Overview of Business Ethics

Defining Ethics

Ethics are the set of moral principles that guide a person's behavior.

LEARNING OBJECTIVES

• Define ethics and how it applies to organizations
  
  

KEY TAKEAWAYS

Key Points

• Ethical behavior is based on written and unwritten codes of principles and values held in society.
• Ethics reflect beliefs about what is right, what is wrong, what is just, what is unjust, what is good, and what is bad in terms of human behavior.
• Ethical principles and values serve as a guide to behavior on a personal level, within professions, and at the organizational level.

Key Terms

• behavior: The way a living creature acts.
• ethics: The study of principles relating to right and wrong conduct.
• values: A collection of guiding principles; what one deems to be correct, important, and desirable in life, especially regarding personal conduct.

Ethics are the set of moral principles that guide a person's behavior. These morals are shaped by social norms, cultural practices, and religious influences. Ethics reflect beliefs about what is right, what is wrong, what is just, what is unjust, what is good, and what is bad in terms of human behavior. They serve as a compass to direct how people should behave toward each other, understand and fulfill their obligations to society, and live their lives.

While ethical beliefs are held by individuals, they can also be reflected in the values, practices, and policies that shape the choices made by decision makers on behalf of their organizations. The phrases business ethics and corporate ethics are often used to describe the application of ethical values to business activities. Ethics applies to all aspects of conduct and is relevant to the actions of individuals, groups, and organizations.

In addition to individual ethics and corporate ethics there are professional ethics. Professionals such as managers, lawyers, and accountants are individuals who exercise specialized knowledge and skills when providing services to customers or to the public. By virtue of their profession, they have obligations to those they serve. For example, lawyers must hold client conversations confidential and accountants must display the highest levels of honest and integrity in their record keeping and financial analysis. Professional organizations, such as the American Medical Association, and licensing authorities, such as state governments, set and enforce ethical standards.

Example

The concept of corporate social responsibility emphasizes ethical behavior in that it requires organizations to understand, identify, and eliminate unethical economic, environmental, and social behaviors.

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Blurring Ethical Lines

Ethical decisions involve judgments of facts and situations that are subject to interpretation and other influences.

LEARNING OBJECTIVES

• Analyze the gray areas of ethical expectations within the context of corporate decision making and ethical business practice
  
  

KEY TAKEAWAYS

Key Points

• Identifying the ethical choice can be difficult, since many situations are ambiguous and facts are subject to interpretation.
• In organizations, employees can look to the code of ethics or the statement of values for guidance about how to handle ethical gray areas.
• Individual ethical judgement can be clouded by rationalizations to justify one's actions.

Key Terms

• business ethics: The branch of ethics that examines questions of moral right and wrong arising in the context of business practice or theory.
• norms: According to sociologists, social norms are the laws that govern society's behaviors.

Law and ethics are not the same thing. Both exist to influence behavior, but complying with the law is mandatory, while adhering to an ethical code is voluntary. Laws define what is permissible, while ethics speak to what is right, good, and just. Lawyers and judges are responsible for clarifying the meaning of a law when there is ambiguity or when a matter is subject to interpretation. Where ethics are concerned, that responsibility lies with each individual. In organizations, employees can look to the code of ethics or the statement of values for guidance about how to handle ethical gray areas.

Even when an individual has a clear sense of right and wrong, or good and bad, it can be difficult to know what is ethical in a given situation. Ethical choices involve judgment because they involve weighing the potential consequences of one's actions for other people. One analyzes ethical issues by asking questions such as: What could happen? How likely is it to happen? What might the harm be? Who might be hurt? The answers are not always clear cut.

Individual judgments can be influenced, even clouded, by a number of factors. A study by Professor Robert Prentice suggests that self-image can influence an individual's decision -making process, making him or her feel justified in taking shortcuts or doing things that could be seen as ethically questionable. In addition, there are times when people believe that the ends justify the means. In other words, if the result of an action is good, then it is okay if the action itself is unethical.

There is a saying that a good person is one who does good deeds when no one is looking. The same goes with ethical decisions. People who are ethical follow their beliefs even when they believe no one will find out about what they have done. In many cases of ethical breaches in organizations, those who acted unethically likely believed that they wouldn't be discovered. Others may have thought that if the issues were discovered, the actions wouldn't be traced back to them. They had the opportunity to be ethical but chose not to be.