Business ethics
Encyclopedia
Business 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.
Business ethics has both normative
and descriptive dimensions. 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, today most major corporations promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters.
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. Ethics implicitly 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.
, 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 along supported by professional societies, centers and journals of business ethics. The Society for Business Ethics was started in 1980. European business schools adopted business ethics after 1987 commencing with the European Business Ethics Network (EBEN). In 1982 the first single-authored books in the field appeared.
Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance themselves from the business scandals of the day, such as the savings and loan crisis
. The idea of business ethics caught the attention of academics, media and business firms by the end of the Cold War
. However, legitimate 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.
, one of whose aims is to determine the fundamental purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility. Corporate entities are legally considered as persons in USA and in most nations. The 'corporate persons' are legally entitled to the rights and liabilities due to citizens as persons.
Economist 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 30-80%. 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. However, 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. 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.
, dividend policy
, the evaluation of alternative investment projects, options
, futures
, swaps
, and other derivatives
, portfolio
diversification
and many others. It is often mistaken 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.
said, "the end and purpose of the polis is the good life". Adam Smith
characterized the good life in terms of material goods and intellectual and moral excellences of character. Smith in his 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." 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. 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 panacea
.
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. Business is 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 realism.
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 shop
s and forex scam
s are criminal manipulations of financial markets. Cases include accounting scandals
, Enron
, WorldCom and Satyam
.
occupies the sphere of activity of recruitment
selection, orientation, performance appraisal
, training and development
, industrial relations and health and safety
issues. 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 labor.
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 negotiable.
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
.
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.
Larger economic issues such as immigration
, trade policy, globalization
and trade union
ism affect workplaces and have an ethical dimension, but are often beyond the purview of individual companies.
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.
that emphasizes philosophy, culture and consensus. None ensure ethical behavior. Some studies claim that sustainable success requires a humanely treated and satisfied workforce.
, deontology, consequentialism
, pragmatism
and relativism.
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 organism
s 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 greenwash
ing, bait and switch
, shill
ing, viral marketing
, spam (electronic)
, pyramid scheme
s and multi-level marketing
. Advertising has raised objections about attack ad
s, subliminal messages, sex in advertising
and marketing in schools
.
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 phone
s 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
'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.
justified property rights saying that God had made "the earth, and all inferior creatures, [in] common to all men".
In 1802 Utilitarian 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".
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 200000 square miles (517,997.6 km²) of land in the 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 Justice Roger B. Taney
in his 1857 judgment stated, "The right of property in a slave is distinctly and expressly affirmed in the Constitution".
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 enjoy it."
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.
(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 copyright
s is regulated by the United States Patent and Trademark Office
.
The 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 patent
s, gene patents, patent
, copyright
and trademark troll
ing, Employee raiding
and monopolizing talent, Bioprospecting, biopiracy
and industrial espionage
, digital rights management
.
Notable IP copyright cases include Napster, Eldred v. Ashcroft
and Air Pirates
.
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 International 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.
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 obligation.
Counter to Friedman's logic it is observed that legal procedures are technocratic, bureaucratic, rigid and obligatory where as ethical act is conscientious, voluntary choice beyond normativity. Law is retroactive. Crime precedes law. Law against 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 accountable.
s, 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 ethical disasters.
An increasing number of companies 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 conduct.
Many companies 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 Saloman Brothers.
Not everyone 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 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. 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 complexity.
Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991, which set standards that organizations (large or small, commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Although intended to assist judges with sentencing, the influence in helping to establish best practices has been far-reaching.
In the wake of numerous corporate scandals between 2001–04 (affecting large corporations like Enron
, WorldCom and Tyco
), even small and medium-sized companies have begun to appoint ethics officers. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities, making recommendations regarding the company's ethical policies, and disseminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. This trend is partly due to the Sarbanes-Oxley Act
in the United States, which was enacted in reaction to the above scandals. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions.
The effectiveness of ethics officers is not clear. If the appointment is made primarily as a reaction to legislative requirements, one might expect little impact, at least over the short term. In part, this is because ethical business practices result from a corporate culture that consistently places value on ethical behaviour, a culture and climate that usually emanates from the top of the organization. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behaviour: a more systemic programme with consistent support from general management will be necessary.
The foundation for ethical behaviour goes well beyond corporate culture and the policies of any given company, for it also depends greatly upon an individual's early moral training, the other institutions that affect an individual, the competitive business environment the company is in and, indeed, society as a whole.
and Business Ethics Quarterly
considered the leaders.
The International 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.
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 Christianity of 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 life..
ethics is part of the philosophy of business
, 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 proper.
The philosophy of business 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 actions. It asks who gains and who loses from economic activity, and is the resultant distribution
fair or just, which are central ethical issues.
Applied ethics
Applied ethics is, in the words of Brenda Almond, co-founder of the Society for Applied Philosophy, "the philosophical examination, from a moral standpoint, of particular issues in private and public life that are matters of moral judgment"...
or professional ethics
Professional ethics
Professional ethics encompass the personal and corporate standards of behaviour expected of professionals.- Professional ethics :Professional people and those working in acknowledged professions exercise specialist knowledge and skill...
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.
Business ethics has both normative
Norm (philosophy)
Norms are concepts of practical import, oriented to effecting an action, rather than conceptual abstractions that describe, explain, and express. Normative sentences imply “ought-to” types of statements and assertions, in distinction to sentences that provide “is” types of statements and assertions...
and descriptive dimensions. 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, today most major corporations promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters.
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. Ethics implicitly 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.
History
Business ethical norms reflect the norms of each historical period. As time passes norms evolve, causing accepted behaviors to become objectionable. Business ethics and the resulting behavior evolved as well. Business was involved in slaverySlavery
Slavery is a system under which people are treated as property to be bought and sold, and are forced to work. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to demand compensation...
, colonialism
Colonialism
Colonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...
, and the cold war
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
.
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 along supported by professional societies, centers and journals of business ethics. The Society for Business Ethics was started in 1980. European business schools adopted business ethics after 1987 commencing with the European Business Ethics Network (EBEN). In 1982 the first single-authored books in the field appeared.
Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance themselves from the business scandals of the day, such as the savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
. The idea of business ethics caught the attention of academics, media and business firms by the end of the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
. However, legitimate 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.
Overview
Business ethics reflects the philosophy of businessPhilosophy of business
The Development of management theory and philosophy considers the fundamental principles that underlie the formation and operation of a business enterprise; the nature and purpose of a business, for example, is it primarily property or a social institution; its role in society; and the moral...
, one of whose aims is to determine the fundamental purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility. Corporate entities are legally considered as persons in USA and in most nations. The 'corporate persons' are legally entitled to the rights and liabilities due to citizens as persons.
Economist 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 30-80%. Duska views Friedman's argument as consequentialist rather than pragmatic
Pragmatic
Pragmatic may refer to:*Of or related to pragmatism, a philosophical movement*Of or related to pragmaticism, Charles Sanders Peirce's post-1905 branch of philosophy*Of or related to pragmatics, the area of linguistics-See also:...
, implying that unrestrained corporate freedom would benefit the most in long term. Similarly author business consultant Peter Drucker
Peter Drucker
Peter Ferdinand Drucker was an influential writer, management consultant, and self-described “social ecologist.”-Introduction:...
observed, "There is neither a separate ethics of business nor is one needed", implying that standards of personal ethics cover all business situations. However, Peter Drucker in another instance observed that the ultimate responsibility of company directors is not to harm—primum non nocere
Primum non nocere
is a Latin phrase that means "First, do no harm". The phrase is sometimes recorded as .Nonmaleficence, which derives from the maxim, is one of the principal precepts of medical ethics that all medical students are taught in medical school and is a fundamental principle for emergency medical...
.
Another view of business is that it must exhibit corporate social responsibility
Corporate social responsibility
Corporate social responsibility is a form of corporate self-regulation integrated into a business model...
(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. 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
Stakeholder concept
A corporate stakeholder is a party that can affect or be affected by the actions of thebusiness as a whole. The stakeholder concept was first used in a 1963 internal memorandum at the Stanford Research Institute. It defined stakeholders as "those groups without whose support the organization...
, its fiduciary responsibility to its shareholders. Issues concerning relations between different companies include hostile take-overs
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
and industrial espionage
Industrial espionage
Industrial espionage, economic espionage or corporate espionage is a form of espionage conducted for commercial purposes instead of purely national security purposes...
. Related issues include corporate governance
Corporate governance
Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
;corporate social entrepreneurship
Corporate Social Entrepreneurship
A corporate social entrepreneur is defined as "an employee of the firm who operates in a socially entrepreneurial manner; identifying opportunities for and/ or championing socially responsible activity; in addition to helping the firm achieve its business targets. The CSE operates regardless of...
; political contributions
Campaign finance reform
Campaign finance reform is the common term for the political effort in the United States to change the involvement of money in politics, primarily in political campaigns....
; legal issues such as the ethical debate over introducing a crime of corporate manslaughter
Corporate manslaughter
Corporate manslaughter is a criminal offence in English law, being an act of homicide committed by a company or organisation. In general, in English criminal law, a juristic person is in the same position as a natural person, and may be convicted for committing many offences...
; and the marketing of corporations' ethics policies.
Finance
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 equityEquity (finance)
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
, dividend policy
Dividend policy
Dividend policy is concerned with taking a decision regarding paying cash dividend in the present or paying an increased dividend at a later stage. The firm could also pay in the form of stock dividends which unlike cash dividends do not provide liquidity to the investors, however, it ensures...
, the evaluation of alternative investment projects, options
Options strategies
Options strategies can favor movements in the underlying that are bullish, bearish or neutral. In the case of neutral strategies, they can be further classified into those that are bullish on volatility and those that are bearish on volatility...
, futures
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...
, swaps
Swap (finance)
In finance, a swap is a derivative in which counterparties exchange certain benefits of one party's financial instrument for those of the other party's financial instrument. The benefits in question depend on the type of financial instruments involved...
, and other derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
, portfolio
Portfolio (finance)
Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.-Definition:The term portfolio refers to any collection of financial assets such as stocks, bonds and cash...
diversification
Diversification (finance)
In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of...
and many others. It is often mistaken to be a discipline free from ethical burdens. The 2008 financial crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
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.
Finance paradigm
AristotleAristotle
Aristotle was a Greek philosopher and polymath, a student of Plato and teacher of Alexander the Great. His writings cover many subjects, including physics, metaphysics, poetry, theater, music, logic, rhetoric, linguistics, politics, government, ethics, biology, and zoology...
said, "the end and purpose of the polis is the good life". Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
characterized the good life in terms of material goods and intellectual and moral excellences of character. Smith in his The Wealth of Nations
The Wealth of Nations
An Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith...
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." However, a section of economists influenced by the ideology of neoliberalism
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
, interpreted the objective of economics to be maximization of economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
through accelerated consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
and production
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
of goods and services
Goods and services
In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility. It is often used when referring to a Goods and Services Tax....
. Neoliberal ideology promoted finance from its position as a component of economics to its core. 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
Pragmatism
Pragmatism is a philosophical tradition centered on the linking of practice and theory. It describes a process where theory is extracted from practice, and applied back to practice to form what is called intelligent practice...
, 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 panacea
Panacea
In Greek mythology, Panacea was a goddess of healing. She was the daughter of Asclepius and Epione. Panacea and her five sisters each performed a facet of Apollo's art: Panacea was the goddess of cures, Iaso was the goddess of recuperation, Hygieia was the goddess of disease prevention, Aceso was...
.
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. Business is 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
Signalling (economics)
In economics, more precisely in contract theory, signalling is the idea that one party credibly conveys some information about itself to another party...
and agency theory
Principal-agent problem
In political science and economics, the principal–agent problem or agency dilemma treats the difficulties that arise under conditions of incomplete and asymmetric information when a principal hires an agent, such as the problem of potential moral hazard and conflict of interest, in as much as the...
extended the paradigm to greater realism.
Other issues
Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax payments, internal audit, external audit and executive compensationExecutive compensation
Executive pay is financial compensation received by an officer of a firm, often as a mixture of salary, bonuses, shares of and/or call options on the company stock, etc. Over the past three decades, executive pay has risen dramatically beyond the rising levels of an average worker's wage...
also fall under the umbrella of finance and accounting. Particular corporate ethical/legal abuses include: creative accounting
Creative accounting
Creative accounting and earnings management are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules...
, earnings management, misleading financial analysis insider trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
, securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, bribery/kickbacks and facilitation payments. Outside of corporations, bucket shop
Bucket shop (stock market)
As defined by the U.S. Supreme Court a Bucket shop is "[a]n establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain,...
s and forex scam
Forex scam
Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S...
s are criminal manipulations of financial markets. Cases include accounting scandals
Accounting scandals
Accounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations...
, Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, WorldCom and Satyam
Satyam scandal
The Satyam Computer Services scandal was publicly announced on 7 January 2009, when Chairman Ramalinga Raju confessed that Satyam's accounts had been falsified.- Aftermath :...
.
Human resource management
Human resource managementHuman resource management
Human Resource Management is the management of an organization's employees. While human resource management is sometimes referred to as a "soft" management skill, effective practice within an organization requires a strategic focus to ensure that people resources can facilitate the achievement of...
occupies the sphere of activity of recruitment
Recruitment
Recruitment refers to the process of attracting, screening, and selecting qualified people for a job. For some components of the recruitment process, mid- and large-size organizations often retain professional recruiters or outsource some of the process to recruitment agencies.The recruitment...
selection, orientation, performance appraisal
Performance appraisal
A performance appraisal, employee appraisal, performance review, or development discussion is a method by which the job performance of an employee is evaluated typically by the corresponding manager or supervisor. A performance appraisal is a part of guiding and managing career development...
, training and development
Training and development
In the field of human resource management, training and development is the field which is concerned with organizational activity aimed at bettering the performance of individuals and groups in organizational settings...
, industrial relations and health and safety
Occupational safety and health
Occupational safety and health is a cross-disciplinary area concerned with protecting the safety, health and welfare of people engaged in work or employment. The goal of all occupational safety and health programs is to foster a safe work environment...
issues. 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 labor.
Issues including employment itself
At-will employment
At-will employment is a doctrine of American law that defines anemployment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship and that the employer does not belong to a...
, privacy
Workplace surveillance
Businesses use workplace surveillance as a way of monitoring the activities of their employees. Today's businesses often use information technology in their operations and communications. Business leaders have concerns related to employee misuse of available technologies. Technology appropriate use...
, compensation in accord with comparable worth, collective bargaining
Collective bargaining
Collective bargaining is a process of negotiations between employers and the representatives of a unit of employees aimed at reaching agreements that regulate working conditions...
(and/or its opposite) can be seen either as inalienable rights or as negotiable.
Discrimination
Discrimination
Discrimination is the prejudicial treatment of an individual based on their membership in a certain group or category. It involves the actual behaviors towards groups such as excluding or restricting members of one group from opportunities that are available to another group. The term began to be...
by age (preferring the young
Ageism
Ageism, also called age discrimination is stereotyping of and discrimination against individuals or groups because of their age. It is a set of beliefs, attitudes, norms, and values used to justify age based prejudice, discrimination, and subordination...
or the old
Seniority
Seniority is the concept of a person or group of people being in charge or in command of another person or group. This control is often granted to the senior person due to experience or length of service in a given position, but it is not uncommon for a senior person to have less experience or...
), gender/sexual harassment
Sexual harassment
Sexual harassment, is intimidation, bullying or coercion of a sexual nature, or the unwelcome or inappropriate promise of rewards in exchange for sexual favors. In some contexts or circumstances, sexual harassment is illegal. It includes a range of behavior from seemingly mild transgressions and...
, race, religion
Religious discrimination
Religious discrimination is valuing or treating a person or group differently because of what they do or do not believe.A concept like that of 'religious discrimination' is necessary to take into account ambiguities of the term religious persecution. The infamous cases in which people have been...
, disability
Disability
A disability may be physical, cognitive, mental, sensory, emotional, developmental or some combination of these.Many people would rather be referred to as a person with a disability instead of handicapped...
, weight and attractiveness. A common approach to remedying discrimination is affirmative action
Affirmative action
Affirmative action refers to policies that take factors including "race, color, religion, gender, sexual orientation or national origin" into consideration in order to benefit an underrepresented group, usually as a means to counter the effects of a history of discrimination.-Origins:The term...
.
Potential employees have ethical obligations to employers, involving intellectual property protection and whistle-blowing.
Employers must consider workplace safety
Occupational safety and health
Occupational safety and health is a cross-disciplinary area concerned with protecting the safety, health and welfare of people engaged in work or employment. The goal of all occupational safety and health programs is to foster a safe work environment...
, which may involve modifying the workplace, or providing appropriate training or hazard disclosure.
Larger economic issues such as immigration
Immigration
Immigration is the act of foreigners passing or coming into a country for the purpose of permanent residence...
, trade policy, globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
and trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
ism affect workplaces and have an ethical dimension, but are often beyond the purview of individual companies.
Trade unions
Unions for example, may push employers to establish due processDue process
Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it...
for workers, but may also cost jobs by demanding unsustainable compensation and work rules.
Unionized workplaces may confront union busting
Union busting
Union busting is a wide range of activities undertaken by employers, their proxies, and governments, which attempt to prevent the formation or expansion of trade unions...
and strike breaking and face the ethical implications of work rules that advantage some workers over others.
Management strategy
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 ZTheory Z
Theory Z is a name applied to three distinctly different psychological theories. One was developed by Abraham H. Maslow in his paper Theory Z and the other is Dr. William Ouchi's so-called "Japanese Management" style popularized during the Asian economic boom of the 1980s. The third was developed...
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 1990s. Marketing ethics was approached from ethical perspectives of virtue or virtue ethicsVirtue ethics
Virtue ethics describes the character of a moral agent as a driving force for ethical behavior, rather than rules , consequentialism , or social context .The difference between these four approaches to morality tends to lie more in the way moral dilemmas are...
, deontology, consequentialism
Consequentialism
Consequentialism is the class of normative ethical theories holding that the consequences of one's conduct are the ultimate basis for any judgment about the rightness of that conduct...
, pragmatism
Pragmatic ethics
Pragmatic ethics is a theory of normative philosophical ethics. Ethical pragmatists, such as John Dewey, believe that societies have progressed morally in much the way they have attained progress in science...
and relativism.
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
Mandatory labelling
Mandatory labelling or labeling is the requirement of consumer products to state their ingredients or components....
such as genetically modified organism
Genetically modified organism
A genetically modified organism or genetically engineered organism is an organism whose genetic material has been altered using genetic engineering techniques. These techniques, generally known as recombinant DNA technology, use DNA molecules from different sources, which are combined into one...
s possible health risks, financial risks, security risks, etc., respect for consumer privacy and autonomy, advertising
Advertising
Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
truthfulness and fairness in pricing
Pricing
Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
& 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
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
and legal actions including price discrimination
Price discrimination
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider...
and price skimming
Price skimming
Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. It is a temporal version of price discrimination/yield management...
. Certain promotional activities have drawn fire, including greenwash
Greenwash
Greenwashing , or "green sheen", is a form of spin in which green PR or green marketing is deceptively used to promote the perception that a company's policies or products are environmentally friendly.-Usage:...
ing, bait and switch
Bait and switch
Bait-and-switch is a form of fraud, most commonly used in retail sales but also applicable to other contexts. First, customers are "baited" by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are "switched" to a...
, shill
Shill
A shill, plant or stooge is a person who helps a person or organization without disclosing that he or she has a close relationship with that person or organization...
ing, viral marketing
Viral marketing
Viral marketing, viral advertising, or marketing buzz are buzzwords referring to marketing techniques that use pre-existing social networks to produce increases in brand awareness or to achieve other marketing objectives through self-replicating viral processes, analogous to the spread of viruses...
, spam (electronic)
Spam (electronic)
Spam is the use of electronic messaging systems to send unsolicited bulk messages indiscriminately...
, pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
s and multi-level marketing
Multi-level marketing
Multi-level marketing is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation...
. Advertising has raised objections about attack ad
Attack ad
In political campaigns, an attack ad is an advertisement whose message is meant as a personal attack against another candidate or political party...
s, subliminal messages, sex in advertising
Sex in advertising
Sex in advertising or sex sells is the use of sexual or erotic imagery in advertising to draw interest to a particular product, for purpose of sale. A feature of sex in advertising is that the imagery used, such as that of a pretty woman, typically has no connection to the product being advertised...
and marketing in schools
Marketing in schools
Marketing in schools is a widespread phenomenon in which schools sign contracts allowing certain businesses to conduct marketing activities in school facilities — primarily advertising...
.
Production
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 tobaccoTobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
products. Production may have environmental impacts, including pollution
Pollution
Pollution is the introduction of contaminants into a natural environment that causes instability, disorder, harm or discomfort to the ecosystem i.e. physical systems or living organisms. Pollution can take the form of chemical substances or energy, such as noise, heat or light...
, habitat destruction
Habitat destruction
Habitat destruction is the process in which natural habitat is rendered functionally unable to support the species present. In this process, the organisms that previously used the site are displaced or destroyed, reducing biodiversity. Habitat destruction by human activity mainly for the purpose of...
and urban sprawl
Urban sprawl
Urban sprawl, also known as suburban sprawl, is a multifaceted concept, which includes the spreading outwards of a city and its suburbs to its outskirts to low-density and auto-dependent development on rural land, high segregation of uses Urban sprawl, also known as suburban sprawl, is a...
. The downstream effects of technologies nuclear power
Nuclear power
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...
, genetically modified food
Genetically modified food
Genetically modified foods are foods derived from genetically modified organisms . Genetically modified organisms have had specific changes introduced into their DNA by genetic engineering techniques...
and mobile phone
Mobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...
s may not be well understood. While the precautionary principle
Precautionary principle
The precautionary principle or precautionary approach states that if an action or policy has a suspected risk of causing harm to the public or to the environment, in the absence of scientific consensus that the action or policy is harmful, the burden of proof that it is not harmful falls on those...
may prohibit introducing new technology whose consequences are not fully understood, that principle would have prohibited most new technology introduced since the industrial revolution
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
. Product testing protocols have been attacked for violating the rights of both humans and animals
Animal testing
Animal testing, also known as animal experimentation, animal research, and in vivo testing, is the use of non-human animals in experiments. Worldwide it is estimated that the number of vertebrate animals—from zebrafish to non-human primates—ranges from the tens of millions to more than 100 million...
Property
The etymological root of property is the LatinLatin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...
'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 17th century within theological discussions of that time. For instance, John LockeJohn Locke
John Locke FRS , widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered one of the first of the British empiricists, following the tradition of Francis Bacon, he is equally important to social...
justified property rights saying that God had made "the earth, and all inferior creatures, [in] common to all men".
In 1802 Utilitarian Jeremy Bentham
Jeremy Bentham
Jeremy Bentham was an English jurist, philosopher, and legal and social reformer. He became a leading theorist in Anglo-American philosophy of law, and a political radical whose ideas influenced the development of welfarism...
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 200000 square miles (517,997.6 km²) of land in the Louisiana Territory
Louisiana Territory
The Territory of Louisiana or Louisiana Territory was an organized incorporated territory of the United States that existed from July 4, 1805 until June 4, 1812, when it was renamed to Missouri Territory...
under the leadership of Thomas Jefferson
Thomas Jefferson
Thomas Jefferson was the principal author of the United States Declaration of Independence and the Statute of Virginia for Religious Freedom , the third President of the United States and founder of the University of Virginia...
, 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
Christianity and slavery
Christian views on slavery are varied both regionally and historically. Slavery in different forms has been imposed by Christians for over 18 centuries. In the early years of Christianity, slavery was a normal feature of the economy and society in the Roman Empire, and this remained well into the...
and essentialized
Essentialism
In philosophy, essentialism is the view that, for any specific kind of entity, there is a set of characteristics or properties all of which any entity of that kind must possess. Therefore all things can be precisely defined or described...
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 Justice Roger B. Taney
Roger B. Taney
Roger Brooke Taney was the fifth Chief Justice of the United States, holding that office from 1836 until his death in 1864. He was the first Roman Catholic to hold that office or sit on the Supreme Court of the United States. He was also the eleventh United States Attorney General. He is most...
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 stake".In common parlance property rights involve a 'bundle of rights
Bundle of Rights
The bundle of rights is a common way to explain the complexities of property ownership. Teachers often use this concept as a way to organize confusing and sometimes contradictory data about real estate....
' 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 enjoy it."
Menon claims that the autonomous individual, responsible for his/her own existence is a cultural construct moulded by Western culture
Western culture
Western culture, sometimes equated with Western civilization or European civilization, refers to cultures of European origin and is used very broadly to refer to a heritage of social norms, ethical values, traditional customs, religious beliefs, political systems, and specific artifacts and...
rather than the truth about the human condition
Human condition
The human condition encompasses the experiences of being human in a social, cultural, and personal context. It can be described as the irreducible part of humanity that is inherent and not connected to gender, race, class, etc. — a search for purpose, sense of curiosity, the inevitability of...
. 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
Indian Removal Act
The Indian Removal Act was signed into law by President Andrew Jackson on May 28, 1830.The Removal Act was strongly supported in the South, where states were eager to gain access to lands inhabited by the Five Civilized Tribes. In particular, Georgia, the largest state at that time, was involved in...
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
Legal realism
Legal realism is a school of legal philosophy that is generally associated with the culmination of the early-twentieth century attack on the orthodox claims of late-nineteenth-century classical legal thought in the United States...
"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
Intellectual propertyIntellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
(IP) encompasses expressions of ideas, thoughts, codes and information. "Intellectual property rights" (IPR) treat IP as a kind of real property
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
, 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 copyright
Copyright
Copyright is a legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time...
s is regulated by the United States Patent and Trademark Office
United States Patent and Trademark Office
The United States Patent and Trademark Office is an agency in the United States Department of Commerce that issues patents to inventors and businesses for their inventions, and trademark registration for product and intellectual property identification.The USPTO is based in Alexandria, Virginia,...
.
The 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
Oxymoron
An oxymoron is a figure of speech that combines contradictory terms...
. 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
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
'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
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
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
Pierre-Joseph Proudhon
Pierre-Joseph Proudhon was a French politician, mutualist philosopher and socialist. He was a member of the French Parliament, and he was the first person to call himself an "anarchist". He is considered among the most influential theorists and organisers of anarchism...
, 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
Knowledge economy
The knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...
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
Patent infringement
Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may vary by jurisdiction, but it typically includes using or...
, copyright infringement
Copyright infringement
Copyright infringement is the unauthorized or prohibited use of works under copyright, infringing the copyright holder's exclusive rights, such as the right to reproduce or perform the copyrighted work, or to make derivative works.- "Piracy" :...
, trademark infringement
Trademark infringement
Trademark infringement is a violation of the exclusive rights attaching to a trademark without the authorization of the trademark owner or any licensees...
, patent
Patent misuse
In United States patent law, patent misuse is an affirmative defense used in patent litigation when a defendant has been accused to have infringed a patent. It has also been used to mitigate damages following a finding of infringement or justify a failure to pay contracted-for royalties...
and copyright misuse
Copyright misuse
Copyright misuse is an equitable defense against copyright infringement in the United States. Under this defense, a copyright infringer may avoid infringement liability if the copyright holder has engaged in abusive or improper conduct in exploiting or enforcing the copyright...
, submarine patent
Submarine patent
A submarine patent is a patent whose issuance and publication are intentionally delayed by the applicant for a long time, such as several years. This strategy requires a patent system where patent applications are not published. In the United States, patent applications filed before November 2000...
s, gene patents, patent
Patent troll
Patent troll is a pejorative but questioned term used for a person or company who is a non-practicing inventor, and buys and enforces patents against one or more alleged infringers in a manner considered by the target or observers as unduly aggressive or opportunistic, often with no intention to...
, copyright
Copyright troll
A copyright troll is a pejorative term for a party that enforces copyrights it owns for purposes of making money through litigation, in a manner considered unduly aggressive or opportunistic, generally without producing or licensing its own works for paid distribution...
and trademark troll
Trademark troll
Trademark troll is a pejorative term for any entity that attempts to register a trademark without intending to use them and who then threatens to sue others who use that mark....
ing, Employee raiding
Employee raiding
In business, employee raiding is the practice of unlawfully inducing an employee to leave one employer and take up employment with another employer....
and monopolizing talent, Bioprospecting, biopiracy
Biopiracy
- Biopiracy and bioprospecting :Bioprospecting is an umbrella term describing the discovery of new and useful biological samples and mechanisms, typically in less-developed countries, either with or without the help of indigenous knowledge, and with or without compensation...
and industrial espionage
Industrial espionage
Industrial espionage, economic espionage or corporate espionage is a form of espionage conducted for commercial purposes instead of purely national security purposes...
, digital rights management
Digital rights management
Digital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...
.
Notable IP copyright cases include Napster, Eldred v. Ashcroft
Eldred v. Ashcroft
Eldred v. Ashcroft, was a court case in the United States challenging the constitutionality of the 1998 Sonny Bono Copyright Term Extension Act...
and Air Pirates
Air Pirates
The Air Pirates were a group of cartoonists who created two issues of an underground comic called Air Pirates Funnies in 1971, leading to a famous lawsuit by The Walt Disney Company...
.
International issues
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 commercial behaviour.
- 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 perspectives.
- Ethical issues arising out of international business transactions; e.g., bioprospecting and biopiracyBiopiracy- Biopiracy and bioprospecting :Bioprospecting is an umbrella term describing the discovery of new and useful biological samples and mechanisms, typically in less-developed countries, either with or without the help of indigenous knowledge, and with or without compensation...
in the pharmaceutical industry; the fair tradeFair tradeFair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
movement; transfer pricingTransfer pricingTransfer pricing refers to the setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of property . Transfer prices among components of an enterprise may be used to reflect allocation of resources among such components, or for other...
. - Issues such as globalizationGlobalizationGlobalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
and cultural imperialismCultural imperialismCultural imperialism is the domination of one culture over another. Cultural imperialism can take the form of a general attitude or an active, formal and deliberate policy, including military action. Economic or technological factors may also play a role...
. - Varying global standards—e.g., the use of child laborChild laborChild labour refers to the employment of children at regular and sustained labour. This practice is considered exploitative by many international organizations and is illegal in many countries...
. - 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 International 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.
Economic systems
Political economyPolitical economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
and political philosophy
Political philosophy
Political philosophy is the study of such topics as liberty, justice, property, rights, law, and the enforcement of a legal code by authority: what they are, why they are needed, what, if anything, makes a government legitimate, what rights and freedoms it should protect and why, what form it...
have ethical implications, particularly regarding the distribution of economic benefits. John Rawls
John Rawls
John Bordley Rawls was an American philosopher and a leading figure in moral and political philosophy. He held the James Bryant Conant University Professorship at Harvard University....
and Robert Nozick
Robert Nozick
Robert Nozick was an American political philosopher, most prominent in the 1970s and 1980s. He was a professor at Harvard University. He is best known for his book Anarchy, State, and Utopia , a right-libertarian answer to John Rawls's A Theory of Justice...
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 obligation.
Law and regulation
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 custom". 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 that legal procedures are technocratic, bureaucratic, rigid and obligatory where as ethical act is conscientious, voluntary choice beyond normativity. Law is retroactive. Crime precedes law. Law against 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
Impossibility defense
An Impossibility defense is a criminal defense occasionally used when a defendant is accused of a criminal attempt that failed only because the crime was factually or legally impossible to commit. Factual impossibility is rarely an adequate defense at common law. In the United States,...
. 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 accountable.
Corporate policies
As part of more comprehensive compliance and ethics programCompliance and ethics program
There has been a long history of business and government excesses and subsequent legal, public and political reaction. Response to criminal misconduct has resulted in legal sanctions, governance practices, compliance standards and cultural transformation...
s, 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 ethical disasters.
An increasing number of companies 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 conduct.
Many companies 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 Saloman Brothers.
Not everyone 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 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. 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 complexity.
Ethics officers
Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of this new role was a series of fraud, corruption, and abuse scandals that afflicted the U.S. defense industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-industry initiative to promote and ensure ethical business practices. The DII set an early benchmark for ethics management in corporations. In 1991, the Ethics & Compliance Officer Association (ECOA)—originally the Ethics Officer Association (EOA)—was founded at the Center for Business Ethics (at Bentley College, Waltham, MA) as a professional association for those responsible for managing organizations' efforts to achieve ethical best practices. The membership grew rapidly (the ECOA now has over 1,200 members) and was soon established as an independent organization.Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991, which set standards that organizations (large or small, commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Although intended to assist judges with sentencing, the influence in helping to establish best practices has been far-reaching.
In the wake of numerous corporate scandals between 2001–04 (affecting large corporations like Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, WorldCom and Tyco
Tyco
Tyco may refer to:* Tyco International, a diversified industrial conglomerate* Tyco Electronics, a former segment of Tyco International* Tyco Toys, a division of Mattel...
), even small and medium-sized companies have begun to appoint ethics officers. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities, making recommendations regarding the company's ethical policies, and disseminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. This trend is partly due to the Sarbanes-Oxley Act
Sarbanes-Oxley Act
The Sarbanes–Oxley Act of 2002 , also known as the 'Public Company Accounting Reform and Investor Protection Act' and 'Corporate and Auditing Accountability and Responsibility Act' and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which...
in the United States, which was enacted in reaction to the above scandals. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions.
The effectiveness of ethics officers is not clear. If the appointment is made primarily as a reaction to legislative requirements, one might expect little impact, at least over the short term. In part, this is because ethical business practices result from a corporate culture that consistently places value on ethical behaviour, a culture and climate that usually emanates from the top of the organization. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behaviour: a more systemic programme with consistent support from general management will be necessary.
The foundation for ethical behaviour goes well beyond corporate culture and the policies of any given company, for it also depends greatly upon an individual's early moral training, the other institutions that affect an individual, the competitive business environment the company is in and, indeed, society as a whole.
Academic discipline
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 Business EthicsJournal of Business Ethics
The Journal of Business Ethics is a peer-reviewed academic journal published by Springer Science+Business Media covering methodological and disciplinary aspects of ethical issues related to business, including systems of production, consumption, marketing, advertising, social and economic...
and Business Ethics Quarterly
Business Ethics Quarterly
Business Ethics Quarterly is a peer-reviewed academic journal that publishes theoretical and empirical research relevant to the ethics of business...
considered the leaders.
The International 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.
Religious views
In ShariaSharia
Sharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...
law, followed by many Muslims, banking
Islamic banking
Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
specifically prohibits charging interest on loans. Traditional Confucian thought discourages profit-seeking. Christianity
Christianity
Christianity is a monotheistic religion based on the life and teachings of Jesus as presented in canonical gospels and other New Testament writings...
offers the Golden Rule
Golden Rule
Golden Rule may refer to:*The Golden Rule in ethics, morality, history and religion, also known as the ethic of reciprocity*Golden Rule savings rate, in economics, the savings rate which maximizes consumption in the Solow growth model...
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 Christianity of 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 life..
Related disciplines
BusinessBusiness
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
ethics is part of the philosophy of business
Philosophy of business
The Development of management theory and philosophy considers the fundamental principles that underlie the formation and operation of a business enterprise; the nature and purpose of a business, for example, is it primarily property or a social institution; its role in society; and the moral...
, the branch of philosophy
Philosophy
Philosophy is the study of general and fundamental problems, such as those connected with existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing such problems by its critical, generally systematic approach and its reliance on rational...
that deals with the philosophical, political, and ethical
Ethics
Ethics, also known as moral philosophy, is a branch of philosophy that addresses questions about morality—that is, concepts such as good and evil, right and wrong, virtue and vice, justice and crime, etc.Major branches of ethics include:...
underpinnings of business and economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. 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
Libertarian socialism
Libertarian socialism is a group of political philosophies that promote a non-hierarchical, non-bureaucratic, stateless society without private property in the means of production...
, (who contend that "business ethics" is an oxymoron
Oxymoron
An oxymoron is a figure of speech that combines contradictory terms...
) do so by definition outside of the domain of business ethics proper.
The philosophy of business also deals with questions such as what, if any, are the social responsibilities
Social responsibility
Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. Social responsibility is a duty every individual or organization has to perform so as to maintain a balance between the economy and the...
of a business; business management theory
Theory
The English word theory was derived from a technical term in Ancient Greek philosophy. The word theoria, , meant "a looking at, viewing, beholding", and referring to contemplation or speculation, as opposed to action...
; theories of individualism
Individualism
Individualism is the moral stance, political philosophy, ideology, or social outlook that stresses "the moral worth of the individual". Individualists promote the exercise of one's goals and desires and so value independence and self-reliance while opposing most external interference upon one's own...
vs. collectivism
Collectivism
Collectivism is any philosophic, political, economic, mystical or social outlook that emphasizes the interdependence of every human in some collective group and the priority of group goals over individual goals. Collectivists usually focus on community, society, or nation...
; free will
Free will
"To make my own decisions whether I am successful or not due to uncontrollable forces" -Troy MorrisonA pragmatic definition of free willFree will is the ability of agents to make choices free from certain kinds of constraints. The existence of free will and its exact nature and definition have long...
among participants in the marketplace
Marketplace
A marketplace is the space, actual, virtual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie. the 'real world' in which products and services are provided and consumed.-Marketplaces and street markets:A...
; the role of self interest
Selfishness
Selfishness denotes an excessive or exclusive concern with oneself, and as such it exceeds mere self interest or self concern. Insofar as a decision maker knowingly burdens or harms others for personal gain, the decision is selfish. In contrast, self-interest is more general...
; invisible hand
Invisible hand
In economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith...
theories; the requirements of social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...
; and natural rights
Natural rights
Natural and legal rights are two types of rights theoretically distinct according to philosophers and political scientists. Natural rights are rights not contingent upon the laws, customs, or beliefs of any particular culture or government, and therefore universal and inalienable...
, especially property rights, in relation to the business enterprise.
Business ethics is also related to political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
, which is economic analysis from political and historical
Economic history
Economic history is the study of economies or economic phenomena in the past. Analysis in economic history is undertaken using a combination of historical methods, statistical methods and by applying economic theory to historical situations and institutions...
perspectives. Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses from economic activity, and is the resultant distribution
Distribution of wealth
The distribution of wealth is a comparison of the wealth of various members or groups in a society. It differs from the distribution of income in that it looks at the distribution of ownership of the assets in a society, rather than the current income of members of that society.-Definition of...
fair or just, which are central ethical issues.
See also
- BriberyBriberyBribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...
- Business culture
- Business Ethics QuarterlyBusiness Ethics QuarterlyBusiness Ethics Quarterly is a peer-reviewed academic journal that publishes theoretical and empirical research relevant to the ethics of business...
- Business and Professional Ethics JournalBusiness and Professional Ethics JournalBusiness and Professional Ethics Journal is a peer-reviewed academic journal that examines ethical issues in business encountered by professionals working in large organizational structures...
- Business law
- Corporate behaviourCorporate behaviourCorporate behaviour is the behaviour of an organisation when considered as a single body.The behaviour of an organisation is influenced by the arrangements for its ownership and control...
- Corporate crimeCorporate crimeIn criminology, corporate crime refers to crimes committed either by a corporation , or by individuals acting on behalf of a corporation or other business entity...
- Corporate Social EntrepreneurshipCorporate Social EntrepreneurshipA corporate social entrepreneur is defined as "an employee of the firm who operates in a socially entrepreneurial manner; identifying opportunities for and/ or championing socially responsible activity; in addition to helping the firm achieve its business targets. The CSE operates regardless of...
- Corporate social responsibilityCorporate social responsibilityCorporate social responsibility is a form of corporate self-regulation integrated into a business model...
- CorruptionPolitical corruptionPolitical corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
- Ethicism
- EthicsEthicsEthics, also known as moral philosophy, is a branch of philosophy that addresses questions about morality—that is, concepts such as good and evil, right and wrong, virtue and vice, justice and crime, etc.Major branches of ethics include:...
- Ethical implications in contractsEthical implications in contractsWhen creating a contract, a negotiator is not only doing so to reach an agreement between two or more parties, but to create an agreement that is durable; whereby parties of the contract are legally bound and committed to its promises...
- Ethical consumerismEthical consumerismEthical consumerism is the intentional purchase of products and services that the customer considers to be made ethically. This may mean with minimal harm to or exploitation of humans, animals and/or the natural environment...
- Ethical codeEthical codeAn ethical code is adopted by an organization in an attempt to assist those in the organization called upon to make a decision understand the difference between 'right' and 'wrong' and to apply this understanding to their decision...
- Ethical jobEthical jobAn ethical job is a broad term to describe a job which accords with a person's ethics or values.Ethical jobs may include green jobs, community sector jobs and jobs in the international aid sector....
- Fiduciary
- Journal of Business EthicsJournal of Business EthicsThe Journal of Business Ethics is a peer-reviewed academic journal published by Springer Science+Business Media covering methodological and disciplinary aspects of ethical issues related to business, including systems of production, consumption, marketing, advertising, social and economic...
- ManagementManagementManagement in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
- Organizational EthicsOrganizational EthicsOrganizational Ethics is the ethics of an organization, and it is how an organization ethically responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture...
- Optimism biasOptimism biasOptimism bias is the demonstrated systematic tendency for people to be overly optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events. Along with the illusion of control and illusory...
- Strategic misrepresentationStrategic misrepresentation"Strategic misrepresentation is the planned, systematic distortion or misstatement of fact—lying—in response to incentives in the budget process...
- Strategic planningStrategic planningStrategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. In order to determine the direction of the organization, it is necessary to understand its current position and the possible avenues...
External links
- Business Ethics in Knowledge@Wharton, the Wharton School's online business journal.
- Business ethics section from the website of the Markkula Center for Applied EthicsMarkkula Center for Applied EthicsThe Markkula Center for Applied Ethics at Santa Clara University promotes research and dialogue in five major focus areas: Bioethics, Business Ethics, Campus Ethics, Character Education, and Government Ethics. The Center offers public talks, workshops, and training, as well as sponsoring...
- Business Ethics Gone Wrong
- Economics and Economic Justice in the Stanford Encyclopedia of Philosophy