Business Ethics Unit 1

 

Business Ethics: An overview, Concept, Nature

Ethics is a branch of social science. It deals with moral principles and social values. It helps us to classifying, what is good and what is bad? It tells us to do good things and avoid doing bad things.

So, ethics separate, good and bad, right and wrong, fair and unfair, moral and immoral and proper and improper human action. In short, ethics means a code of conduct. It is like the 10 commandments of holy Bible. It tells a person how to behave with another person.

In short, business ethics means to conduct business with a human touch in order to give welfare to the society.

So, the businessmen must give a regular supply of good quality goods and services at reasonable prices to their consumers. They must avoid indulging in unfair trade practices like adulteration, promoting misleading advertisements, cheating in weights and measures, black marketing, etc. They must give fair wages and provide good working conditions to their workers. They must not exploit the workers. They must encourage competition in the market. They must protect the interest of small businessmen. They must avoid unfair competition. They must avoid monopolies. They must pay all their taxes regularly to the government.

Definition of Business Ethics

According to Andrew Crane,

“Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed.”

According to Raymond C. Baumhart,

“The ethics of business is the ethics of responsibility. The business man must promise that he will not harm knowinfly.”

According to Wikipedia,

“Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.”

Nature of Business Ethics

The characteristics or features of business ethics are:

• Code of conduct: Business ethics is a code of conduct. It tells what to do and what not to do for the welfare of the society. All businessmen must follow this code of conduct.

• Based on moral and social values: Business ethics is based on moral and social values. It contains moral and social principles (rules) for doing business. This includes self-control, consumer protection and welfare, service to society, fair treatment to social groups, not to exploit others, etc.

• Gives protection to social groups: Business ethics give protection to different social groups such as consumers, employees, small businessmen, government, shareholders, creditors, etc.

• Provides basic framework: Business ethics provide a basic framework for doing business. It gives the social cultural, economic, legal and other limits of business. Business must be conducted within these limits.

• Voluntary: Business ethics must be voluntary. The businessmen must accept business ethics on their own. Business ethics must be like self-discipline. It must not be enforced by law.

• Requires education and guidance: Businessmen must be given proper education and guidance before introducing business ethics. The businessmen must be motivated to use business ethics. They must be informed about the advantages of using business ethics. Trade Associations and Chambers of Commerce must also play an active role in this matter.

• Relative Term: Business ethics is a relative term. That is, it changes from one business to another. It also changes from one country to another. What is considered as good in one country may be taboo in another country.

• New concept: Business ethics is a newer concept. It is strictly followed only in developed countries. It is not followed properly in poor and developing countries.

Advantages of Business Ethics

More and more companies recognize the link between business ethics and financial performance. Companies displaying a “clear commitment to ethical conduct” consistently outperform companies that do not display ethical conduct.

1. Attracting and retaining talent

People aspire to join organizations that have high ethical values. Companies are able to attract the best talent and an ethical company that is dedicated to taking care of its employees will be rewarded with employees being equally dedicated in taking care of the organization. The ethical climate matter to the employees. 

Organizations create an environment that is trustworthy, making employees willing to rely, take decisions and act on the decisions and actions of the co-employees. In such a work environment, employees can expect to be treated with respect and consideration for their colleagues and superiors. It cultivates strong teamwork and Productivity and support employee growth.

2. Investor Loyalty

Investors are concerned about ethics, social responsibility and reputation of the company in which they invest. Investors are becoming more and more aware that an ethical climate provides a foundation for efficiency, productivity and profits. Relationship with any stakeholder, including investors, based on dependability, trust and commitment results in sustained loyalty.

3. Customer satisfaction

Customer satisfaction is a vital factor in successful business strategy. Repeat purchases/orders and enduring relationship of mutual respect is essential for the success of the company. The name of a company should evoke trust and respect among customers for enduring success. This is achieved by a company that adopts ethical practices. When a company because of its belief in high ethics is perceived as such, any crisis or mishaps along the way is tolerated by the customers as a minor aberration. Such companies are also guided by their ethics to survive a critical situation. Preferred values are identified ensuring that organizational behaviours are aligned with those values. An organization with a strong ethical environment places its customers’ interests as foremost. Ethical conduct towards customers builds a strong competitive position. It promotes a strong public image.

4. Regulators

Regulators eye companies functioning ethically as responsible citizens. The regulator need not always monitor the functioning of the ethically sound company. The company earns profits and reputational gains if it acts within the confines of business ethics. To summaries, companies that are responsive to employees’ needs have lower turnover in staff.

• Shareholders invest their money into a company and expect a certain level of return from that money in the form of dividends and/or capital growth.

• Customers pay for goods, give their loyalty and enhance a company’s reputation in return for goods or services that meet their needs.

• Employees provide their time, skills and energy in return for salary, bonus, career progression, and learning.

Scope of Business Ethics

Ethical problems and phenomena arise across all the functional areas of companies and at all levels within the company.

1. Ethics in Compliance

Compliance is about obeying and adhering to rules and authority. The motivation for being compliant could be to do the right thing out of the fear of being caught rather than a desire to be abiding by the law. An ethical climate in an organization ensures that compliance with law is fuelled by a desire to abide by the laws. Organizations that value high ethics comply with the laws not only in letter but go beyond what is stipulated or expected of them.

2. Ethics in Finance

The ethical issues in finance that companies and employees are confronted with include:

• In accounting – window dressing, misleading financial analysis.

• Related party transactions not at arm’s length

• Insider trading, securities fraud leading to manipulation of the financial markets.

• Executive compensation.

• Bribery, kickbacks, over billing of expenses, facilitation payments.

• Fake reimbursements

3. Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and implementing ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee.

The issues of ethics faced by HRM include:

• Discrimination issues i.e. discrimination on the bases of age, gender, race, religion, disabilities, weight etc.

• Sexual harassment.

• Affirmative Action.

• Issues surrounding the representation of employees and the democratization of the workplace, trade.

• Issues affecting the privacy of the employee: workplace surveillance, drug testing.

• Issues affecting the privacy of the employer: whistle-blowing.

• Issues relating to the fairness of the employment contract and the balance of power between employer and employee.

• Occupational safety and health.

Companies tend to shift economic risks onto the shoulders of their employees. The boom of performance-related pay systems and flexible employment contracts are indicators of these newly established forms of shifting risk.

4. Ethics in Marketing

Marketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. The ethical issues confronted in this area include:

• Pricing: price fixing, price discrimination, price skimming.

• Anti-competitive practices like manipulation of supply, exclusive dealing arrangements, tying arrangements etc.

• Misleading advertisements

• Content of advertisements.

• Children and marketing.

• Black markets, grey markets.

5. Ethics of Production

This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.

• Defective, addictive and inherently dangerous products and

• Ethical relations between the company and the environment include pollution, environmental ethics, and carbon emissions trading.

• Ethical problems arising out of new technologies for eg. Genetically modified food

• Product testing ethics.

The most systematic approach to fostering ethical behaviour is to build corporate cultures that link ethical standards and business practices.

Concept of Values, Types and Formation of Values

Generally, value has been taken to mean moral ideas, general conceptions or orientations towards the world or sometimes simply interests, attitudes, preferences, needs, sentiments and dispositions. But sociologists use this term in a more precise sense to mean “the generalised end which has the connotations of rightness, goodness or inherent desirability”.

These ends are regarded legitimate and binding by society. They define what is important worthwhile and worth striving for. Sometimes, values have been interpreted to mean “such standards by means of which the ends of action are selected”. Thus, values are collective conceptions of what is considered good, desirable, and proper or bad, undesirable, and improper in a culture.

According to M. Haralambos (2000), “a value is a belief that something is good and desirable”. For R.K. Mukerjee (1949) (a pioneer Indian sociologist who initiated the study of social values), “values are socially approved desires and goals that are internalised through the process of conditioning, learning or socialisation and that become subjective preferences, standards and aspirations”. A value is a shared idea about how something is ranked in terms of desirability, worth or goodness.

Familiar examples of values are wealth, loyalty, independence, equality, justice, fraternity and friend¬liness. These are generalised ends consciously pursued by or held up to individuals as being worthwhile in themselves. It is not easy to clarify the fundamental values of a given society because of their sheer breadth.

Characteristics:

Values may be specific, such as honouring one’s parents or owning a home or they may be more general, such as health, love and democracy. “Truth prevails”, “love thy neighbour as yourself, “learning is good as ends itself are a few examples of general values. Individual achievement, individual happiness and materi¬alism are major values of modern industrial society.

Value systems can be different from culture to culture. One may value aggressiveness and deplores passivity, another the reverse, and a third gives little attention to this dimension altogether, emphasising instead the virtue of sobriety over emotionality, which may be quite unimportant in either of the other cultures. This point has very aptly been explored and explained by Florence Kluchkhon (1949) in her studies of five small communities (tribes) of the American south-west. One society may value individual achievement (as in USA), another may emphasise family unity and kin support (as in India). The values of hard work and individual achievement are often associated with industrial capitalist societies.

The values of a culture may change, but most remain stable during one person’s lifetime. Socially shared, intensely felt values are a fundamental part of our lives. Values are often emotionally charged because they stand for things we believe to be worth defending. Often, this characteristic of values brings conflict between different communities or societies or sometimes between different persons.

Most of our basic values are learnt early in life from family, friends, neighbourhood, school, the mass print and visual media and other sources within society. These values become part of our person¬alities. They are generally shared and reinforced by those with whom we interact.

The main functions of values are as follows:

1. Values play an important role in the integration and fulfillment of man’s basic impulses and desires in a stable and consistent manner appropriate for his living.

2. They are generic experiences in social action made up of both individual and social responses and attitudes.

3. They build up societies, integrate social relations.

4. They mould the ideal dimensions of personality and range and depth of culture.

5. They influence people’s behaviour and serve as criteria for evaluating the actions of others.

6. They have a great role to play in the conduct of social life.

7. They help in creating norms to guide day-to-day behaviour.

Types:

Values can be classified into two broad categories:

(1) Individual values:

These are the values which are related with the development of human personality or individual norms of recognition and protection of the human personality such as honesty, loyalty, veracity and honour.

(2) Collective values:

Values connected with the solidarity of the community or collective norms of equality, justice, solidarity and sociablenessare known as collective values.

Values can also be’ categorised from the point of view their hierarchical arrangement:

(1) Intrinsic values:

These are the values which are related with goals of life. They are sometimes known as ultimate and transcendent values. They determine the schemata of human rights and duties and of human virtues. In the hierarchy of values, they occupy the highest place and superior to all other values of life.

(2) Instrumental values:

These values come after the intrinsic values in the scheme of gradation of values. These values are means to achieve goals (intrinsic values) of life. They are also known as incidental or proximate values.

How are Values Formed?

Value formation is the confluence of our personal experiences and particular culture we are entwined in. Values are imposed from our family in childhood and reinforced through culture and life experiences. The value of, for example, kindness was imposed on me from my parents, and reinforced throughout early childhood. Then I applied that value on the school playground and experienced how it helped me create greater social bonds with my school mates. My personal experiences growing up reinforced the value of kindness as I experienced the adaptive effects of showing kindness and the maladaptive effects when choosing malice over kindness. All through my upbringing, both my personal experiences and cultural surroundings both reinforced the value of kindness.

Having been born and raised in Dallas, Texas, the values of rugged individualism, church, and God was ingrained in my psyche from birth. Each of those three values, as I grew older, eventually formed the foundation of my worldview and politics. In a sense, our values, imposed upon us early in childhood, become the spectacles in which we view and judge the world.

Our culture plays a huge role in our value formation. Culture gives us a community and shared reality so that we can cooperate in activities and customs that give meaning, purpose, and significance to our existence. Culture gives us prescriptions for appropriate conduct so that we can learn best how to get along with others. All you have to do is travel to another country to see how values ebb and flow with culture. You can travel to China and see how they elevate the group and family over the individual in contrast to most Americans; you can see how South Americans elevate hospitality and care for their elderly unlike most Americans; and how Hawaiians elevate relaxation and balance unlike most urban metropolitan cities in the U.S.

Values and Behavior

Behavior influences social values, so if you care about how you act and follow rules of society (behavior) your social values will climb and others will see this as the norm and follow suit, just like today its the opposite, people are shortcutting the rules (no texting while driving, speeding, even smoking – you know it causes cancer and other diseases but you still smoke) and others follow along thinking its ok to do this because others do it.

Values can be incorporated into the beliefs-behaviors-consequences relationship. consequences can shape both beliefs and values, and it is true both beliefs and values lead to particular behaviors.  The critical point for a leader to understand when attempting to change the culture of their organization, is that focusing on values is a much more powerful lever than simply focusing on beliefs.

One value – two entirely opposite behaviours.

Does this mean you should drop values to focus on behaviours? Not quite. Here are some of the reasons for using one or the other.

Values

• Values are an essential part of culture and are needed to describe it at the deepest level – They are part of the BE level, along with feelings and beliefs.

• Values underpin behaviours – It is difficult to change behaviours without going to the BE level.

• Employees are used to discussing values because they have been part of the corporate landscape for many years. In fact, many organisations used to focus solely on values to shape their culture.

• Values are easy to express conceptually in one word.

• Values hierarchy is at the core of how we behave – the most common hierarchies sit behind the main cultural archetypes we use to describe culture at Walking the Talk.

Behaviours

• Behaviours are what makes culture do-able. They translate values into tangible, observable and measurable elements that can be implemented, assessed and improved.

• Because (as my earlier story shows) there can be many, sometimes opposite, behaviours for a single value, working with behaviours can avoid ambiguity.

• One behaviour, on the other hand, can represent several values.

• Behaviours are easy to observe, they are what people do – what we call the DO level. As a consequence, employees can easily self-correct.

• Behaviours make it easy to define standards – this, in turn, makes culture do-able.

Evolving ethical values

Dated back to Code of Hammurabi some 4,000 years ago, business ethics is a social science, whose main aim is to define and examine the responsibilities of businesses and their agents as a part of the general moral environment of a given society.

Business ethics refers to how ethical principles guide a business’s operations. Common issues that fall under the umbrella of business ethics include employer-employee relations, discrimination, environmental issues, bribery and insider trading, and social responsibility. While many laws exist to set basic ethical standards within the business community, it is largely dependent upon a business’s leadership to develop a code of ethics. Practicing strong ethics keeps a business within the parameters of the law; as well as building goodwill and brand equity. Popular social issues largely drive business ethics; as different issues come to the forefront, organizations respond by bringing their ethical tenets in line with the new social norms.

Business Ethics in the ’60s

The 1960s brought the first major wave of changes in business ethics. Cultural values were shifting, with individualism and fierce dedication to social issues such as environmentalism and world peace coming into vogue. While young workers were idealistic and wanted to make the world a better place, employers found their work ethic, compared to that of previous generations, to be lacking. Drug use was rampant, and the new focus on individualism caused many workers to look upon their employers with disdain.

Companies responded by beefing up human resources departments and establishing mission statements and codes of conduct. In response to the changing desires of their employees, however, businesses also began embracing social responsibility at a level not previously seen; the 1960s saw companies trumpet environmental friendliness for the first time and find new ways to give back to their communities.

Major Events in the ’70s and ’80s

During the 1970s and 1980s, two events shaped changes in business ethics: defense contractor scandals that became highly publicized during the Vietnam War and a heightened sense of tension between employers and employees. In response, the government implemented stricter policies governing defense contractors, and companies revamped contracts with employees to focus less on rigid compliance and more on values; popular management philosophy shifted from pure authoritarianism to more collaboration and working on equal footing.

The ’90s and Environmentalism

The 1990s saw a rebirth of environmentalism, social responsibility reaching new heights and graver legal ramifications for ethical missteps. Tobacco companies and junk food manufacturers faced heightened scrutiny, along with several highly publicized lawsuits, over the public health ramifications of their products. Oil companies and chemical companies had to contend with increasing public pressure to answer for environmental damage. Class action lawsuits rapidly gained in popularity; in response, businesses were forced to spend more on their legal departments.

The Online Realm in 2000+

From the year 2000 forward, business ethics have expanded to the online realm. The big ethical dilemmas of the 21st century have mostly centered on cybercrimes and privacy issues. Crimes such as identity theft, almost unheard of 20 years before, remain a huge threat to anyone doing business online—a majority of the population. As a result, businesses face social and legal pressure to take every measure possible to protect customers’ sensitive information. The rise in popularity of data mining and target marketing has forced businesses to walk a fine line between respecting customers’ privacy and using their online activities to glean valuable marketing data.

Relevance of Ethics and Values in Business

Need for Business Ethics:

1. Business organisations are economic and social institutions that serve customers’ needs by supplying them right goods at the right place, time and price. This is possible if the institutions engage in ethical practices.

2. Business ethics help in long-run survival of the firms. Unethical practices like paying low wages to workers, providing poor working conditions, lack of health and safety measures for employees, selling smuggled or adulterated goods, tax evasion etc. can increase short-run profits but endanger their long-run survival. It is important, therefore, for firms to suffer short-term losses but fulfill ethical social obligations to secure their long-term future.

3. Business houses operate in the social environment and use resources provided by the society. They are, therefore, morally and socially committed to look after the interests of society by adopting ethical business practices.

4. Ethical business activities improve company’s image and give it edge over competitors to promote sales and profits.

5. Legal framework of a country also enforces ethical practices. Under Consumer Protection Act, for example, consumers can complain against unethical business practices. Labour laws protect the interests of workers against unethical practices. Legal framework of the country, therefore, promotes ethical business behaviour. Business houses want to avoid Government intervention and, therefore, follow ethical practices.

Barriers to Management Ethics:

1. Chain of command:

If employees know that superiors are not following ethical behaviour, they hesitate in reporting the matter up the hierarchy for the fear of being misunderstood and penalized. The chain of command is, thus, a barrier to reporting unethical activities of superiors.

2. Group membership:

Informal groups lead to group code of ethics. Group members are strongly bonded by their loyalty and respect for each other and unethical behaviour of any member of the group is generally ignored by the rest.

3. Ambiguous priorities:

When policies are unclear and ambiguous, employees’ behaviourcannot be guided in a unified direction. It is difficult to understand what is ethical and what is unethical.

Solutions to Barriers:

The following measures can improve the climate for ethical behaviour:

1. Organisational objectives and policies should be clear so that every member works towards these goals ethically.

2. The behaviour of top managers is followed by others in the organisation. Ethical actions of top managers promote ethical behaviour throughout the organisation.

3. Imposing penalties and threats for not conforming to ethical behaviour can reduce unethical activities in the organisation. Formal procedures of lodging complaints help subordinates report unethical behaviour of superiors to the concerned committees.

4. Educational institutions also offer courses and training in business ethics to develop conscientious managers who observe ethical behaviour.

Values:

Values are a set of principles that people cherish. They enhance the quality of individual and collective life. They involve personal and community discipline and sacrifice of immediate gratification needs. Quality of life is a product of physical, social, environmental, mental and spiritual health and wholeness. Values refer to intrinsic worth or goodness.

They are the beliefs that guide an individual’s actions. They represent a person’s belief about what is right or wrong. Values lay standards against which behaviouris judged. They determine the overall personality of an individual and the organization he is working for. His family, peer group, educational institutions, environment and the work place develop values in him. Values apply to individuals and institutions, both business and non-business.

Values and Behaviour:

Values remain embedded in our minds since childhood. As children, we are taught what is good, bad, right or wrong by parents, educational institutions and social groups. These values become part of our behaviour and personality when we grow up and are transmitted to future generations, thus, creating a healthy society.

In the business world, every person, whether manager or non-manager, whose behaviour is value-based shapes the culture of the organisation. Organisation is a group of people responsible for its formation, survival and growth. How good an organisation is depends upon how good are the people managing it.

Good people are those whose actions and behaviour are based on a sound value system and ethical principles. Value system is a combination of all values that an individual should have. Values lay foundation for organisational success.

They develop the attitudes, perceptions and motives that shape the behaviour of people working in the organisation. This develops a sound organisation culture that promotes image of the organisation in the society. Values in individuals develop a value-based organisation, society, nation and the world as a whole.

Values in Business Management:

There are many ways in which the basic human values – truth, righteousness, peace, love and non-violence can be practiced in the day-to-day conduct of business. There are different aspects of management such as marketing, finance, industrial relations, etc., but the most important aspect is “man-management.” Each country has its own historical and cultural background and Indian managers should not mechanically copy practices from abroad but should keep in mind the Indian milieu and our national ethos.

Values of Managers:

Management is a systematic way of doing work in any field. Its task is to make people capable of joint performance, to make their weaknesses irrelevant and convert them into strengths. It strikes harmony in working equilibrium, in thoughts and actions, goals and achievements, plans and performance, products and markets.

Lack of management will cause disorder, confusion, wastage, delay, destruction and even depression. Successful management means managing men, money and material in the best possible way according to circumstances and environment.

Most of the Indian enterprises today face conflicts, tensions, low efficiency and productivity, absence of motivation, lack of work culture, etc. This is perhaps due to the reason that managers are moving away from the concept of values and ethics.

The lure for maximizing profits is deviating them from the value-based managerial behaviour. There is need for managers to develop a set of values and beliefs that will help them attain the ultimate goals of profits, survival and growth.

They need to develop the following values:

1. Optimum utilization of resources:

The first lesson in the management science is to choose wisely and utilize optimally the scarce resources to succeed in business venture.

2. Attitude towards work:

Managers have to develop visionary perspective in their work. They have to develop a sense of larger vision in their work for the common good.

3. Work commitment:

Managers have to work with dedication. Dedicated work means ‘work for the sake of work’. Though results are important, performance should not always be based on expected benefits. They should focus on the quality of performance. The best means for effective work performance is to become the work itself. Attaining the state of nishkama karma is the right attitude to work because it prevents ego and the mind from thinking about future gains or losses.

Managers should renounce egoism and promote team work, dignity, sharing, co¬operation, harmony, trust, sacrificing lower needs for higher goals, seeing others in you and yourself in others etc. The work must be done with detachment. De-personified intelligence is best suited for those who sincerely believe in the supremacy of organisational goals as compared to narrow personal success and achievement.

Value based managers do the following to discharge their duties well:

1. Cultivate sound philosophy of life.

2. Identify with inner core of self-sufficiency.

3. Strive for excellence through ‘Work is Worship’.

4. Build internal integrated force to face contrary impulses and emotions.

5. Pursue ethico-moral righteousness.

6. Vision:

Managers must have a long-term vision. The visionary manager must be practical, dynamic and capable of translating dreams into reality. This dynamism and strength of a true leader flows from an inspired and spontaneous motivation to help others.

Vision includes the following:

(a) Forming a vision and planning the strategy to realize such vision.

(b) Cultivating the art of leadership.

(c) Establishing institutional excellence and building an innovative organization.

(d) Developing human resources.

(e) Team building and teamwork.

(f) Delegation, motivation and communication.

(g) Reviewing performance and taking corrective steps whenever called for.

The management gurus like Lord Krishna, Swami Vivekananda and Peter F. Drucker assert that managers should develop the following values:

1. Move from the state of inertia to the state of righteous action.

2. Move from the state of faithlessness to the state of faith and self-confidence.

3. Their actions should benefit not only them but the society at large.

4. Move from unethical actions to ethical actions.

5. Move from untruth to truth.

6. ‘No doer of good ever ends in misery’. Good actions always produce good results and evil actions produce evil results.

7. Take the best from the western models of efficiency, dynamism and excellence and tune them to Indian conditions.

Arguments against Business Ethics

Businesses are not real: They are conceptual, abstractions. The big change that moved us towards the huge multinational businesses we see today was the legal decision to allow businesses to be treated as their own entities and we should honour that separation.

The same is true of government when people talk about government morality.

The sole purpose of any business is to make money.

The sole purpose of a government is to retain stability, order and retain power.

Ethics are personal. This is not to say they aren’t important, they are. They should be venerated to the degree that wealth and youth are in western society, even if they aren’t.

Businesses and democratic governments are abstractions we created to fulfil human needs and desires. We want to have lots of money and not have a dangerous, chaotic environment.

Politics and business leverage evolution. We have created artificial environments with artificial rewards. Organisms that can’t get enough food, keep themselves safe and attract a mate die. This works remarkably well and has for a very very long time. It is the only successful way to create an efficient economy that can improve quality of life, alternatives like communism fail in the large scale because they can’t provide this evolutionary simulation.

Business has a clear metric – money. If you make a profit you survive, if you don’t you ‘die’ (bankruptcy). Businesses can breed (merge), they can grow. A characteristic of any living organism has to be passed on through breeding but business ideas that work spread regardless. Think agile programming, or the idea of specialisation at work even at a more basic level. Businesses that implemented them had a greater chance of success, more of them survived. Now most surviving businesses implement them.

So where does ethics come in? Two places. Businesses should be ethical if it makes them money. There are defined markets for ethical goods. People are attracted by fair trade labels, they will (sometimes) pay more to know the workers who made their clothes live acceptable lives.

The second is people in the business. They have the responsibility to ethical because they are people, real people, not abstract concepts.

Which has two implications:

1. People should not be overly celebrated for being rich. This is not a virtue.

2. People should be celebrated for their ethics.

The reverse obviously being true for companies.

The problem is a western culture that overvalues entrepreneurs, apologies entrepreneurs. There are many dangerous side effects of this.

When evaluating the success of a company you might say how wonderful apple is for example. They hit the $1 trillion valuation today. You remark about how great their profit margins are. How wonderful they are at marketing their products. How good they are at turning relatively cheap hardware into a product that feels and seems to react in a premium way. How good they are at trapping people in their ecosystem.

But there is no point judging apple by its ethics because it isn’t designed to be ethical.

But this DOESN’T transfer to the person in charge, or the people in charge. It is strange. Why judge those peoples success on their ability to generate wealth, which is their profession and not judge an engineer by his ability to write code or build bridges? It doesn’t make any sense. Someone making lots of money is neither good nor bad. Whether they make that responsibly is entirely different.

People whinge all the time about businesses not being ethical, when it isn’t their purpose to be ethical. It is, purely, people shirking their responsibility to exercise ethics. You can’t defer the problem by blaming these other entities. That leads to the weak thinking that there is no point trying to be ethical because these huge entities are evil and have all the power.

The key for people is to remember you have no control businesses or anyone else, all you can do is attempt to exercise self control and act ethically, as well as encourage everyone else to do the same. This applies at work and at home

The key for business ethics is for the workers to exercise ethics and to remember that the business is the abstract concept, made of people making decisions. It is NOT the case that you are just ‘a cog of the system’ and thus your role is purely profit driven, because it isn’t the case.

Whether or not the company is considered “ethical” with the positive connotation we normally give this word is another matter that involves judgments based on morality. Such a label is subjective, but the business community, as a whole, looks at key factors to decide whether or not a business is practicing good business ethics:

• Business structuring

• Moral decision making

• Ethical business principles

One of the foundations of business ethics is the theory of utilitarianism. Utilitarianism states that, when weighing all options, the option that produces the greatest net benefits for the least net cost, is the most ethical option. Which factors are considered in this cost/benefit analysis, however, could greatly skew the results one direction or another. Successful companies recognize the need for fair and responsible ethical behavior, not just from a moral standpoint, but from a business standpoint, as well.