Every business has an ethical duty to each of its associates, owners, employees, customers, suppliers and the community. Each of these affects organization and is affected by it. Each is a stakeholder in the enterprise with certain expectations as to what the enterprise should do and how it should do it.
Business ethics is applied ethics. It is the application of our understanding of what is good and right to that assortment of institutions, technologies, transactions, activities and pursuits that we call business. Ethical behavior is the best long term business strategy for company, however this does not mean that occasions may never arise when doing what is ethical will prove costly to a company nor does it mean that ethical behavior is always rewarded or that unethical behavior is always punished. On the contrary, unethical behavior sometimes pays off and the good sometimes lose. Strategy means merely that over the long run and for most of the part, ethical behavior can give a company significant competitive advantages over companies that are not ethical.
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CONCEPT OF BUSINESS ETHICS
Business ethics must begin by providing a framework of basic principles for understanding what is meant by the terms good and right, only then one can proceed to discuss the implications of ethics to the business world.
Management should hold and develop a deeper knowledge of the nature of ethical principles and concepts and an understanding of how these apply to ethical problems encountered in business. This type of knowledge and understanding should help managers more clearly see their way through the ethical uncertainties that confront them in their business lives.
Ethics is the discipline that examines one’s moral standards or the moral standards of the society. It asks how these standards apply to our lives and whether these standards are reasonable or unreasonable — that is whether they are supported by good reasons or poor ones.
Ethics is however not the only way to study morality. The social sciences — such as sociology and psychology also study morality but do so in a way that is quite different from the approach to morality that is characteristics of ethics. It is a descriptive study which tries to describe or explain the world without reaching any conclusions about whether the world is as it should be and does not try to reach any conclusions about what things are truly good or bad or right or wrong. Ethics in contrast, is a study of moral standards whose explicit purpose is to determine as far as possible whether a given moral standard is more or less correct.
In business ethics, it is a specialized study of moral right and wrong. It concentrates on moral standards as they apply to business policies, institutions and behavior and how these apply to the systems and organizations through which modern societies produce and distribute goods and services and to the people who work within these organizations. Business ethics therefore includes not only the analysis of moral norms and moral values but also attempt to apply the conclusions of this analysis to that assortment of institutions, technologies, transactions, activities and pursuits that we call business.
To cope up with their complex coordination and control problems, the management of large corporations adopts formal bureaucratic systems of rules that link together the activities of the individual members of the organization so as to achieve certain outcomes or objectives. Business enterprises are the primary economic institutions through which people in modern societies carry on the tasks of producing and distributing goods and services.
SCOPE OF ETHICS
The issues that business ethics covers encompass a wide variety of topics. Business ethics investigates three kinds of issues — systemic, corporate and individual. Systemic issues in business ethics are ethical questions raised about the economic, political, legal and other social systems within which business operates. These include questions about the morality of the laws, regulations, industrial structures and social practices within which business operates.
Tobacco in any form is deadly—whether one is chewing or smoking. Results of World Health Organization studies are an eye opener of how it is affecting the health of the people throughout the world. Tobacco causes mouth diseases, cancer and renal and respiratory diseases is rising. It has become mandatory for cigarette manufactures in many countries to print the graphic health warning on each packet.
Corporate issues in business ethics are ethical questions raised about a particular company. These include questions about the morality of the activities, policies, practices or organizational structure of an individual company taken as a whole. Here questions about morality would be a company’s decision to invest millions of dollars on a project that the company knew would probably not generate any profits.
Finally, individuals’ issues in business ethics are ethical questions raised about a particular individual or particular individuals within a company. These include questions about the morality of the decisions, actions or character of an individual. The question whether it is moral for a leader of an organization to allow its researchers to develop a drug that would probably not generate any profits.
This categorization will be helpful for our understanding, often we come across decisions that involve a large number of extremely complicated interrelated kinds of issues that can cause confusion unless the different kinds of issues are first carefully sorted out and distinguished from each other. Corporate organizations pose major problems for anyone who tries to apply moral standards to business activities. It makes no sense to apply moral terms to organizations as a whole but only to the individuals who make up the organization. Organizations are composed of related human individuals that we conventionally agree to treat as a single unit and they act only when we conventionally agree to treat the actions of these individuals as the actions of that unit.
It makes perfectly good sense to say that a corporate organization has moral duties and that it is morally responsible for its acts. However organizations have moral duties and are morally responsible in a secondary sense. A corporation has a moral duty to do something only if some of its members have a moral duty to make sure it is done and a corporation is morally responsible for something only if some of its members are morally responsible for what happened. Individuals are the primary carriers of moral duties and moral responsibilities. Corporate policies, corporate culture, corporate norms and corporate design can and do have an enormous influence on the choices, beliefs and behaviors of corporate employees.
STAKEHOLDERS AND ETHICS
A company’s duty to employees arises out of respect for the worth and dignity of individuals who devote their energies to the business and who depend on the business for their economic well being. Principled strategy making requires that employee related decisions be made equitably and compassionately with concern for due process and for the impact that strategic change has on employee’s lives. At best the chosen strategy should promote employee interests and concerns such as compensation, career opportunities, job security and overall working conditions. At worst the chosen strategy should not disadvantage employees. Even in crisis situations, businesses have an ethical duty to minimize whatever hardships have to be imposed in the form of workforce reductions, plant closings, job transfers, relocations, retraining and loss of income.
The duty to the customer arises out of expectations that attend the purchase of a good or services. However, the questions which still abound are, should a seller voluntarily inform consumers that its products contain ingredients that though officially approved for use are suspected of having potentially harmful effect? Is it ethical for cigarette manufacturers to advertise at all? Is it ethical for manufacturers to stonewall efforts to recall products they suspect have faulty parts or defective designs?
A company’s ethical duty to suppliers arises out of the market relationship that exists between them. They are both partners and adversaries. They are partners in the sense that the quality of suppliers’ parts affects the quality of a firm’s own product and in the sense that their businesses are connected. They are adversaries in the sense that the supplier wants the highest price and profit it can get while the buyer wants a cheaper price better quality and speeder service.
A company confronts several ethical issues in its supplier relationship. The questions that arise are — is it ethical to purchase goods from foreign suppliers who employ child labor, pay substandard wages? Is it ethical to threaten to cease doing business with a supplier unless supplier agrees not to do business with key competitors? Is it ethical to reveal one suppliers’ price quote to a rival supplier?
Imperial Tobacco Limited is based in Bristol, UK and in the line of manufacture of different brands of cigarettes and tobacco. It is the 4th largest tobacco company in the world and has 30 factories around the world, employing 14,500 people. Its turnover during 2006 was Pounds 11billion
A company’s ethical duty to the community at large stems from its status as a member of the community and as an institution of society. Communities and society are reasonable in expecting businesses to be good citizens —to pay their fair share of taxes for fire and police protection, waste removal, streets and highways and so on, and to exercise care in the impact their activities have on their environment, on society, and on the communities in which they operate. Is the company reasonable in advertising tobacco products when there is pressure from nations to reduce consumption of tobacco? Also read utilitarianism and business ethics essay
The questions that arise are — for example, whether it is ethical for Imperial Tobacco company to advertise its products on TV, at slots when these acts are likely to he seen by underage viewers or not? A company’s community citizenship is ultimately demonstrated by whether it refrains from acting in a manner contrary to the well being of society and by the degree to which it supports community activities, encourages employees to participate in community activities, handles the health and safety aspects of its operations, accepts responsibility for overcoming environmental pollution, relates to regulatory bodies and employee unions and exhibits high ethical standards.
BUSINESS AND ETHICS
One way to argue that ethics should be brought into business is simply by pointing out that, ethics should govern all voluntary human activities and because business is a voluntary human activity. The other way of looking at it is that business is a cooperative activity whose very existence requires ethical behavior. Any individual business will collapse if all of its managers, employees and customers come to think that it is morally permissible to steal from, lie to, or break their agreements with the company. Because no business can exist entirely without ethics, the pursuit of business requires at least a minimal adherence to ethics on the part of those involved in business,
Second, all businesses require a stable society to carry on their business dealings and the stability of any society requires that its members adhere to some minimal standards of ethics. Another persuasive way to argue that ethics should be brought into business is by showing that ethical considerations are consistent with business pursuits in particular the pursuits of profit. Imperial Tobacco Limited is renowned for its long standing ethical culture and yet it is one of the most spectacularly profitable companies of all time.
The Changing Business Paradigm and Ethical Dilemmas
Most of the big corporate houses like Imperial Tobacco operate globally and maintain manufacturing, marketing, service or administrative operations in many different host countries. With a worldwide presence, these corporations draw capital, raw materials and human labor from wherever in the world they are cheap, skilled and available, and assemble and market their products in whatever nations offer manufacturing advantages and open markets. The fact that these corporations operate in more than one country produces ethical dilemmas for their managers than the managers of firms limited to a single country.
The reason to this is that the corporations have operations in more than one country and the ability to shift their operations out of any country that becomes inhospitable and relocate in another country that offers it cheaper labor, less stringent laws or more favorable treatment. This ability to shift the operations sometimes enables the multinationals to escape the social controls that a single nation might attempt to impose on the multinational and can allow the corporation to play one country against another.
Environmental laws for example which can ensure that domestic companies operate in responsible manner that a country deems right for its people, may not be effective constraints on a corporation that can simply move or threaten to move to a country without such laws. The managers therefore are confronted with the dilemma of choosing between the economic needs and interests of their business, on the one hand and the local needs and interests of their host country on the other hand.
Another set of dilemmas is created since corporations operate plants in several countries, it can sometimes transfer raw materials, goods and capital among its plants in different countries at terms that enable it to escape taxes and fiscal obligations that companies limited to a single nation must bear. Another group of dilemmas is faced by multinationals — because they operate in several countries they often have the opportunity to transfer a new technology or set of products from a developed country into nations that are less developed. The multinational wants to carry out the transfer because it perceives an opportunity for profit and the host country wants and allows the transfer because it perceives these technologies and products as key to its own development. The transfer of technologies and products into a developing country can create risks when the country is not ready to assimilate them.
ETHICS AND BUSINESS: OBJECTIONS
People taking objections to bringing ethics into business argue that persons involved in business should single mindedly pursue the financial interests of their firm and not side track their energies or their firms resources into doing good works.
Some argue that in perfectly competitive free markets the pursuit of profit will by itself ensure that the members of society are served in the most socially beneficial ways. Often assumptions behind this argument like perfectly competitive market situation do not exist. Another argument is that business managers should single-mindedly pursue the interests of their firms and should ignore ethical considerations.
This argument finds its basis that a manager engaged in certain illegal or unethical conduct be excused because he did it not for himself but to protect the interests of his company. The assumptions behind this argument can be questioned on several grounds.
The third kind of objection is that to be ethical it is enough for business people merely to obey the law. Business ethics is essentially obeying law. It is wrong however to see lax and ethics as identical. It is true that some laws require behavior that is same as the behavior required by our moral standards. Law and morality do not always coincide. Some laws have nothing to do with morality because they do not involve serious matters. These include dress codes, parking laws and other laws covering similar matters.
Beyond these arguments for and against the role of ethics in business, discussions happen whether ethical companies are more profitable than unethical ones. There are many different ways of defining ethical, many different ways of measuring profits and the findings of different studies remain inconclusive. By and large ethics do not detract from profit and seems to contribute to profits.
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