Business Ethics

1. Definition:

Business ethics (also known as corporate ethics) is a form of applied

ethics or professional ethics, that examines ethical principles and moral or ethical
problems that can 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 is the study of appropriate business policies and practices regarding
potentially controversial subjects including corporate governance, insider trading,
bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The
law often guides business ethics, but at other times business ethics provide a basic
guideline that businesses can choose to follow to gain public approval.

2. History:
Business ethics 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 slavery,[6][7][8] colonialism,[9][10]and
the Cold War.[11]
The term 'business ethics' came into common use in the United States in the early 1970s.
By the mid-1980s at least 500 courses in business ethics reached 40,000 students, using
some twenty textbooks and at least ten casebooks supported by professional societies,
centers and journals of business ethics. The Society for Business Ethics was founded in
1980. European business schools adopted business ethics after 1987 commencing with
the European Business Ethics Network.[12][13][14] In 1982 the first single-authored books in
the field appeared.[15][16]
Firms began highlighting their ethical stature in the late 1980s and early 1990s, possibly
in an attempt to distance themselves from the business scandals of the day, such as
the savings and loan crisis. The concept of business ethics caught the attention of
academics, media and business firms by the end of the Cold War.[13][17][18] However,
criticism of business practices was attacked for infringing the freedom
of entrepreneurs and critics were accused of supporting communists.[19][20] This scuttled
the discourse of business ethics both in media and academia.[21] The Defense Industry
Initiative on Business Ethics and Conduct (DII) was created to support corporate ethical
conduct. This era began the belief and support of self-regulation and free trade, which
lifted tariffs and barriers and allowed businesses to merge and divest in an increasing
global atmosphere.

3. Examples

Some competitors' advertisements tout high-fiber cereals that have the potential to reduce
the risk of some types of cancer. The cereal company in question wants to gain more
market share, but the marketing department cannot make dubious health claims on cereal
boxes without the risk of litigation and fines. Even though competitors with larger market
shares of the cereal industry use shady labeling practices, that doesn't mean every
manufacturer should engage in unethical behavior.

For another example, consider the matter of quality control for a company that
manufactures electronic components for computer servers. These components must ship
on time, or the manufacturer of the parts risks losing a lucrative contract. The quality-
control department discovers a possible defect, and every component in one shipment
faces checks.

Unfortunately, the checks may take too long, and the window for on-time shipping could
pass, which could delay the customer's product release. The quality-control department
can ship the parts, hoping that not all of them are defective, or delay the shipment and test
everything. If the parts are defective, the company that buys the components might face a
firestorm of consumer backlash, which may lead the customer to seek a more reliable
supplier.

4. Why are business ethics important?

Business ethics are important because they have lasting implications on several levels.
With increased investor awareness on environmental, social, and governance issues, a
company's reputation is at stake. For instance, if a company partakes in unethical
practices, such as poor customer privacy procedures and protections, it could result in a
data breach. This, in turn, may lead to a significant loss of customers, erosion of trust,
less competitive hires, and share price declines. 

5. Why should managers be ethical?

It was one thing, however, for social responsibility advocates to provide a broad and
appealing answer to the question: Why should managers be ethical? It was quite another to
answer the obvious follow-up: How can managers determine the ethical course in any
particular situation and stick to it in the face of competing pressures?

To address this question, social responsibility advocates set out in the 1970s to create a
brand-new managerial discipline: business ethics. One idea was to bring experts in moral
philosophy into the business schools. Training in moral philosophy would give business
ethicists the analytical frameworks and conceptual tools necessary for making fine-grained
ethical distinctions and discerning the appropriate course in difficult ethical situations.
Once “retooled” in management, the moral philosophers could apply their sophisticated
frameworks to the day-to-day moral problems that managers face.

However, things have not worked out quite the way traditional advocates of corporate
social responsibility had hoped. Largely because of their background in moral philosophy,
a discipline that tends to place a high value on precisely those kinds of experiences and
activities where self-interest does not rule, many business ethicists found the precepts of
corporate social responsibility profoundly dissatisfying. As a result, they have spent a great
deal of scholarly time and energy tearing down the social responsibility position in order to
erect their own. Indeed, far from taking a step closer to the real-world moral problems of
management, several prominent business ethicists have chosen to reopen the fundamental
question: Why should managers be ethical?