1. Define Business Ethics/ Nature of Business Ethics.

Answer: Business Ethics is the study of behavior that is being practiced as a

stakeholder in the area of business in order to identify them as good or bad.

Business ethics is what makes sense for organizations in the long run – for their
customers, their employees, their investors and their wider stakeholders based
on the best possible rational decisions in their interests. Businessmen have
absolute power to choose their own moral principles, and to decide how they
behave. They are responsible for what they choose to do. This does not justify
actions on a whim in search of short-term gains in the name of ethics. Something
that may appear beneficial right now often destroys value in the long run. If
business ethics had to be described in two words, they are “fairness” and
“objectivity”.

Fairness disqualifies bias, discrimination, envy and other value-destroying

behaviors. It ensures judgments are made on individual merits to allow for the
best possible decisions in the long run. Similarly basic principles of fairness help
ensure that people in business feel adequately rewarded for working hard rather
than being evaluated on irrelevant criteria such as how good they are at golf or
how nice their hair is.

Objectivity facilitates rational thinking that is congruent with the truth of reality,
helping to avoid delusive or ambiguous decision-making.
Significance of ethics for society and business (with reference to Thomas
Hobbes)
Hobbes writes that imagine a situation where there is no moral structure for one’s actions, no legal
system, no power greater than the individual’s to adjudicate conflict, and where all people are free to
pursue their own interests. For Hobbes this is the ‘state of nature’. Although the prospect of pursuing
our own self-interest might at first seem attractive , he shows that it is actually not.Because in such a
state every one would be at war with everyone else, and all would be constantly at risk of losing
property and life. The standard of behavior of civil society would be absent, and violence would be the
order of the day. The words of justice and injustice would have no meaning.

In this situation the interest of the strong would prevail. Human experience in such a society would be
miserable, in Hobbes words: Life would be ‘ solitary, poor, nasty, brutish, and short’. All rational person
would want to find a way out of this

It is sense and reason that facilitate to get out of the state of nature. For example, we will be better off
when pursuing our own self-interest if we accept some constraints on our actions in return for restraints
being accepted by others. We will be freer, even though we have accepted constrains, because we are
no longer in danger from everybody else. Accepting the constraints will lead us to follow ethics.
Therefore, following ethics we can arrive in the civil society.

There are many situations in business where individuals are tempted to do something that violates their
ethical standards. The unethical conduct of some businesspeople, chronicled in the daily newspaper,
concerns not uncertainty over ethical choices but fundamental errors of human conduct. The followings
are some natural laws drawn from hobbes’s discussion that are most applicable for the practices of
business:

1. We should claim as much liberty as we are willing to grant to others.

2. We should keep promises and perform contracts to which we have agreed.
3. We should acknowledge the equality of all
4. Judges should be impartial
5. Things that cannot be divided should be shared in common
6. We should not do to others what we don’t want them to do to us.

Businesses, no less than individuals need such moral precepts. A business needs employees who are
honest and loyal. How else could a company trust its employees with proprietary information, money,
access to important planning documents and so on? Without Ethics, neither businesses nor individuals
could function and we would be struggling in Hobbes’s state of nature.
3. Hobbes writes that imagine a situation where there is no moral structure for one’s actions, no legal
system, no power greater than the individual’s to adjudicate conflict, and where all people are free to
pursue their own interests. For Hobbes this is the ‘state of nature’. Although the prospect of pursuing
our own self-interest might at first seem attractive , he shows that it is actually not.Because in such a
state every one would be at war with everyone else, and all would be constantly at risk of losing
property and life. The standard of behavior of civil society would be absent, and violence would be the
order of the day. The words of justice and injustice would have no meaning.

In this situation the interest of the strong would prevail. Human experience in such a society would be
miserable, in Hobbes words: Life would be ‘ solitary, poor, nasty, brutish, and short’. All rational person
would want to find a way out of this

It is sense and reason that facilitate to get out of the state of nature. For example, we will be better off
when pursuing our own self-interest if we accept some constraints on our actions in return for restraints
being accepted by others. We will be freer, even though we have accepted constrains, because we are
no longer in danger from everybody else. But Hobbes thinks that most people are not sufficiently
enlightened to seek their own best interests. So he advocates the development of a strong sovereign
power ( like State)to force people to follow the laws of nature.

Being in a civil society means that we accept the responsibility of obeying the law. We arrive to this
stage of civil society through natural reason. Only in an organized and civil society, the forces of business
and industry function well.

4. Casuistry is an alternative to self-interest, which forces moral behavior through a comprehensive set
of rules that guide not only individual conduct but also provide for the general welfare.

1. The rule governed approach to behavior leaves a question of what to do when there is no specific rule
to apply to a given situation.

-The obvious answer is to develop more rules; but as these rules proved to be inadequate, the need will
appear for still more rules.

2. A second problem with casuistry is that we need another set of rules to help us decide what to do
when our rules conflict with each other.

-There are rules for applying the rules, rules that tell us which rules to use in which situation , and still
more rules for telling us when to apply the rules.

3. A third difficulty is that obeying the rules leads to the sense of having acted ethically, whereas actually
one might have done only what is minimally required and not fulfilled the spirit of the rules at all.

4. A fourth difficulty is that a rule-bound form of conducts tempt us to look for loopholes, ways of
satisfying the technical demands of the rules while still doing things that the rules were intended to
prevent.

5. Advantages of Ethical Theory

1. Ethical theory searches for principles for guidance, and general understanding that helps us
make moral decisions in a variety of situations and assist us in discovering the morally relevant
aspects of our decisions.

2. Ethical Theory looks for a moral framework within which to assess our actions and for general
principles to apply to a variety of individual cases.

3. The goal of business theory is to discover those general approaches that will help managers deal
with a wide range of specific cases. For example, a rule such as treat your customers right if you
want your business to succeed does not give specific guidance in each individual case, but it
 does provide a general principle that a skillful manager can appeal to in making individual
decision

4. Each moral theory contributes important insights to our ethical thinking, but none of them alone
seems adequate to address all ethical issues with which we are faced.

5. The great advantage of ethical theories ( such as Aristotle's Virtue Ethics, Kant’s Ethics of Duty,
and Mill’s Utilitarianism) help us penetrate the complexities of a real-world situation. And
isolate the morally relevant aspects of actions.

6. Rights of individuals and minority is better protected by theories , such as Kant’s theory of duty,
that emphasizes respect for individual and the importance of fairness as moral criteria.

7. Ethical theories give us a vocabulary for discussion of ethical choices

8. They help us identify the morally relevant aspects of our actions.

6. One of the challenges to business ethics comes from the philosophers who think that philosophy
should be based solely on the analysis of statements of facts.

For them, if a statement could not be verified by methods of scientific analysis, that statement would be
rejected on the ground that it was not meaningful. This school of philosophy is known as positivism

Initially, seemed to be scientific, this view attracted a great deal of support

But further reflection showed that this was not the case. For most of the scientific theories and laws fail
to stand up to the tests of empirical proof demanded by positivism. Because scientific theories and laws
themselves determine what counts as empirical proof and are generally viewed as organizing principles
for the analysis of empirical data and not verifiable by the empirical means

Worse for positivism is that it could not even prove the truth of its own assumptions. When a positivist
argues that ‘only statements that can be empirically tested are meaningful’, the positivist is making a
statement that itself cannot be empirically tested.

These and similar difficulties with positivism has caused it to be abandoned.

Challenge from RIght

A challenge to business ethics comes from those who argue that the only duty of business is to make a
profit.

• The eighteenth century philosopher and economist Adam smith (1723-1790) upheld this view.

• In his book An Inquiry into the Nature and Causes of the wealth of Nations , Smith claims that ‘ it
is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner,
but from their regard for their own self-interest.’
• According to this view, in a completely free marketplace, where people are allowed to seek
their own self-interest, the forces of competition will produce the quantity and variety of
material goods essential to civil society.

• In this type of market, the forces of supply and demand act as a sort of ‘invisible hand’( it’s
Smith’s prominent phrase)that restrains individual greed and stimulates productivity.

• Smith’s view has become a kind of tune for the unrestrained economy, a laissez-faire approach
to the marketplace.