Business ethics (also known as corporate ethics) is a form of applied
ethics or professional ethics that examines ethical principles and
moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the
conduct of individuals and entire organizations. These ethics
originate from individuals, organizational statements or from the
legal system. These norms, values, ethical, and unethical practices
are what is used to guide business. They help those businesses
maintain a better connection with their stakeholders.
Business ethics refers to contemporary organizational standards,
principles, sets of values and norms that govern the actions and
behavior of an individual in the business organization. Business
ethics have two dimensions, normative business ethics or descriptive
business ethics. As a corporate practice and a career specialization,
the field is primarily normative. Academics attempting to understand
business behavior employ descriptive methods. The range and quantity
of business ethical issues reflects the interaction of
profit-maximizing behavior with non-economic concerns.
Interest in business ethics accelerated dramatically during the 1980s
and 1990s, both within major corporations and within academia. For
example, most major corporations today promote their commitment to
non-economic values under headings such as ethics codes and social
Adam Smith said, "People of the same trade seldom meet together, even
for merriment and diversion, but the conversation ends in a conspiracy
against the public, or in some contrivance to raise prices."
Governments use laws and regulations to point business behavior in
what they perceive to be beneficial directions.
regulates areas and details of behavior that lie beyond governmental
control. The emergence of large corporations with limited
relationships and sensitivity to the communities in which they operate
accelerated the development of formal ethics regimes.
3 In Thirukural
4 Functional business areas
4.2 Other issues
4.3 Human resource management
Sales and marketing
4.7.1 Modern history of property rights
188.8.131.52 Slaves as property
4.7.2 Natural right vs Social construct
4.8 Intellectual property
5 International issues
7 Economic systems
Law and regulation
9.1 Corporate policies
10 Academic discipline
11 Religious views
12 Related disciplines
13 See also
14.1 Works cited
15 Further reading
Maintaining an ethical status is the responsibility of the manager of
the business. According to the Journal of
ethical behavior is one of the most pervasive and complex problems
facing business organizations today"
Business ethics reflect the norms of each historical period. As time
passes, norms evolve, causing accepted behaviors to become
Business ethics and the resulting behavior evolved as
Business was involved in slavery, colonialism,
and the cold war.
The term 'business ethics' came into common use in the United States
in the early 1970s. By the mid-1980s at least 500 courses in business
ethics reached 40,000 students, using some twenty textbooks and at
least ten casebooks supported by professional societies, centers and
journals of business ethics. The Society for
founded in 1980. European business schools adopted business ethics
after 1987 commencing with the European
(EBEN). In 1982 the first single-authored books in the
Firms began highlighting their ethical stature in the late 1980s and
early 1990s, possibly in an attempt to distance themselves from the
business scandals of the day, such as the savings and loan crisis. The
concept of business ethics caught the attention of academics, media
and business firms by the end of the Cold War. However,
criticism of business practices was attacked for infringing the
freedom of entrepreneurs and critics were accused of supporting
communists. This scuttled the discourse of business ethics
both in media and academia. The Defense Industry Initiative on
Ethics and Conduct(DII) was created to support corporate
ethical conduct. This era began the belief and support of
self-regulation and free trade, which lifted tariffs and barriers and
allowed businesses to merge and divest in an increasing global
Business ethics reflects the philosophy of business, of which one aim
is to determine the fundamental purposes of a company. If a company's
purpose is to maximize shareholder returns, then sacrificing profits
for other concerns is a violation of its fiduciary responsibility.
Corporate entities are legally considered as persons in the United
States and in most nations. The 'corporate persons' are legally
entitled to the rights and liabilities due to citizens as persons.
Ethics are the rules or standards that govern our decisions on a daily
basis. Many consider “ethics” with conscience or a simplistic
sense of “right” and “wrong.” Others would say that ethics is
an internal code that governs an individual’s conduct, ingrained
into each person by family, faith, tradition, community, laws, and
personal mores. Corporations and professional organizations,
particularly licensing boards, generally will have a written “Code
of Ethics” that governs standards of professional conduct expected
of all in the field. It is important to note that “law” and
“ethics” are not synonymous, nor are the “legal” and
“ethical” courses of action in a given situation necessarily the
same. Statutes and regulations passed by legislative bodies and
administrative boards set forth the “law.”
Slavery once was legal
in the US, but one certainly wouldn’t say enslaving another was an
Milton Friedman writes that corporate executives'
"responsibility... generally will be to make as much money as possible
while conforming to their basic rules of the society, both those
embodied in law and those embodied in ethical custom". Friedman
also said, "the only entities who can have responsibilities are
individuals ... A business cannot have responsibilities. So the
question is, do corporate executives, provided they stay within the
law, have responsibilities in their business activities other than to
make as much money for their stockholders as possible? And my answer
to that is, no, they do not." A multi-country 2011 survey
found support for this view among the "informed public" ranging from
30 to 80%. Ronald Duska views Friedman's argument as
consequentialist rather than pragmatic, implying that unrestrained
corporate freedom would benefit the most in long term.
Similarly author business consultant
Peter Drucker observed, "There is
neither a separate ethics of business nor is one needed", implying
that standards of personal ethics cover all business situations.
Peter Drucker in another instance observed that the ultimate
responsibility of company directors is not to harm—primum non
nocere. Another view of business is that it must exhibit corporate
social responsibility (CSR): an umbrella term indicating that an
ethical business must act as a responsible citizen of the communities
in which it operates even at the cost of profits or other
goals. In the US and most other nations corporate entities are
legally treated as persons in some respects. For example, they can
hold title to property, sue and be sued and are subject to taxation,
although their free speech rights are limited. This can be interpreted
to imply that they have independent ethical responsibilities.[citation
needed] Duska argues that stakeholders have the right to expect a
business to be ethical; if business has no ethical obligations, other
institutions could make the same claim which would be
counterproductive to the corporation.
Ethical issues include the rights and duties between a company and its
employees, suppliers, customers and neighbors, its fiduciary
responsibility to its shareholders. Issues concerning relations
between different companies include hostile take-overs and industrial
espionage. Related issues include corporate governance; corporate
social entrepreneurship; political contributions; legal issues such as
the ethical debate over introducing a crime of corporate manslaughter;
and the marketing of corporations' ethics policies.
According to IBE/ Ipsos MORI research published in late 2012, the
three major areas of public concern regarding business ethics in
Britain are executive pay, corporate tax avoidance and bribery and
Ethical standards of an entire organization can be badly damaged if a
corporate psychopath is in charge.This will not only affect the
company and its outcome but the employees who work under a corporate
psychopath. The way a corporate psychopath can rise in a company is by
their manipulation, scheming, and bullying. They do this in a way that
can hide their true character and intentions for a company.
One of the first seen written accounts of business ethics can be seen
in Thirukural, a book said to be written by
Thiruvalluvar some 2000
years ago in Tamil Literature. Their literature speaks of business
ethics in many of its verses. It has been discussed in verse 113,
adapting to a changing environment in verses 474, 426, and 140,
learning the intricacies of different tasks in verses 462 and 677, and
Functional business areas
Fundamentally finance is a social science discipline. The
discipline borders behavioral economics, sociology, economics,
accounting and management. It concerns technical issues such as the
mix of debt and equity, dividend policy, the evaluation of alternative
investment projects, options, futures, swaps, and other derivatives,
portfolio diversification and many others. It is often mistaken by the
people to be a discipline free from ethical burdens. The 2008
financial crisis caused critics to challenge the ethics of the
executives in charge of U.S. and European financial institutions and
financial regulatory bodies.
Finance ethics is overlooked for
another reason—issues in finance are often addressed as matters of
law rather than ethics.
Aristotle said, "the end and purpose of the polis is the good
Adam Smith characterized the good life in terms of material
goods and intellectual and moral excellences of character. Smith
The Wealth of Nations
The Wealth of Nations commented, "All for ourselves, and
nothing for other people, seems, in every age of the world, to have
been the vile maxim of the masters of mankind."
Wikiquote has quotations related to: Adam Smith
However, a section of economists influenced by the ideology of
neoliberalism, interpreted the objective of economics to be
maximization of economic growth through accelerated consumption and
production of goods and services. Neoliberal ideology promoted finance
from its position as a component of economics to its core.[citation
needed] Proponents of the ideology hold that unrestricted financial
flows, if redeemed from the shackles of "financial repressions", best
help impoverished nations to grow. The theory holds
that open financial systems accelerate economic growth by encouraging
foreign capital inflows, thereby enabling higher levels of savings,
investment, employment, productivity and "welfare", along
with containing corruption. Neoliberals recommended that governments
open their financial systems to the global market with minimal
regulation over capital flows. The recommendations
however, met with criticisms from various schools of ethical
philosophy. Some pragmatic ethicists, found these claims to
unfalsifiable and a priori, although neither of these makes the
recommendations false or unethical per se. Raising
economic growth to the highest value necessarily means that welfare is
subordinate, although advocates dispute this saying that economic
growth provides more welfare than known alternatives. Since
history shows that neither regulated nor unregulated firms always
behave ethically, neither regime offers an ethical
Neoliberal recommendations to developing countries to unconditionally
open up their economies to transnational finance corporations was
fiercely contested by some ethicists. The claim
that deregulation and the opening up of economies would reduce
corruption was also contested.
Dobson observes, "a rational agent is simply one who pursues personal
material advantage ad infinitum. In essence, to be rational in finance
is to be individualistic, materialistic, and competitive.
a game played by individuals, as with all games the object is to win,
and winning is measured in terms solely of material wealth. Within the
discipline this rationality concept is never questioned, and has
indeed become the theory-of-the-firm's sine qua non".
Financial ethics is in this view a mathematical function of
shareholder wealth. Such simplifying assumptions were once necessary
for the construction of mathematically robust models. However
signalling theory and agency theory extended the paradigm to greater
Fairness in trading practices, trading conditions, financial
contracting, sales practices, consultancy services, tax payments,
internal audit, external audit and executive compensation also, fall
under the umbrella of finance and accounting. Particular
corporate ethical/legal abuses include: creative accounting, earnings
management, misleading financial analysis, insider trading, securities
fraud, bribery/kickbacks and facilitation payments. Outside of
corporations, bucket shops and forex scams are criminal manipulations
of financial markets. Cases include accounting scandals, Enron,
WorldCom and Satyam.
Human resource management
Human resource management
Human resource management occupies the sphere of activity of
recruitment selection, orientation, performance appraisal, training
and development, industrial relations and health and safety
Business Ethicists differ in their orientation towards
labour ethics. Some assess human resource policies according to
whether they support an egalitarian workplace and the dignity of
Issues including employment itself, privacy, compensation in accord
with comparable worth, collective bargaining (and/or its opposite) can
be seen either as inalienable rights or as
Discrimination by age (preferring the
young or the old), gender/sexual harassment, race, religion,
disability, weight and attractiveness. A common approach to remedying
discrimination is affirmative action.
Once hired, employees have the right to occasional cost of living
increases, as well as raises based on merit. Promotions, however, are
not a right, and there are often fewer openings than qualified
applicants. It may seem unfair if an employee who has been with a
company longer is passed over for a promotion, but it is not
unethical. It is only unethical if the employer did not give the
employee proper consideration or used improper criteria for the
promotion.Each employer should know the distinction between what
is unethical and what is illegal. If an action is illegal it is
breaking the law but if an action seems morally incorrect that is
unethical. In the workplace what is unethical does not mean illegal
and should follow the guidelines put in place by OSHA, EEOC, and other
law binding entities.
Potential employees have ethical obligations to employers, involving
intellectual property protection and whistle-blowing.
Employers must consider workplace safety, which may involve modifying
the workplace, or providing appropriate training or hazard disclosure.
This differentiates on the location and type of work that is taking
place and can needs to comply with the standards to protect employees
and non employees under workplace safety.
Larger economic issues such as immigration, trade policy,
globalization and trade unionism affect workplaces and have an ethical
dimension, but are often beyond the purview of individual
Trade Unions for example, may push employers to establish due process
for workers, but may also cost jobs by demanding unsustainable
compensation and work rules.
Unionized workplaces may confront union busting and strike breaking
and face the ethical implications of work rules that advantage some
workers over others.
Among the many people management strategies that companies employ are
a "soft" approach that regards employees as a source of creative
energy and participants in workplace decision making, a "hard" version
explicitly focused on control and
Theory Z that emphasizes
philosophy, culture and consensus. None ensure ethical
behavior. Some studies claim that sustainable success requires a
humanely treated and satisfied workforce.
Sales and marketing
Marketing ethics came of age only as late as the 1990s. Marketing
ethics was approached from ethical perspectives of virtue or virtue
ethics, deontology, consequentialism, pragmatism and
Ethics in marketing deals with the principles, values and/or ideals by
which marketers (and marketing institutions) ought to act.
Marketing ethics is also contested terrain, beyond the previously
described issue of potential conflicts between profitability and other
concerns. Ethical marketing issues include marketing redundant or
dangerous products/services transparency about
environmental risks, transparency about product ingredients such as
genetically modified organisms possible health
risks, financial risks, security risks, etc., respect for
consumer privacy and autonomy, advertising truthfulness and
fairness in pricing & distribution.
According to Borgerson, and Schroeder (2008), marketing can influence
individuals' perceptions of and interactions with other people,
implying an ethical responsibility to avoid distorting those
perceptions and interactions.
Marketing ethics involves pricing practices, including illegal actions
such as price fixing and legal actions including price discrimination
and price skimming. Certain promotional activities have drawn fire,
including greenwashing, bait and switch, shilling, viral marketing,
spam (electronic), pyramid schemes and multi-level marketing.
Advertising has raised objections about attack ads, subliminal
messages, sex in advertising and marketing in schools.
Being the most important element of a business, stakeholders' main
concern is to determine whether or not the business is behaving
ethical or unethical. The business' actions and decisions should be
primarily ethical before it happens to become an ethical or even legal
issue. "In the case of the government, community, and society what was
merely an ethical issue can become a legal debate and eventually
law." Some unethical issues are:
1. Fairness The three aspects that motivate people to be fair is;
equality, optimisation, and reciprocity. Fairness is the quality of
being just, equitable, and impartial.
2. Misuse of company's times & Resources This particular topic may
not seems to be a very common one, but it is very important, as it
costs a company billions of dollars on a yearly basis. This misuse is
from late arrivals, leaving early, long lunch breaks, inappropriate
sick days etc. This has been observed as a major form of misconduct in
businesses today. One of the greatest ways employees participate in
misuse of company's time and resources is by using the company
computer for personal use.
Fraud There are many different types of fraud, namely;
friendly fraud, return fraud, wardrobing, price arbitrage, returning
Fraud is a major unethical practice within businesses
which should be paid special attention. Consumer fraud is when
consumers attempt to deceive businesses for their very own
This area of business ethics usually deals with the duties of a
company to ensure that products and production processes do not
needlessly cause harm. Since few goods and services can be produced
and consumed with zero risk, determining the ethical course can be
problematic. In some case consumers demand products that harm them,
such as tobacco products. Production may have environmental impacts,
including pollution, habitat destruction and urban sprawl. The
downstream effects of technologies nuclear power, genetically modified
food and mobile phones may not be well understood. While the
precautionary principle may prohibit introducing new technology whose
consequences are not fully understood, that principle would have
prohibited most new technology introduced since the industrial
revolution. Product testing protocols have been attacked for violating
the rights of both humans and animals.With technology
growing there are sources and websites that provide list and
information on companies and business and that are "green" or do not
test on animals. These companies often advertise this and are growing
in popularity among the younger generations.
Private property and Property rights
The etymological root of property is the
Latin 'proprius' which
refers to 'nature', 'quality', 'one's own', 'special characteristic',
'proper', 'intrinsic', 'inherent', 'regular', 'normal', 'genuine',
'thorough, complete, perfect' etc. The word property is value loaded
and associated with the personal qualities of propriety and
respectability, also implies questions relating to ownership. A
'proper' person owns and is true to herself or himself, and is thus
genuine, perfect and pure.
Modern history of property rights
Modern discourse on property emerged by the turn of the 17th century
within theological discussions of that time. For instance, John Locke
justified property rights saying that God had made "the earth, and all
inferior creatures, [in] common to all men".
Jeremy Bentham stated, "property and law are born
together and die together".
One argument for property ownership is that it enhances individual
liberty by extending the line of non-interference by the state or
others around the person. Seen from this perspective, property
right is absolute and property has a special and distinctive character
that precedes its legal protection. Blackstone conceptualized property
as the "sole and despotic dominion which one man claims and exercises
over the external things of the world, in total exclusion of the right
of any other individual in the universe".
Slaves as property
During the seventeenth and eighteenth centuries, slavery spread to
European colonies including America, where colonial legislatures
defined the legal status of slaves as a form of property. During this
time settlers began the centuries-long process of dispossessing the
natives of America of millions of acres of land. Ironically, the
natives lost about 200,000 square miles (520,000 km2) of land in
Louisiana Territory under the leadership of Thomas Jefferson, who
championed property rights.
Combined with theological justification, property was taken to be
essentially natural ordained by God. Property, which later gained
meaning as ownership and appeared natural to Locke, Jefferson and to
many of the 18th and 19th century intellectuals as land, labour or
idea and property right over slaves had the same theological and
essentialized justification It was even
held that the property in slaves was a sacred right. Wiecek
noted, "slavery was more clearly and explicitly established under the
Constitution as it had been under the Articles". Accordingly, US
Supreme Court Chief
Roger B. Taney
Roger B. Taney in his 1857 judgment
stated, "The right of property in a slave is distinctly and expressly
affirmed in the Constitution".
Natural right vs Social construct
Neoliberals hold that private property rights are a non-negotiable
natural right. Davies counters with "property is no
different from other legal categories in that it is simply a
consequence of the significance attached by law to the relationships
between legal persons." Singer claims, "Property is a form of
power, and the distribution of power is a political problem of the
highest order". Rose finds, "'Property' is only an effect, a
construction, of relationships between people, meaning that its
objective character is contestable. Persons and things, are
'constituted' or 'fabricated' by legal and other normative
techniques.". Singer observes, "A private property regime is
not, after all, a Hobbesian state of nature; it requires a working
legal system that can define, allocate, and enforce property
rights." Davis claims that common law theory generally favors the
view that "property is not essentially a 'right to a thing', but
rather a separable bundle of rights subsisting between persons which
may vary according to the context and the object which is at
In common parlance property rights involve a 'bundle of rights'
including occupancy, use and enjoyment, and the right to sell, devise,
give, or lease all or part of these rights.
Custodians of property have obligations as well as rights.
Michelman writes, "A property regime thus depends on a great deal of
cooperation, trustworthiness, and self-restraint among the people who
Menon claims that the autonomous individual, responsible for his/her
own existence is a cultural construct moulded by Western culture
rather than the truth about the human condition. Penner views property
as an "illusion"—a "normative phantasm" without substance.
In the neoliberal literature, property is part of the private side of
a public/private dichotomy and acts a counterweight to state power.
Davies counters that "any space may be subject to plural meanings or
appropriations which do not necessarily come into conflict".
Private property has never been a universal doctrine, although since
the end of the
Cold War is it has become nearly so. Some societies,
e.g., Native American bands, held land, if not all property, in
common. When groups came into conflict, the victor often appropriated
the loser's property. The rights paradigm tended to stabilize the
distribution of property holdings on the presumption that title had
been lawfully acquired.
Property does not exist in isolation, and so property rights too.
Bryan claimed that property rights describe relations among people and
not just relations between people and
things Singer holds that the idea that
owners have no legal obligations to others wrongly supposes that
property rights hardly ever conflict with other legally protected
interests. Singer continues implying that legal realists "did not
take the character and structure of social relations as an important
independent factor in choosing the rules that govern market life".
Ethics of property rights begins with recognizing the vacuous nature
of the notion of property.
Intellectual property and
Intellectual property rights
Intellectual property (IP) encompasses expressions of ideas, thoughts,
codes and information. "
Intellectual property rights" (IPR) treat IP
as a kind of real property, subject to analogous protections, rather
than as a reproducible good or service. Boldrin and Levine argue that
"government does not ordinarily enforce monopolies for producers of
other goods. This is because it is widely recognized that monopoly
creates many social costs. Intellectual monopoly is no different in
this respect. The question we address is whether it also, creates
social benefits commensurate with these social costs."
International standards relating to Intellectual Property Rights are
enforced through Agreement on
Trade Related Aspects of Intellectual
Property Rights (TRIPS). In the US, IP other than copyrights is
regulated by the United States Patent and Trademark Office.
US Constitution included the power to protect intellectual
property, empowering the Federal government "to promote the progress
of science and useful arts, by securing for limited times to authors
and inventors the exclusive right to their respective writings and
discoveries". Boldrin and Levine see no value in such
state-enforced monopolies stating, "we ordinarily think of innovative
monopoly as an oxymoron. Further they comment, 'intellectual
property' "is not like ordinary property at all, but constitutes a
government grant of a costly and dangerous private monopoly over
ideas. We show through theory and example that intellectual monopoly
is not necessary for innovation and as a practical matter is damaging
to growth, prosperity, and liberty" . Steelman defends patent
monopolies, writing, "Consider prescription drugs, for instance. Such
drugs have benefited millions of people, improving or extending their
lives. Patent protection enables drug companies to recoup their
development costs because for a specific period of time they have the
sole right to manufacture and distribute the products they have
invented." The court cases by 39 pharmaceutical companies against
South Africa's 1997 Medicines and Related Substances Control Amendment
Act, which intended to provide affordable HIV medicines has been cited
as a harmful effect of patents.
One attack on IPR is moral rather than utilitarian, claiming that
inventions are mostly a collective, cumulative, path dependent, social
creation and therefore, no one person or firm should be able to
monopolize them even for a limited period. The opposing argument
is that the benefits of innovation arrive sooner when patents
encourage innovators and their investors to increase their
commitments. Roderick Long, a libertarian philosopher, observes,
"Ethically, property rights of any kind have to be justified as
extensions of the right of individuals to control their own lives.
Thus any alleged property rights that conflict with this moral
basis—like the "right" to own slaves—are invalidated. In my
judgment, intellectual property rights also fail to pass this test. To
enforce copyright laws and the like is to prevent people from making
peaceful use of the information they possess. If you have acquired the
information legitimately (say, by buying a book), then on what grounds
can you be prevented from using it, reproducing it, trading it? Is
this not a violation of the freedom of speech and press? It may be
objected that the person who originated the information deserves
ownership rights over it. But information is not a concrete thing an
individual can control; it is a universal, existing in other people's
minds and other people's property, and over these the originator has
no legitimate sovereignty. You cannot own information without owning
other people". Machlup concluded that patents do not have the
intended effect of enhancing innovation. Self-declared anarchist
Proudhon, in his 1847 seminal work noted, "Monopoly is the natural
opposite of competition," and continued, "Competition is the vital
force which animates the collective being: to destroy it, if such a
supposition were possible, would be to kill society"
Mindeli and Pipiya hold that the knowledge economy is an economy of
abundance because it relies on the "infinite potential" of
knowledge and ideas rather than on the limited resources of natural
resources, labor and capital. Allison envisioned an egalitarian
distribution of knowledge. Kinsella claims that IPR create
artificial scarcity and reduce equality. Bouckaert
wrote, "Natural scarcity is that which follows from the relationship
between man and nature. Scarcity is natural when it is possible to
conceive of it before any human, institutional, contractual
arrangement. Artificial scarcity, on the other hand, is the outcome of
such arrangements. Artificial scarcity can hardly serve as a
justification for the legal framework that causes that scarcity. Such
an argument would be completely circular. On the contrary, artificial
scarcity itself needs a justification"  Corporations fund much IP
creation and can acquire IP they do not create, to which Menon
and others object. Andersen claims that IPR has increasingly
become an instrument in eroding public domain.
Ethical and legal issues include: Patent infringement, copyright
infringement, trademark infringement, patent and copyright misuse,
submarine patents, biological patents, patent, copyright and trademark
Employee raiding and monopolizing talent, Bioprospecting,
biopiracy and industrial espionage, digital rights management.
Notable IP copyright cases include Napster,
Eldred v. Ashcroft
Eldred v. Ashcroft and Air
While business ethics emerged as a field in the 1970s, international
business ethics did not emerge until the late 1990s, looking back on
the international developments of that decade. Many new practical
issues arose out of the international context of business. Theoretical
issues such as cultural relativity of ethical values receive more
emphasis in this field. Other, older issues can be grouped here as
well. Issues and subfields include:
The search for universal values as a basis for international
Comparison of business ethical traditions in different countries.
Also, on the basis of their respective GDP and [Corruption rankings].
Comparison of business ethical traditions from various religious
Ethical issues arising out of international business transactions;
e.g., bioprospecting and biopiracy in the pharmaceutical industry; the
fair trade movement; transfer pricing.
Issues such as globalization and cultural imperialism.
Varying global standards—e.g., the use of child labor.
The way in which multinationals take advantage of international
differences, such as outsourcing production (e.g. clothes) and
services (e.g. call centres) to low-wage countries.
The permissibility of international commerce with pariah states.
The success of any business depends on its financial performance.
Financial accounting helps the management to report and also, control
the business performance.
The information regarding the financial performance of the company
plays an important role in enabling people to take right decision
about the company. Therefore, it becomes necessary to understand how
to record based on accounting conventions and concepts ensure
unambling and accurate records.
Foreign countries often use dumping as a competitive threat, selling
products at prices lower than their normal value. This can lead to
problems in domestic markets. It becomes difficult for these markets
to compete with the pricing set by foreign markets. In 2009, the
Trade Commission has been researching anti-dumping laws.
Dumping is often seen as an ethical issue, as larger companies are
taking advantage of other less economically advanced companies.
Ethical issues often arise in business settings, whether through
business transactions or forming new business relationships. An
ethical issue in a business atmosphere may refer to any situation that
requires business associates as individuals, or as a group (for
example, a department or firm) to evaluate the morality of specific
actions, and subsequently make a decision amongst the choices. Some
ethical issues of particular concern in today's evolving business
market include such topics as: honesty, integrity, professional
behaviors, environmental issues, harassment, and fraud to name a few.
It is integral to the success of an organization that ethics issues
such as these be properly addressed and resolved. Businesses should
strive to educate themselves on these issues, and ethical practices in
general. From a 2009 National
Ethics survey, it was found
that types of employee-observed ethical misconduct included abusive
behavior (at a rate of 22 percent), discrimination (at a rate of 14
percent), improper hiring practices (at a rate of 10 percent), and
company resource abuse (at a rate of percent).
The ethical issues associated with honesty are widespread and vary
greatly in business, from the misuse of company time or resources to
lying with malicious intent, engaging in bribery, or creating
conflicts of interest within an organization.
wholly the truthful speech and actions of an individual. Some cultures
and belief systems even consider honesty to be an essential pillar of
life, such as Confucianism and Buddhism (referred to as sacca, part of
the Four Noble Truths). Many employees lie in order to reach goals,
avoid assignments or negative issues; however, sacrificing honesty in
order to gain status or reap rewards poses potential problems for the
overall ethical culture organization, and jeopardizes organizational
goals in the long run. Using company time or resources for personal
use is also, commonly viewed as unethical because it boils down to
stealing from the company. The misue of resources costs companies
billions of dollars each year, averaging about 4.25 hours per week of
stolen time alone, and employees' abuse of Internet services is
another main concern. Bribery, on the other hand, is not only
considered unethical is business practices, but it is also illegal. In
accordance with this, the Foreign Corrupt Practices Act was
established in 1977 to deter international businesses from giving or
receiving unwarranted payments and gifts that were intended to
influence the decisions of executives and political officials.
Although, small payments known as facilitation payments will not be
considered unlawful under the Foreign Corrupt Practices Act if they
are used towards regular public governance activities, such as permits
Political economy and political philosophy have ethical implications,
particularly regarding the distribution of economic benefits.
John Rawls and
Robert Nozick are both notable contributors. For
example, Rawls has been interpreted as offering a critique of offshore
outsourcing on social contract grounds, whereas Nozick's libertarian
philosophy rejects the notion of any positive corporate social
Law and regulation
“Laws” are the written statutes, codes, and opinions of government
organizations by which citizens, businesses, and persons present
within a jurisdiction are expected to govern themselves or face legal
sanction. Sanctions for violating the law can include (a) civil
penalties, such as fines, pecuniary damages, and loss of licenses,
property, rights, or privileges; (b) criminal penalties, such as
fines, probation, imprisonment, or a combination thereof; or (c) both
civil and criminal penalties.
Very often it is held that business is not bound by any ethics other
than abiding by the law.
Milton Friedman is the pioneer of the view.
He held that corporations have the obligation to make a profit within
the framework of the legal system, nothing more. Friedman made it
explicit that the duty of the business leaders is, "to make as much
money as possible while conforming to the basic rules of the society,
both those embodied in the law and those embodied in ethical
Ethics for Friedman is nothing more than abiding by
'customs' and 'laws'. The reduction of ethics to abidance to laws and
customs however have drawn serious criticisms.
Counter to Friedman's logic it is observed[by whom?] that legal
procedures are technocratic, bureaucratic, rigid and obligatory where
as ethical act is conscientious, voluntary choice beyond
Law is retroactive. Crime precedes law.
a crime, to be passed, the crime must have happened. Laws are blind to
the crimes undefined in it. Further, as per law, "conduct is not
criminal unless forbidden by law which gives advance warning that such
conduct is criminal". Also, law presumes the accused is innocent
until proven guilty and that the state must establish the guilt of the
accused beyond reasonable doubt. As per liberal laws followed in most
of the democracies, until the government prosecutor proves the firm
guilty with the limited resources available to her, the accused is
considered to be innocent. Though the liberal premises of law is
necessary to protect individuals from being persecuted by Government,
it is not a sufficient mechanism to make firms morally
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See also: Corporate governance
As part of more comprehensive compliance and ethics programs, many
companies have formulated internal policies pertaining to the ethical
conduct of employees. These policies can be simple exhortations in
broad, highly generalized language (typically called a corporate
ethics statement), or they can be more detailed policies, containing
specific behavioural requirements (typically called corporate ethics
codes). They are generally meant to identify the company's
expectations of workers and to offer guidance on handling some of the
more common ethical problems that might arise in the course of doing
business. It is hoped that having such a policy will lead to greater
ethical awareness, consistency in application, and the avoidance of
An increasing number of companies[who?] also require employees to
attend seminars regarding business conduct, which often include
discussion of the company's policies, specific case studies, and legal
requirements. Some companies even require their employees to sign
agreements stating that they will abide by the company's rules of
Many companies[who?] are assessing the environmental factors that can
lead employees to engage in unethical conduct. A competitive business
environment may call for unethical behaviour. Lying has become
expected in fields such as trading. An example of this are the issues
surrounding the unethical actions of the Salomon Brothers.
Not everyone[who?] supports corporate policies that govern ethical
conduct. Some claim that ethical problems are better dealt with by
depending upon employees to use their own judgment.
Others[who?] believe that corporate ethics policies are primarily
rooted in utilitarian concerns, and that they are mainly to limit the
company's legal liability, or to curry public favour by giving the
appearance of being a good corporate citizen. Ideally, the company
will avoid a lawsuit because its employees will follow the rules.
Should a lawsuit occur, the company can claim that the problem would
not have arisen if the employee had only followed the code properly.
Sometimes there is disconnection between the company's code of ethics
and the company's actual practices[who?]. Thus, whether or not such
conduct is explicitly sanctioned by management, at worst, this makes
the policy duplicitous, and, at best, it is merely a marketing tool.
Jones and Parker write, "Most of what we read under the name business
ethics is either sentimental common sense, or a set of excuses for
being unpleasant." Many manuals are procedural form filling
exercises unconcerned about the real ethical dilemmas. For instance,
US Department of Commerce ethics program treats business ethics as a
set of instructions and procedures to be followed by 'ethics
officers'., some others claim being ethical is just for the sake
of being ethical.
Business ethicists may trivialize the subject,
offering standard answers that do not reflect the situation's
Author of '
Business Ethics,' Richard DeGeorge writes in regard to the
importance of maintaining a corporate code, "Corporate codes have a
certain usefulness and there are several advantages to developing
them. First, the very exercise of doing so in itself is worthwhile,
especially if it forces a large number of people in the firm to think
through, in a fresh way, their mission and the important obligations
they as a group and as individuals have to the firm, to each other, to
their clients and customers, and to society as a whole. Second, once
adopted a code can be used to generate continuing discussion and
possible modification to the code. Third, it could help to inculcate
in new employees at all levels the perspective of responsibility, the
need to think in moral terms about their actions, and the importance
of developing the virtues appropriate to their position."
Following a series of fraud, corruption, and abuse scandals that
affected the United States defense industry in the mid-1980s, the
Defense Industry Initiative (DII) was created to promote ethical
business practices and ethics management in multiple industries.
Subsequent to these scandals, many organizations began appointing
ethics officers (also referred to as "compliance" officers). In 1991,
Ethics & Compliance Officer Association (ECOA)—originally
Ethics Officer Association (EOA)—was founded at the Center for
Bentley University as a professional association
for ethics and compliance officers.
The 1991 passing of the Federal Sentencing Guidelines for
Organizations in 1991 was another factor in many companies appointing
ethics/compliance officers. These guidelines, intended to assist
judges with sentencing, set standards organizations must follow to
obtain a reduction in sentence if they should be convicted of a
Following the high-profile corporate scandals of companies like Enron,
WorldCom and Tyco between 2001 and 2004, and following the passage of
the Sarbanes–Oxley Act, many small and mid-sized companies also
began to appoint ethics officers.
Often reporting to the Chief Executive Officer, ethics officers focus
on uncovering or preventing unethical and illegal actions. This is
accomplished by assessing the ethical implications of the company's
activities, making recommendations on ethical policies, and
disseminating information to employees.
The effectiveness of ethics officers is not clear. The establishment
of an ethics officer position is likely to be insufficient in driving
ethical business practices without a corporate culture that values
ethical behavior. These values and behaviors should be consistently
and systemically supported by those at the top of the
organization. Employees with strong community involvement,
loyalty to employers, superiors or owners, smart work practices, trust
among the team members do inculcate a corporate culture
Many corporate and business strategies now include sustainability. In
addition to the traditional environmental 'green' sustainability
concerns, business ethics practices have expanded to include social
Social sustainability focuses on issues related to
human capital in the business supply chain, such as worker's rights,
working conditions, child labor, and human trafficking.
Incorporation of these considerations is increasing, as consumers and
procurement officials demand documentation of a business' compliance
with national and international initiatives, guidelines, and
standards. Many industries have organizations dedicated to verifying
ethical delivery of products from start to finish, such as the
Kimberly Process, which aims to stop the flow of conflict diamonds
into international markets, or the Fair Wear Foundation, dedicated to
sustainability and fairness in the garment industry.
As an academic discipline, business ethics emerged in the 1970s. Since
no academic business ethics journals or conferences existed,
researchers published in general management journals, and attended
general conferences. Over time, specialized peer-reviewed journals
appeared, and more researchers entered the field. Corporate scandals
in the earlier 2000s increased the field's popularity. As of 2009,
sixteen academic journals devoted to various business ethics issues
existed, with Journal of
considered the leaders.
Business Development Institute is a global
non-profit organization that represents 217 nations and all 50 United
States. It offers a Charter in
Business Development (CBD) that focuses
on ethical business practices and standards. The Charter is directed
by Harvard, MIT, and
Fulbright Scholars, and it includes
graduate-level coursework in economics, politics, marketing,
management, technology, and legal aspects of business development as
it pertains to business ethics. IBDI also oversees the International
Business Development Institute of Asia which provides individuals
living in 20 Asian nations the opportunity to earn the Charter.
Sharia law, followed by many Muslims, banking specifically
prohibits charging interest on loans. Traditional Confucian
thought discourages profit-seeking.
Christianity offers the
Golden Rule command, "Therefore all things whatsoever ye would that
men should do to you, do ye even so to them: for this is the law and
the prophets." According to the article "
Theory of the real
economy", there is a more narrow point of view from the Christianity
faith towards the relationship between ethics and religious
traditions. This article stresses about how capable is
establishing reliable boundaries for financial institutions. One
criticism comes from Pope Benedict by describing the "damaging effects
of the real economy of badly managed and largely speculative financial
dealing." It is mentioned that
Christianity has the potential to
transform the nature of finance and investment but only if theologians
and ethicist provide more evidence of what is real in the economic
Business ethics receives an extensive treatment in Jewish
thought and Rabbinic literature, both from an ethical (Mussar) and a
legal (Halakha) perspective; see article
Jewish business ethics for
further discussion. According to the article "Indian
Business Ethics: A Review", by Chandrani Chattopadyay, Hindus follow
Ethics and unethical business practices are
Business men are supposed to maintain
steady-mindedness, self-purification, non-violence, concentration,
charity and control over senses.Books like Bhagavat Gita  and
Arthashastra  contribute a lot towards conduct of ethical
Business ethics is part of the philosophy of economics, the branch of
philosophy that deals with the philosophical, political, and ethical
underpinnings of business and economics.
Business ethics operates
on the premise, for example, that the ethical operation of a private
business is possible—those who dispute that premise, such as
libertarian socialists, (who contend that "business ethics" is an
oxymoron) do so by definition outside of the domain of business ethics
The philosophy of economics also deals with questions such as what, if
any, are the social responsibilities of a business; business
management theory; theories of individualism vs. collectivism; free
will among participants in the marketplace; the role of self interest;
invisible hand theories; the requirements of social justice; and
natural rights, especially property rights, in relation to the
business enterprise.
Business ethics is also related to political economy, which is
economic analysis from political and historical perspectives.
Political economy deals with the distributive consequences of economic
Business and Professional
Corporate social entrepreneurship
Corporate social responsibility
Ethical implications in contracts
Penny stock scam
Philosophy and economics
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Business Ethics: A Stakeholder and Issues
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Ethics of care
Good and evil
Suffering or Pain
Augustine of Hippo
Georg W. F. Hegel
John Stuart Mill
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Robert Merrihew Adams
Ethics of eating meat
Ethics of technology
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