BUSINESS ETHICS
Concept of Ethics and Business Ethics in an
Organization
- Ethics are derived from societal mores and deeprooted personal beliefs about issues of right and
wrong that are not universally agreed upon.
- Ethics pertains to the principle of conduct that
individuals use in making choices and guiding
their behavior in situations that involve the
concepts of right or wrong.
- Business ethics, also called corporate ethics, is a
form of applied ethics or professional ethics that
examines the ethical and moral principles and
problems that arise in a business environment
- Business ethics involves finding the answers to:
o How do managers decided what is right in
conducting their business?
o Once managers have recognized what is
right, how do they achieve it?
- Business ethics are related to the discussion of:
o Morally right or wrong in the business
context
o Fairness, justice, and equity
o Applications of moral standards by
persons in the organization
o Moral standards that were derived from
the society
- Ethical issues in business can be divided into
four areas (examples):
o Equity – Salaries, Comparable Worth,
Product Pricing
o Rights – Corporate due process, Employee
health screening, Employee privacy,
Sexual harassment, Diversity, Equal
employment opportunity, Whistleblowing
o Honesty - Employee and management
conflict of interest, Security of organization
data and records, Misleading advertising,
Questionable business practices, Accurate
reporting of shareholder interest
o Exercise of Corporate Power- Political
actions committee, Workplace safety,
Product safety, Environmental issues,
Divestment of interest, Corporate political
contributions, Downsizing and plant
closures
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Making ethical decisions
o Business organizations have conflicting
responsibilities to their employees,
shareholders, customers, and the public
because every major decision has
consequences that potentially harm or
benefit these constituents.
o Seeking a balance between those
consequences is the manager’s ethical
responsibility, in which the following ethical
principles provide some guidance in the
discharge of that responsibility
o Proportionality – the benefit from a decision
must outweigh the risks, and furthermore,
there must be no alternative decision that
provides the same or greater benefit with
less risk.
o Justice - The benefits of the decision
should be distributed fairly to those
who share the risks. Those who do
not benefit should not carry the
burden of risk.
o Minimize Risk - Even if judged
acceptable by the principles, the
decision should be implemented so
as to minimize all of the risks and
avoid any unnecessary risks.
Ethical decision-making process can be viewed
as a system influenced by several components
as given under:
o Ethical issues
o Principles guiding ethical decision making
o Managerial concerns in an organization
o Environmental factors, like culture, legal
frameworks, etc.
o Personal characteristics of decision maker
Ethical Issues in an Organization
1. Finance and Accounting - Many overlooked
finance ethics because issues in finance are
often addressed as matters of law rather than
ethics
Specific corporate ethical and legal abuses
include:
Creative
accounting,
Earnings
management, Misleading financial analysis,
Insider trading, Securities fraud, Bribery,
Kickbacks, Facilitation payments
2. Human Resource Management- Human
resource (HR) management involves
recruitment
selection,
orientation,
performance
appraisal,
training
and
development, industrial relations and health
and safety issues
The HR manager must respond to
ethical issues related to discrimination
concerning:
Age, Disability, Gender, Sexual
orientation, Race, Religion, Weight.
3. Sales and Marketing- Ethics in marketing
refers to the principles, values, and ideals
marketers and marketing institutions follow
Marketing issues related to ethics include:
Marketing redundant or dangerous
products and services, Lack of transparency
regarding environmental risks, product
ingredients, possible health risks, or financial
risks, Disrespect for consumer privacy and
autonomy, Advertising truthfulness, Fairness
in pricing and distribution
Some argue that marketing can influence
individuals' perceptions of and interactions
with other people, implying an ethical
responsibility to avoid distorting those
perceptions and interactions.
4. Production - Business ethics refer to the duty
companies have to ensure their products and
production processes do not cause harm
In some cases, consumers demand and
choose to purchase products that will likely
cause harm, such as tobacco products
Production may also have an environmental
impact, such as pollution, habitat destruction,
and urban sprawl
Empowerment of Individual’s Ethics in a Business
Organization
- Structure
o At the individual level, organizations must
focus on developing and empowering
each employee to understand and adhere
to ethical standards
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o There are four basic elements
organizations can build to empower
individual ethics:
1. A written code of ethical standards
(ethical code)
2. Training for management and
employees (ethical training)
3. Advice and consulting on a situation
to situation basis (ethics officers)
4. A confidential and easily accessible
system of reporting (ethical
reporting)
Motivation
o As with most facets of management, there
is also a critical motivational component
to individual ethics
o Intrinsic and extrinsic motivations can
reinforce positive behavior and/or
eliminate negative behavior in the
workplace.
o Whistleblowing, for example, is a practice
that gets quite a bit of both positive and
negative attention
Whistleblowers are individuals
who identify unethical practices in
organizations and report the behavior to
management or the authorities.
A whistleblower who behaves
honestly, reporting a problem accurately,
should be rewarded for their bravery and
honesty, as opposed to punished and
ostracized
If an employee is blowing the
whistle, it is likely that the organization
itself has failed to empower and positively
reinforce honest and ethical discussions
internally.
o Another example is rewarding employees
for admitting mistakes
An employee who makes a
mistake on the assembly line, and
accidentally produces a batch of defective
goods, could react in a number of ways.
If the organization punishes
employees for mistakes, the employee is
quite likely to be motivated to keep quiet
and not mention it to avoid punishment
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However, if the organizational is
ethical and clever, they will empower
employees to take responsibility for their
mistakes and even reward them for
coming forward, apologizing, and
ensuring that no consumer receives a
defective product.
Professionalism
o Some aspects of individual ethics are rooted
in the individual
o Attaining a strong sense of professionalism,
and recognizing the ethical implications of
certain professional decisions, is a key
component of education, individual reflection,
and experience.
Computer Ethics
- The use of technology in business has had a
major impact on society, thus, raises significant
ethical issues regarding computer crime, working
conditions, privacy, and more.
- Computer ethics is “the analysis of the nature and
social impact of computer technology and the
corresponding formulation and justification of
policies for the ethical use of such technology;
this includes concerns about software as well as
hardware and concerns about networks
connecting computers as well as computers
themselves” – J.H. Moore
- Privacy - The issue of privacy is that people desire
to be in full control of what and how much
information about themselves is available to
others, and to whom it is available.
- Security
o Computer security is an attempt to avoid
undesirable events as a loss of confidentiality
or data integrity.
o Security systems attempt to prevent fraud
and other misuse of computer system
o The ethical issues involving security arises
from the emergence of shared, computerized
databases that have the potential to cause
irreparable harm to individuals by
disseminating inaccurate information to
authorized users.
- There is a similar danger in disseminating
accurate information to person unauthorized to
receive such information.
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Ownership of Property - Copy right laws have
been invoked in an attempt to protect those who
developed software from having it copied.
Equity in Access
o Some barriers to access are intrinsic to the
technology of information systems, but some
are avoidable through careful system design.
o Several factors, some of which are not unique
to information systems, can limit access to
computing technology
o The economic status of an individual or
the affluence of an organization will
determine the ability to obtain information
technology
o Culture also limits access, for example,
when documentation is prepared in only
one language or is poorly translated.
o Safety features, or the lack thereof, also
cause limitations to access.
Environmental Issues
o Advancement in technology affects the
environment, for example, high-speed
printers allow production of printed
documents faster than ever, which results in
more papers being used and disposed in a not
environmentally friendly way.
Artificial Intelligence
o A new set of social and ethical issues has
risen out of popularity of expert systems,
which were being marketed as decision
makers or replacement for experts, in which
some people rely on them significantly.
o Both the knowledge engineers and domain
experts must be concerned about their
responsibility for faulty decisions.
Unemployment and Displacement
o Many jobs have been and are being
changed as a result of the availability of
computer technologies.
o People who are unable on unprepared to
such change are left unemployed.
Misuse of Computers
o Computers can be misused in various ways,
such as:
Copying a licensed software
Using company computer for personal benefit
Checking other people’s computer files