Ethics is just being right or wrong, good or bad, fair or unfair, blameworthy or praiseworthy. (www.onlineethics.com, 2008) Ethics are the moral principles and values that govern the actions and decisions of an individual or group. They serve as guidelines on how to act rightly and justly when faced with moral dilemmas. It is indefinable but exists with limits. It derives from the social environment, established practice, law, religion, beliefs, values, and individual conscience. But critically assesses each of these sources. It is a complex, perplexed and debatable issue. It is built with the character and develops through the conduct.
As it has been observed that ethics is a theory of social relation but business ethics is the theory of business and society relation. Business ethics considers two viewpoints – one is from the society and the second one is from the business. Doing business from the profit point of view and it is legitimate to society also, is considered as good business. But if the business is done for profit and is not legitimate for society, then arises a dilemma for business to make the right choice either in its favor or against it. This is called Business Ethical Dilemmas.
Importance of Business ethics
Business today is not just being a silent observer of its profit-making units and keeps concentrating on its increase in sales volume, but it has taken the broader view in the form of society, employees, values, and above all its corporate social responsibility. People are more aware of the companies. TV, print media, internet become more active, free and help out the companies to reach individual’s doorstep. People also want to know in and out of the company, from which they are associated. Society becomes more judgemental and litigious. It is been the moral responsibility of the business towards the society for whom they are working for and it is the fundamental right of the individual to ask about the various suspicious activities of the organization. From the business point of view, it will help to develop a brand image in the mind of the customer, reliability, long-lasting relation with the customer, and above all the profit associated with the righteous act of ethics. Basic advantages come with following business ethics relate to: investors and customers confidence, increased employee productivity, reputation management, and legal and financial benefits.
Issues In Business Ethics
Business ethics is a specialized study of moral right and wrong. It concentrates on moral standards as they apply to business policies, institutions and behavior. Business ethics is a form of applied ethics. (www.lotsofessays.com, 2008) It includes not only the analysis of moral norms and moral values, but also attempts to apply the conclusions of this analysis to that assortment of institutions, technologies, transactions, activities, and pursuits that we call Business. Ethical issues arise when there is confront between the values or ethics of the organization and the values and believes of the society. Sometimes ethical issues also arise due to confrontation between employee and organizational values. There are various unethical behaviors involved in the organizations and across various industries. Each unethical behavior pertaining to different industries is different but some unethical behavior is common across all the verticals. As the ethical behavior derives from the top management to down the line, so first of all the top management should consider the ethical dilemmas which might happen in the future while making strategies.
While making strategies, organizations may incur strategic changes of developing vision statements (priorities, culture, and values), fixing managerial remuneration, and implementing strategic changes (changes in ownership through M&As or through exchange offers, share purchase, going private or leveraged buyouts or through computerization) which have both positive and negative effects. But there are some common corporate issues in business ethics that are raised about a particular company. These include questions about:-
The morality of the activities
Morals are the principles of right and wrong. Morality refers to the standards of conduct that are accepted as right and proper. Moral Standards deal with desired right and wrong human behavior. They focus on what ought to be done and what ought not to be done by an individual or group in a given situation. A person is morally responsible only for those acts and their foreseen injurious effects which the person knowingly and freely performed and which it was morally wrong for the person to perform or bring about, or which the person knowingly and freely failed to perform or prevent and which it was morally wrong for the person to fail to perform or prevent. It also means moral duty or moral obligation.
These are the chartered statement meant for the organizational behavior, considering their vision, mission, and organizational structure. The business ethics policy laid down the values, beliefs, work culture, and goals of the organization. Apart from the formal code of conduct laid down by the organizations, there is another code of conduct which is laid down on some factors: a) Individual factors – Moral values inculcated in a person by family, education, and culture. They play an important role in framing an ethical decision that revolves around two factors viz. Significant factors -Those which reference groups, top management, and peers influence the individual; and Opportunity Factors -Ethical codes & standards that are promoted in an organization. These are the rules and policies framed by the organization, which all the employees are expected to adhere to.
The policies which are laid down in the organization are not on paper, they must be started practicing in the organization religiously. Right from the top management to the bottom line everybody should practice ethics in the organizations. Sometimes people involve in practicing fraudulent activities in the organization. So this creates a mismatch between the policies and practices of the organization. There should be a proper alignment of key organizational systems which permeate all aspects of the organization’s culture, yet many well-intentioned programs never move beyond drafting a code of conduct. The organization should review an organization’s management and operational processes and offer recommendations to modify management systems and rewards, adapt personnel appraisal procedures, integrate new manager and new employee training programs, improve environmental practices, and review accounting and audit accountabilities.
The good and conducive organizational structure helps a lot to make a good ethical environment in the organization. Mostly there are two types of organizational structure: flat and horizontal. In a flat organizational structure, no one is the owner, each division has its strategic boss and above that, there is one head. The reporting is not hierarchy-wise.
Individual Issues (Morality of decisions, actions, or character of an individual)
A morality of decisions is an acquired disposition that is valued as part of the character of a morally good human being and that is exhibited in the person’s habitual behavior. A person has a moral virtue when the person is disposed to behave habitually in the way and with the reasons, feelings, and desires that are characteristic of a morally good person. There are a few examples of unethical activities that organizations usually face like industrial espionage, giving or receiving bribes and kickbacks, misrepresentation, infringement of trademarks and patents, race discrimination, compensation discrimination (full-time and part-time worker), sexual harassment, and ‘creative accounting.
Theory of rationality
To justify the nature of ethics, a theory of rationality is taken that distinguishes and combines ‘processes’ and ‘consequences’ of business behavior. In this approach, a rational business organization aims at reaching the most profitable consequences from a business point of view. But the process by which these consequences are attained also matters from the point of view of society since it may have detrimental impacts on society as a whole. Processes and consequences are thus the supports of two types of judgments that reflect the two points of view that one can adopt to address the relationship between business and society. The theory suggests that any behavior is composed of both a process and a consequence, a characterization that structures the way is a choice of behavior (Le Menestrel, 1999, 2002).
The distinction between processes and consequences supports two types of judgments that combine to influence an actor’s choice of behavior: judgments on the processes and judgments on the consequences. Consequential judgments evaluate what the organization expects as the result of its action, from its own point of view. Procedural judgments evaluate how these results are achieved – e.g. how profits are made – in other words how the business activity itself, distinctively from its consequences for the organization, affects society as a whole. Both these theories go hand in hand.
Ethical issues in business always remain a controversial topic. Business ethics always changes from land to land, organization to organization but the core of business ethics keeps intact the organization. Ethical dilemmas arise when there is a conflict between society’s ethics and organizations. These can be resolved with the theory of rationality, which suggests that the consequences and processes of the work go together. these form simply very different business attitudes towards society: controversial or competitive for the former and aligned or cooperative for the latter. These attitudes raise the question of good faith in business argumentation, in the sense that they may or may not be consistent with actual business behaviors. Because consequential attitudes merely involve communication and lobbying actions, the question of good faith lies in the consistency between beliefs and discourse. On the other hand, procedural attitudes refer to a change of the process of behavior and thus raise the question of the consistency between discourses and behavior.
- Le Menestrel, M. (1999). ‘A Model of Rational behavior Combining Processes and Consequences’. Ph.D.Dissertation, INSEAD, Fontainebleau, France. Web.
- LotsOfEssays. Web. (2008).
- Hollingsworth. John A, Hall Jr. Ernest H. and Trinkaus. Robert J., (1999) Utilitarianism: An Ethical Framework for Compensation Decision Making. Review of Business. Volume: 13. Issue: 3. Page Number: 17.
- Le Menestrel Marc, (2001). ‘Processes and Consequences in Business Ethical Dilemmas’.