What are Business Ethics its Principles, Dilemmas & Concepts?
🤔 What is Business Ethics? (Definition & Origin)
The word “ethics” comes from the Greek word “ethos,” which means “character.” Ethics is a branch of philosophy that deals with human character and conduct. It’s the discipline of defining “what is good and bad” and “what is right and wrong” in our behavior.
Business Ethics is simply the application of these ethical principles to the business world. It is the systematic study of moral and ethical matters that arise in business, industry, and related activities.
In short, as defined by Cater Mcnamara:
“Business Ethics is generally coming to know what is right or wrong in the workplace and doing what is right.”
It covers a wide range of potentially controversial subjects, including:
Corporate Social Responsibility (CSR)
Insider trading
Bribery
Discrimination
Fiduciary (trust-based) responsibilities
✨ The Nature & Characteristics of Business Ethics
Business ethics can be understood through its key features:
Code of Conduct: It’s a set of “do’s and don’ts” that tells businessmen what they should and should not do for the welfare of society.
Based on Moral & Social Values: It is built on principles like self-control, consumer protection, service to society, and fair treatment of all.
Provides a Basic Framework: It gives the social, legal, and economic limits within which a business must operate.
Protects Social Groups: It aims to protect various groups (consumers, employees, shareholders, creditors) from exploitation.
Voluntary: For ethics to be effective, they must be accepted voluntarily as a form of self-discipline, not just something forced by law.
Requires Education: Businesspeople must be guided and educated on the benefits of following ethical practices.
Relative Term: Ethics can change from one business to another and one country to another. What is an accepted custom in one country may be taboo in another.
⚖️ The Managerial Dilemma: Profit vs. Social Responsibility
Managers often face a conflict between their commercial concern (profit) and their social concern (welfare). A business’s ultimate goal is profit, but it also has social responsibilities. These two goals often pull in opposite directions.
This is the “Managerial Dilemma.”
For example, using advanced technology is good for productivity, but it may ruin the occupations of local inhabitants.
The Boatman Example: A regional film depicted the plight of an aged boatman whose entire livelihood was transporting people across a river. When a bridge was built, his occupation was threatened.
The Dilemma: Should the community stop technological advancement (the bridge) to protect the man’s job? No.
The Ethical Solution: An ethical company finds a trade-off. The boatman’s trauma should be minimized. An ethical solution would be to provide him with an alternative job on the bridge itself, such as a security guard or toll tax collector.
This same principle applies when companies merge (Mergers & Acquisitions). If two job positions are duplicated, the ethical solution is not just to fire one employee. It is to offer Job Reassignment or Retraining for an alternative role.
An ethical company is one that tries to reach a balance between its economic objectives and its social obligations.
💡 6 Core Ethical Principles in Business (Indian Perspective)
Integrity: Having the courage to do what you think is right, even when there is great pressure to maximize profit instead.
Loyalty: Being trustworthy and loyal to your institution and colleagues. It means safeguarding confidential information and avoiding conflicts of interest.
Honesty: Being truthful in all dealings. This means not deliberately deceiving or misleading others, avoiding partial truths, and not using selective omissions.
Respect and Concern: Being compassionate, kind, and caring. It means showing respect for the dignity, privacy, and rights of all people (employees, customers).
Fairness: Being just and equal in all dealings. This means not using your power in an indecent way, not taking undue advantage of others’ mistakes, and being open-minded.
Leadership: Being an ethical role model for others. Leaders must be aware of their responsibilities and opportunities, setting a positive example for everyone in the organization.
🏛️ 6 Key Reasons Why Business Ethics is Important
Meets Basic Human Needs: People want to be part of an organization they can respect and be proud of.
Builds Public Credibility: A company known for its ethics gains public trust. People are more likely to buy products from a company they believe is honest.
Builds Employee Credibility: When employees are proud of their company’s values, it creates loyalty and common goals.
Leads to Better Decision Making: Ethics forces management to consider all aspects of a decision—economic, social, and ethical—leading to better long-term results.
Improves Profitability: In the long run, ethical companies are more successful. They build a loyal customer base, even if it costs them more in the short term.
Protects Society: Ethics can protect society in ways the legal system cannot. An ethical company will choose not to harm society, even if it isn’t strictly illegal.
🗺️ Basic Concepts & Scope of Business Ethics
Ethical issues can arise at three levels:
Macro Level: Issues in the political, economic, and legal environment where business operates.
Corporate Level: Issues related to a specific company.
Individual Level: Issues related to the conduct of a single person within a company.
Here are some basic concepts and the functional areas where ethics applies:
1. Ethics in Finance & Compliance
Compliance is about obeying rules. An ethical company obeys the law not out of fear, but out of a desire to do the right thing.
Key Issues:
“Window dressing” (misleading financial analysis).
Insider trading.
Bribery, kickbacks, or fake reimbursements.
2. Ethics in Human Resources (HR)
This covers the ethical issues in the employer-employee relationship.
Key Issues:
Discrimination (based on age, gender, race, etc.).
Sexual harassment.
Employee privacy (e.g., workplace surveillance).
Workplace safety.
Whistle-blowing (exposing company wrongdoing).
3. Ethics in Marketing
This deals with the moral principles behind marketing and advertising.
Key Issues:
Misleading advertisements.
Price fixing (colluding with competitors).
Unsafe products or materials.
Marketing harmful products (e.g., to children).
4. The Concept of “Moral Rights”
A moral right is a person’s claim to something.
Negative Rights: Duties on others not to interfere with you. (e.g., your right to express your opinion).
Positive Rights: Duties on others to provide you with something. (e.g., your right to an education, which the university must provide).
5. The Concept of “Justice”
Justice refers to the fair allocation of benefits (e.g., wealth) and burdens (e.g., work). Key theories of justice include:
Egalitarianism: Every person should be given exactly equal shares.
Utilitarianism: Distribute resources to create the greatest benefit for the greatest number of people.
Capitalist Justice: Benefits should be proportionate to a person’s contribution.
Socialist Justice: Burdens should be distributed based on ability, and benefits should be distributed based on needs.