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Business ethics


Business ethics is the field of ethics that examines moral controversies relating to the social responsibilities of business practices, in any economic system. It looks at various business activities and asks "Is this ethicallyright or wrong?"

9 See also:


Topics within this field include deception in advertising , covertmonitoring of employee computers and telephones, insider trading ,disinformation planting, ponzi schemes , employee rights, confidentiality, job discrimination, affirmative action , drug testing, bribery , political contributions , pricediscrimination , product churning , unethical labour practices,retail price maintenance, environmental issues, collusion, grey marketing , patent and copyright enfringement, tort law , negligence , product liability , sexual harassment , accounting accountability, tax avoidance, numerous sales techniques, covertmarketing research, product placement , planned obsolescence , business intelligence gathering, industrial espionage , undercover marketing , kick-backs, sex inadvertising , spamming , telemarketing , payola , pyramid schemes , black market , competitive raiding, corporate crime , union busting, predatory pricing, hostile take-overs , creative accounting , child labour, and whistle blowing. In 2001, theinfamous scandal with Enron in the United States heightened concern about corporate ethics.

Business ethics is closely related to the philosophy of business which deals with the philosophical, political, andethical underpinnings of business and economics. The philosophy of business asks questions like what the social role of businessshould be, if indeed it should have one at all, questions of individualism vs. collectivism, freewill, enlightened self interest,"invisible hand theories", and natural rights.

It is also closely related to politicaleconomy which is economic analysis from a political, normative (rather than positive), and historical perspective.Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses.

Normative business ethics

Business ethics is primarily an applied ethics. It takes ethical concepts and applies them in specific business situations.Like political economy, but unlike the philosophy of business, business ethics is a normative discipline. It makes specificjudgements about right and wrong. It makes claims about what should be done and what aught not to be done. It is less concernedwith explaining or describing ethical events (called descriptive ethics) or analysing ethical concepts to achieve a deeperunderstanding of their meaning and justification (called analytical ethics).

Three levels of application

Business ethics can be applied at three levels; the individual employee, the organization, and the society. Very othensituations arise in which the three levels are not in line. A behaviour many be good for the employee, bad for the company, andgood for society (or some other combination). Some ethicists (in particular Henry Sidgwick) see the role of business ethics asthe harmonization and reconciliation of these three conflicting levels.

An example of an ethical question in business

Disagreements exist within the field regarding whether ethical imperatives imply only compliance with legal standards or goingbeyond such standards. This relates to the broader philosophical question of the appropriate role for business. If the role ofbusiness is to maximize the return of shareholders, then only activities that increase profitability should be encouraged. Thiswould enclude obeying all laws because the consequences of failing to do so could be very costly both in fines and companyreputation. If you see the company as having a social responsibility, then going beyond minimum legal requirements makes sense.It is sometimes claimed that a Gresham's law of ethics applies in whichbad ethical practices drive out good ethical practices. In a competitive business environment, those companies that survive arethe ones that recognize that their only role is to maximize profits.

A related problem is where a company faces multiple legal standards. Problems arise for multinational companies when variousjurisdictions have different legal requirements: Do they obey the laws of their home country, or the less stringent laws of thedeveloping country that they are operating in? For example American law forbids American companies from giving bribesdomestically or overseas. But in some parts of the world, hidden bribes are the way business is conducted. What is the US companyto do? Similar situations occur in regards to employee safety and environmental protection laws.

Ethics statements and ethics codes

Many companies are drafting policies in regards to ethics. When these policies are summarised into a few sentences that givegeneral guidelines they are called ethics statements. When they are itemized in a multi-page list that covers manyspecific situations, they are called ethics codes.

Their purpose is to give employees guidance in ethically ambiguous situations. This should create consistency. It may or maynot raise the level of behaviour, depending on the ethical standands of individual employees relative to the new codifiedstandards.

Not everybody is happy with their use. Some claim that many ethical situations are better dealt with by giving individualsdiscresion and leting them use their best judgement. Many are also skeptical, claiming the main purpose of ethics codes is reallyto limit the companies legal liability. In case of a law suit the company can claim that the problem would not have arisen if theemployee had followed the code properly.

There is often a dissonance between code and practice. Frequently the code will say one thing, but the established practice inthe organization is something quite different. This puts the employee in an untenable situation.

To be successful a code of ethics should:

  • have the support of top management
  • be followed by top management
  • be clearly explained to all employees
  • be practical and realistic
  • include penalties for disobeyance
  • be continuously implemented by a "watchdog committee" that has authority to take disciplinary actions

Ethics officers

Since 2002 many companies have been appointing ethics officers. They typically report to the CEO and are responsible forassessing the ethical implications of the company's activities. They are particularly interested in uncovering or preventingfraudulent and illegal actions. This trend is due primarily to the Sarbanes-Oxley Act in the US. A related trend is the introduction of risk assessment officers thatmonitor how shareholders' investments might be impacted by the companies decisions.

The effectiveness of ethics officers is not yet clear. Generally, when the appointment is made merely as a reaction to theSarbanes-Oxley Act, efficacy will be minimal. This is because ethical business practices emerge from a corporate culture. Acorporate culture eminates with the CEO and is dissiminated through out the entire organization. By itself, the appointment of anofficer to oversee ethics will do little to create a culture of ethical business behaviour: a more systemic programme will benecessary.

Religious views on business ethics

Jewish business ethics

Judaism has an extensive literature and legal code on the accumulation and use ofwealth. The basis of these laws is the Torah , where there are more rules about the kashrut (fitness) of one's money than about the kashrut of one's food. These laws aredeveloped and expanded upon in the Mishnah and the Talmud .

There are sections on business ethics in all the major codes of Jewish law ,including the Mishneh Torah (12th century) and the Shulkhan Arukh (17th century.); a wide array of topics on business ethics arediscussed in the responsa literature.

Rabbi YisraelLipkin Salanter (19th century), founder of the Mussar movement in Eastern European, taught that just as one checks carefullyto make sure their food is kosher, so too should one check to see if their money is earned in a kosher fashion. ( Chofetz Chaim , Sfat Tamim, chapter 5).

Al Chet: Sins In The Marketplace Meir Tamari, Jason Aronson, 1996
The Challenge of Wealth: A Jewish Perspective on Earning and Spending Money Meir Tamari, Jason Aronson, 1995

Christian business ethics

Christianity has an extensive literature on the accumulation and use ofwealth. The basis of this theology is the Old Testament and the New Testament .

Muslim business ethics

Islam has an extensive literature and legal code on the accumulation and use ofwealth. The basis of these laws is the Quran , and they are amplified in the Hadith .

Political views of business ethics

Libertarian socialist view

Libertarian socialists , sometimes known asleft-anarchists, hold that, as Proudhon said, "Property is theft" -- thatis, in reference to the ownership of productive resources, property is not the right to use, but the right to keep others fromusing. Advocates of this philosophy therefore hold the "institution of property", as they sometimes call it, to be immoral initself, so the accumulation of wealth that includes productive resources, especially land ,is also immoral. This means that no business can really be ethical, since the very foundation of business as we know it isprivate property.

See also:

  • Ethics
  • List of business ethics, political economy, andphilosophy of business topics
  • Ethical code


General references

Moral Issues in Business, Vincent E. Barry, Belmont, CA: Wadsworth, 1986
Essays on Ethics in Business and the Professions, Jack N. Behrman, Englewood Cliffs, NJ: Prentice Hall, 1988
Ethical Dilemmas in the Modern Corporation Gerald F. Cavanagh, Prentice-Hall, 1988
Ethics and the Management of Computer Technology: Proceedings of the Fourth National Conference on Business EthicsNational Conference on Business Ethics (4th: 1981: Bentley College) Cambridge, MA: Oelgeschlager, Gunn & Hain, 1981
Above the Bottom Line: An Introduction to Business Ethics Rbert C. Solomon, Harcourt Brace Jovanovich, 1983

Jewish references

You Shall Strengthen Them: A Rabbinic Letter on the Poor Elliot N. Dorff with Lee Paskind, The Rabbinical Assembly, NY
Free Enterprise and Jewish Law: Aspects of Jewish Business Ethics Aaron Levine, Ktav Publishing House, 1980
The Challenge of Wealth, Meir Tamari, Jason Aronson Inc., 1995
With All Your Possessions: Jewish Ethics and Economic Life, Meir Tamari, Free Press, 1987, ISBN 0029321506
Al Chet: Sins in the marketplace, Meir Tamari, Jason Aronson, 1986, ISBN 1568219067

Christian references

Biblical Business Ethics: Exploring Secular Ethical Values & Alternative Christian Approaches, David Bertch,Terry Martin, Dyna Martin, Works Press, 1994. ISBN 0963447238
Business By The Book: The Complete Guide Of Biblical Principles For The Workplace, Larry Burkett, Nelson Reference;Updated edition 1998, ISBN0785271414
God is my CEO: Following God's Principles in a Bottom-Line World, Larry S. Julian, Adams Media Corporation, 2001, ISBN 1580624774
Full value: Cases in Christian business ethics O.F. Williams and J. W. Houck, San Francisco, CA: Harper & Row,1978

Muslim references

Islamic Business Ethics Rafik Issa Beekun, The International Institute of Islamic Thought
Islam and the Economic Challenge M.Umer Chapra
The Problem With Interest Tarek El Diwany
Distributive Justice And Need Fulfilment in an Islamic Economy Munawar Iqbal, The Islamic Foundation, Leicester,U.K.
Islamic Commercial Law: An Analysis of Futures and Options Mohammad Hashim Kamali
Banking Without Interest Muhammad Nejatullah Siddiqi

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