral standards: the norms on the kinds of actions we believe are morally right and wrong, as well
as the values we place on what we believe is morally good or morally bad. It could be expressed as
general rules about our actions as well.

Nonmoral standards: the standards by which we judge what is good or bad and right or wrong in a
nonmoral way. (also called “conventional” standards and norms)

Six Characteristics of Moral Standards

1. Involve serious wrongs or significant benefits

2. Should be preferred to other values including self-interest
3. Not established by authority figures
4. Felt to be universal
5. Based on impartial considerations
6. Associated with special emotions and vocabulary

Ethics

The discipline that examines one’s moral standards or the moral standards of a society to evaluate
their reasonableness and their implications for one’s life

normative study: an investigation that attempts to reach conclusions about what things are good or
bad or about what actions are right or wrong.

descriptive study: an investigation that attempts to describe or explain the world without reaching
any conclusions about whether the world is as it should be.

Business Ethics

A specialized study of moral right and wrong that concentrates on moral standards as they apply to
business institutions, organizations, and behavior.

issues that business ethics investigates:

Systemic issues: ethical questions raised about the economic, political, legal, and other institutions
within which businesses operate.

Corporate issues: ethical questions raised about a particular organization and its policies, culture,
climate, impact, or actions.
Individual issues: ethical questions raised about a particular individual or particular individuals within
a company and their behaviors and decisions.

Applying Ethical Concepts to Corporations

Should Ethical Qualities be Attributed Only to People or Also to Corporations?

 One view says corporations, like people, act intentionally and have moral rights, and
obligations, and are morally responsible.
 Another view says it makes no sense to attribute ethical qualities to corporations since they
are not like people but more like machines; only humans can have ethical qualities.
 A middle view says that humans carry out the corporation’s actions so they are morally
responsible for what they do and ethical qualities apply in a primary sense to them;
corporations have ethical qualities only in a derivative sense.

Objections to Business Ethics

The Arguments Against Ethics in Business

 In a free market economy, the pursuit of profit will ensure maximum social benefit so
business ethics is not needed.
 A manager’s most important obligation is loyalty to the company regardless of ethics.
 So long as companies obey the law, they will do all that ethics requires.

Ethical Issues in Business

Technology and Business Ethics

New Technologies Raise New Ethical Issues for Business:

 The agricultural and industrial revolutions introduced new ethical issues.

 Information technology raises new ethical issues related to risk, privacy, and property rights.
 Nano technology and biotechnology raise new ethical issues related to risk and to the spread
of dangerous products

Business and Ethical Relativism

Different cultures have different moral standards and by this, it leads many people to adopt the
theory of ethical relativism. Ethical relativism is the theory that there are no ethical standards that
are true absolutely.
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The term ethics has several meanings

One of them in the dictionary means the principles of conduct governing an individual or a group

Ethics, according to the dictionary is the study of morality. Like how the term chemistry refer to
study of chemical substances.

Although Ethics relates with morality but it’s not the same as morality. To be clear, ethics is a kind of
investigation where morality is the subject matter that ethics investigates

There are several terms of ethics like

Personal ethics which refer to the rules where individual live his or her personal life

Accounting ethics which refer to the code to guide the professional conduct of accountants

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Morality define as the standards that an individual or a group has about what is right and wrong.
Morality involves in the belief where it was wrong to lie or perhaps to endanger the lives of others
and also believe in that integrity is good and dishonesty is bad.

This belief relates to moral standards. It refers to norms about the kinds of actions we believe are
morally right and wrong, as well as the values we place on what we believe to be morally good or
morally bad. These norms can be expressed as general rules about our actions, which have been
taught to us from the society for example like always telling the truth, it’s wrong to kill innocent
people or the action to the extent to create happiness is right.

The values of morality we hold refers to the statements about objects or features of objects that
have worth like how we distinguish honesty is good and injustice is bad.

And where do these standards of morality come from? Well typically we first learned as a child from
family, friends, and various societal influences like school, church, television, so on. And eventually
we mature, the experience, learning and intellectual development will lead us to evaluate this
standard according to what will we judge them to be reasonable or unreasonable.

The contrast of moral standards where the standards we hold is about the things that are judge not
in a moral way, it is called as nonmoral standard. Sometimes it is called conventional standards and
norms. The example like the standards of etiquette by which we judge people’s manner as good or
bad, the standards of art by which we judge whether a painting or a song is good or bad and so
many more.

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There are ways to distinguish between the moral norms and nonmoral norms

First is moral standards deal with matters that are serious, in example: the matters that we think can
seriously wrong or significantly benefit human beings. Because they are about serious matters,
violating moral standards is seen as seriously wrong and we feel that the obligation to obey moral
standards has greater claim on us than conventional norms do.
Second is we feel that moral standards should be preferred to other values including self-interest.
That is, if a person has a moral obligation to do something, then he or she is supposed to do it even if
this conflicts with other, conventional norms or with self-interest. But it doesn’t always mean that
following our self-interest is bad, what this statement means that when we believe a certain
standard/ norm is moral then we might feel that it would be wrong to choose self-interest over the
moral norm.

Third is moral standard is not established or changed by the decisions of authority figures or
authoritative bodies. These authorities do not establish moral standards and their validity comes
from people’s preferences.

Forth, moral standards are felt to be universal. Like if we genuinely hold the principle where such
standards like do not lie or do not steal as moral standards then people might also feel that it is what
everyone should try to live up to those standards and it would be bad if others transgressing it.

Fifth, the moral standards are based on impartial considerations. moral standards are based on “the
moral point of view” where it a point of view that does not evaluate standards according to whether
they advance the interests of a particular individual or group, but one that goes beyond personal
interests to a “universal” standpoint in which everyone’s interests are impartially counted as equal.

Lastly, moral standards are associated with special emotions and a special vocabulary. For example,
if someone act contrary to a moral standard, the person will normally feel guilty, ashamed, or
remorseful.

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We are back to the ethics again. After knowing fully about the morality.

Ethics described as the discipline that examines one’s moral standards or the moral standards of a
society to evaluate their reasonableness and their implications for one’s life.

Ethics is not the only way to study morality. The social sciences itself also study morality, but in a
way that is different from the approach to morality that ethics takes. The difference is that is a
normative is a study of morality while the social sciences engage in a descriptive study of morality.

What actually these studies are?

Normative study talks about what things are good/bad or about what actions are right or wrong. The
study is focusing to discover what ought to be.

However, Descriptive study does not try to reach any conclusions about what things are truly good
or bad or right or wrong. Instead, a descriptive study tries to describe or explain the world without
reaching any conclusions about whether the world is as it ought to be. They try to develop accurate
descriptions of the moral standards of a culture and perhaps, develop a theory that explains how
they came to hold those standards. But in the end, it is not up to the anthropologist / the sociologist
to determine whether those moral standards are correct or incorrect.

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Business Ethics is a specialized study of moral right and wrong that concentrates on moral standards
as they apply to business institutions, organizations, and behavior.

There are three different kinds of issues that business ethics investigates: (Page 15)
Firstly, Systemic issues in business ethics are ethical questions raised about the economic, political,
legal, and other institutions within which businesses operate. These include questions about the
morality of capitalism or of the laws, regulations, industrial structures, and social practices within
which U.S. businesses operate.

Second, Corporate issues are ethical questions raised about a particular organization. These include
questions about the morality of the activities, policies, practices, or organizational structure of an
individual company taken as a whole.

Third, individual issues are ethical questions raised about a particular individual or particular
individuals within a company and their behaviors and decisions. These include questions about the
morality of the decisions, actions, or character of an individual.

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Applying Ethical Concepts to Corporations

Should Ethical Qualities be Attributed Only to People or Also to Corporations?

• One view says corporations, like people, act intentionally and have moral rights, and obligations,
and are morally responsible.

for example, companies can “merge” together, make contracts, compete against other companies,
and make products. And these do not just happen, companies seem to do these things with
intention. In this, the company act as a moral agent where it is capable of having moral rights and
obligations and being morally responsible for its actions. The problem with this argument is that
organizations also do not seem to “act” or “intend” in the same sense that people do. Unlike
individuals, organizations have no minds to form “intentions” and are conscious of neither pain nor
pleasure nor anything else; and unlike individual, organizations do not act on their own but instead
humans must act for them.

• Another view says it makes no sense to attribute ethical qualities to corporations since they
are not like people but more like machines; only humans can have ethical qualities.

the major problem with this second view is that, unlike machines, at least some of the members of
organizations usually know what they are doing and are free to choose whether to follow the
organization’s rules or even to change these rules.

A middle view says that humans carry out the corporation’s actions so they are morally responsible
for what they do and ethical qualities apply in a primary sense to them; corporations have ethical
qualities only in a derivative sense.

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Arguments Against Ethics in Business

• Some have argued that in a free market economy, the pursuit of profit will ensure maximum social
benefit so business ethics is not needed. However, there are more questionable assumptions on this
particular argument:

First, most industrial markets are not “perfectly competitive” as the argument assumes. To the
extent that firms do not have to compete, they can maximize profits despite inefficient production.
Second, the argument assumes that increase profits will necessarily be socially beneficial. In fact,
there are several ways of increasing profits that actually injure society such as: allowing harmful
pollution to go uncontrolled, concealing product hazards, fraud, bribery, and so on.

Third, the argument assumes that, by producing whatever the buying public wants, firms are
producing what all the members of society want. But the wants of large segments of society (the
poor and disadvantaged) are not necessarily met when companies produce what buyers want,
because these segments of society cannot participate fully in the marketplace.

Fourth, the argument is essentially making a normative judgment on the basis of some unspoken
and unproved moral standard (“people should do whatever will benefit those who participate in
markets”). Thus, although the argument tries to show that ethics does not matter, it assumes an
unproved ethical standard to show this. And the standard does not look very reasonable.

• Another view is that manager’s most important obligation is loyalty to the company regardless of
ethics.

The argument can be paraphrased as follows:

1. As a loyal agent of his or her employer, the manager has a duty to serve the employer as the
employer would want to be served (if the employer had the agent’s expertise). the
argument tries to show (again) that ethics does not matter by assuming an unproved moral
standard (“the manager should serve the employer in whatever way the employer wants to
be served”). But there is no reason to assume that it would be acceptable only if it were
suitably qualified (e.g., “the manager should serve the employer in whatever moral and legal
way the employer wants to be served”).

2. An employer would want to be served in whatever ways will advance his or her interests.
This assumes that there are no limits to the manager’s duties to serve the employer.

3. Therefore, as a loyal agent of the employer, the manager has a duty to serve the employer in
whatever ways will advance the employer’s interest. This assumes that if a manager agrees
to serve an employer, then this agreement somehow justifies whatever the manager does
on behalf of his employer.
However, this assumption is false: An agreement to serve an employer does not
automatically justify doing wrong on his or her behalf. If it is wrong for me knowingly to put
people’s lives at risk by selling them defective products, then it is still wrong when I am
doing it for my employer

• So long as companies obey the law, they will do all that ethics require

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Ethical Issues in Business

Technology consists of all those methods, processes, and tools that humans invent to manipulate
and control their environment. The new technologies have raised several ethical issues for business

 The agricultural and industrial revolutions introduced new ethical issues.

The invention of irrigation, the harnessing of water and wind power, and the development of levers,
wedges, hoists, and gears during this period eventually allowed humans to accumulate more goods
than they could consume, and out of this surplus grew trade, commerce, and the first businesses.
And with commerce came the issues related to business ethics such as being fair in trading, setting a
just price, and using true weights and measures.

 Information technology raises new ethical issues related to risk, privacy, and property rights.
Because these technologies enable others to gather such detailed and potentially injurious
information about ourselves, many people have argued that this violate our right to privacy.
 Nano technology and biotechnology raise new ethical issues related to risk and to the spread
of dangerous products.

 Nanotechnology itself is a new field that encompasses the development of tiny artificial
structures only nanometers (billionths of a meter) in size. Greenpeace International, an
environmental group, has suggested that nanoparticles could be harmful if accidentally
inhaled by humans (carbon nanotubes, for example, have caused cancer in rats when
inhaled) or if they carried toxic ingredients.
Biotechnology has created yet another host of difficult ethical issues. One of its activities is
Genetic engineering which refers to a large variety of new techniques that let us change the
genes in the cells of humans, animals, and plants. Businesses have used genetic engineering
to create and market new varieties of vegetables, grains, sheep, cows, rabbits, bacteria,
viruses, and numerous other organisms. The ethical issues in this matter are questioned
whether by doing such experiments would bare an unpredictable consequence to the world
and its environment.

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Globalization is the worldwide process by which the economic and social systems of nations
have become connected facilitating between them the flow of goods, money, culture, and
people.

 And there are corporations like multination corporation that has manufacturing, marketing,
service, or administrative operations in many different nations. These corporations are at
the heart of this process of globalization and are responsible for much of volume of
international transactions that take place today.
 Globalization has brought the world tremendous benefits. As multinationals like Nike,
Motorola, and Ford build factories and establish assembly operations in countries with low
labor costs, they bring jobs, skills, income, and technology to regions of the world that were
formerly underdeveloped, raising the standard of living in these areas and providing
consumers everywhere with lower-priced goods.
 Critics of globalization also argue that while it has benefited developed nations that have
high-value products to sell (such as high-tech products), many poorer nations that have only
cheap agricultural products to trade have been left behind. This matter is approved by world
bank reports, as there’s inequality in between and within nations.
Multinationals can pull their operations out of one country and insert them into another that
offers cheaper labor, less stringent laws, or lower taxes. This ability enables the
multinational to play one country off against another. If a multinational does not like one
nation’s environmental, wage, or labor standards, it can move or threaten to move to a
country with lower standards.
Critics also claim that multinationals sometimes import technologies or products into
developing nations that cannot yet deal with their risks. Some chemical companies—for
example, Amvac Chemical Corporation, Bayer, and BASF— have been accused of marketing
 toxic pesticides in developing nations whose farm workers do not know about, and cannot
protect themselves against, whereas those chemicals can inflict on their health.

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Business and Ethical Relativism

There are certain cultural differences that create a special problem for managers. Managers
of multinationals often find it hard to know what to do when they encounter moral
standards that are different from the ones they personally hold and that are accepted in
their home country.

The fact that different cultures have different moral standards, leads many people to adopt
the theory of ethical relativism. Ethical relativism is the theory that there are no ethical
standards that are true absolutely

Objections to Ethical Relativism

 Some moral standards are found in all societies.
 Moral differences do not logically imply relativism.
 Relativism has incoherent consequences.
 Relativism privileges whatever moral standards are widely accepted in a society.