Ethics

What is ethics?

Ethics is the science of morals in human conduct - i.e. determining what is the right or wrong course of action. In this knowledge bank we are most concerned with business ethics.

Furthermore it is possible to distinguish between business ethics (the discipline described above) and an ethical business (such as The Co-operative Bank) that has decided to place high ethical standards on an equal priority to the pursuit of profit.

Examples of ethical dilemmas

An ethical dilemma involves a situation where a decision-maker has to decide what is the 'right' or 'wrong' thing to do. Examples of ethical dilemmas can be found throughout all aspects of business operations.

Accounting issues:

• Creative accounting to boost or suppress reported profits.
• Directors' pay arrangements - should directors continue to receive large pay packets even if the company is performing poorly?
• Should bribes be paid to facilitate contracts, especially in countries where such payments are commonplace?
• Insider trading, where for example directors may be tempted to buy shares in their company knowing that a favourable announcement about to be made should boost the share price.

Production issues:

• Should the company produce certain products at all, e.g. guns, pornography, tobacco, alcoholic drinks aimed at teenagers?
• Should the company be concerned about the effects on the environment of its production processes?
• Should the company test its products on animals?

Sales and marketing issues:

• Price fixing and anti-competitive behaviour may be overt and illegal or may be more subtle.
• Is it ethical to target advertising at children, e.g. for fast food or for expensive toys at Christmas?
• Should products be advertised by junk mail or spam email?

Personnel (HRM) issues:

• Employees should not be favoured or discriminated against on the basis of gender, race, religion, age, disability, etc.
• The contract of employment must offer a fair balance of power between employee and employer.
• The workplace must be a safe and healthy place to operate in.

Different types of ethics

'Ethics' can be divided into three areas:

• meta-ethics - the study of what is ethical behaviour
• normative ethics - how to arrive at practical standards of ethical behaviour
• applied ethics - applying ethical ideas to specific controversial issues.

Any study of ethics ties in with the religious and cultural background of the society. For example 'Thou shalt not steal' is one of the Ten Commandments of the Christian faith. Meta-ethics would consider whether such a statement is always absolutely true, or whether it is only true relative to some society or culture - for example, was Robin Hood wrong to 'steal' from the rich to give to the poor in medieval England?.

Proponents of business ethics are generally less concerned with meta-ethics and more interested in solving practical business problems.Business ethics is therefore a normative discipline whereby particular standards are set out and obligations are placed on participants in a commercial relationship. Experts in applied ethics can then test whether the normative rules are effective in particular circumstances.

Different approaches to ethics

Approaches to deciding what is "right" or "wrong" include discussion of the following:

(1) The consequences - "the end justifies the means"

(2) The motivation of the parties concerned

(3) Guiding principles - e.g. "treat others as you would like to be treated"

(4) Duties - e.g. based on religious codes

(5) Key values - e.g. the importance of human rights

These are often, but not always, incorporated into legislation.

Different theories of ethics can be found here.

Why business ethics is important

Businesses are part of society. Society expects its individuals to behave properly, and similarly expects companies to operate to certain standards.

Business ethics is important to both the organisation and the individual.

Further topics

Furtehr discussion of ethics can be found using thr navigation bar at the top of the page or the box on the right or by clicking on any of the following links:

• Theories of ethics  
• Ethical decision making  
• Conflicts of interest and ethical threats  
• Professional and corporate ethics  
• Corruption and bribery 

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Tags:	Ethics;business ethics;meta-ethics;normative ethics;applied ethics