5.1 Understanding Business Ethics
Ethics is a set of moral standards for judging whether something is right or wrong. The first step in understanding business ethics is learning to recognize an ethical issue. An ethical issue is a situation where someone must choose between a set of actions that may be ethical or unethical. Business ethics are how we ought to conduct business fairly using real-world situations.
Example
But consider the actions of the stranded, hungry people in New Orleans who lost everything in the aftermath of Hurricane Katrina. They broke into flooded stores, taking food and bottled water without paying for them. Was this unethical behaviour? Or what about the small Texas plastics manufacturer that employed over 100 people and specialized in the Latin American market? The president was distraught because he knew the firm would be bankrupt by the end of the year if it didn’t receive more contracts. He knew that he was losing business because he refused to pay bribes. Bribes were part of the culture in his major markets. Closing the firm would put many people out of work. Should he start paying bribes in order to stay in business? Would this be unethical? Let’s look at the next section to obtain some guidance on recognizing unethical situations.
Recognizing Unethical Business Activities
Researchers from Brigham Young University tell us that all unethical business activities will fall into one of the following categories:
- Taking things that don’t belong to you. The unauthorized use of someone else’s property or taking property under false pretenses is taking something that does not belong to you. Even the smallest offence, such as using the postage meter at your office for mailing personal letters or exaggerating your travel expenses, belongs in this category of ethical violations.
- Saying things you know are not true. Often, when trying for a promotion and advancement, fellow employees discredit their coworkers. Falsely assigning blame or inaccurately reporting conversations is lying. Although “This is the way the game is played around here” is a common justification, saying things that are untrue is an ethical violation.
- Giving or allowing false impressions. The salesperson who permits a potential customer to believe that cardboard boxes will hold the customer’s tomatoes for long-distance shipping when the salesperson knows the boxes are not strong enough has given a false impression. A car dealer who fails to disclose that a car has been in an accident is misleading potential customers.
- Buying influence or engaging in a conflict of interest. A conflict of interest occurs when the official responsibilities of an employee or government official are influenced by the potential for personal gain. Suppose an American company awards a construction contract to a firm owned by the father of the state attorney general while the state attorney general’s office is investigating that company. If this construction award has the potential to shape the outcome of the investigation, a conflict of interest has occurred.
- Hiding or divulging information. Failing to disclose the results of medical studies that indicate your firm’s new drug has significant side effects is the ethical violation of hiding information that the product could be harmful to purchasers. Taking your firm’s product development or trade secrets to a new place of employment constitutes the ethical violation of divulging proprietary information.
- Taking unfair advantage. Many current consumer protection laws in Canada and the United States were passed because so many businesses took unfair advantage of people who were not educated or were unable to discern the nuances of complex contracts. Cooling off periods, laws around credit and borrowing, and new regulations on door-to-door sales all resulted because businesses misled consumers who could not easily follow the jargon of long, complex agreements. See Your Rights Under Consumer Protection Act – Misrepresentation for details on consumer rights in Ontario.
- Committing improper personal behaviour. Although the ethical aspects of an employee’s right to privacy are still debated, it has become increasingly clear that personal conduct outside the job can influence performance and company reputation. Thus, a company driver must abstain from substance abuse because of safety issues. Even the traditional company holiday party and summer picnic have come under scrutiny due to the possibility that employees at and following these events might harm others through alcohol-related accidents.
- Abusing power and mistreating individuals. Suppose a manager sexually harasses an employee or subjects employees to humiliating corrections or reprimands in the presence of customers. In some cases, sexual harassment in particular, laws protect employees. Many situations, however, are simply interpersonal abuse that constitutes an ethical violation.
- Permitting organizational abuse. Many U.S. and Canadian firms with operations overseas have faced issues of organizational abuse. The unfair treatment of workers in international operations appears in the form of child labour, demeaning wages, excessive work hours, and unsafe work environments. Although a business cannot change the culture of another country, it can perpetuate—or stop—abuse through its operations there.
- Violating rules. Many organizations use rules and processes to maintain internal controls or respect the authority of managers. Although these rules may seem burdensome to employees trying to serve customers, a violation may be considered an unethical act.
- Condoning unethical actions. What if you witnessed a fellow employee embezzling company funds by forging her signature on a check? Would you report the violation? A winking tolerance of others’ unethical behaviour is itself unethical. (Schwartz, 2015)
After recognizing that a situation is unethical, the next question is what do you do? The action that a person takes is partially based upon his or her ethical philosophy. The environment in which we live and work also plays a role in our behaviour. This section describes personal philosophies and legal factors that influence the choices we make when confronting an ethical dilemma.
Justice—The Question of Fairness
Another factor influencing individual business ethics is justice, or what is fair according to prevailing standards of society. We all expect life to be reasonably fair. You expect your exams to be fair, the grading to be fair, and your wages to be fair, based on the type of work being done.
Today we take justice to mean an equitable distribution of the burdens and rewards that society has to offer. The distributive process varies from society to society. Those in a democratic society believe in the “equal pay for equal work” doctrine, in which individuals are rewarded based on the value the free market places on their services. Because the market places different values on different occupations, the rewards, such as wages, are not necessarily equal. Nevertheless, many regard the rewards as just. A politician who argued that a supermarket clerk should receive the same pay as a physician, for example, would not receive many votes in an election. At the other extreme, communist theorists have argued that justice would be served by a society in which burdens and rewards were distributed to individuals according to their abilities and their needs, respectively.
Utilitarianism—Seeking the Best for the Majority
One of the philosophies that may influence choices between right and wrong is utilitarianism, which focuses on the consequences of an action taken by a person or organization. The notion that people should act so as to generate the greatest good for the greatest number is derived from utilitarianism. When an action affects the majority adversely, it is morally wrong. One problem with this philosophy is that it is nearly impossible to accurately determine how a decision will affect a large number of people.
Another problem is that utilitarianism always involves both winners and losers. If sales are slowing and a manager decides to fire five people rather than putting everyone on a 30-hour workweek, the 20 people who keep their full-time jobs are winners, but the other five are losers.
A final criticism of utilitarianism is that some “costs,” although small relative to the potential good, are so negative that some segments of society find them unacceptable. What if scientists deliberately killed animals by breaking their backs to conduct spinal cord research that someday could lead to a cure for spinal cord injuries? To a number of people, the “costs” of killing these animals are simply too horrible for this type of research to continue.
Following Our Obligations and Duties
The philosophy that says people should meet their obligations and duties when analyzing an ethical dilemma is called deontology. This means that a person will follow his or her obligations to another individual or society because upholding one’s duty is what is considered ethically correct. For instance, people who follow this philosophy will always keep their promises to a friend and will follow the law. They will produce very consistent decisions, because they will be based on the individual’s set duties. Note that this theory is not necessarily concerned with the welfare of others. Say, for example, a technician for Orkin Pest Control has decided that it’s his ethical duty (and is very practical) to always be on time to meetings with homeowners. Today he is running late. How is he supposed to drive? Is the technician supposed to speed, breaking his duty to society to uphold the law, or is he supposed to arrive at the client’s home late, breaking his duty to be on time? This scenario of conflicting obligations does not lead us to a clear ethically correct resolution, nor does it protect the welfare of others from the technician’s decision.
Individual Rights
In our society, individuals and groups have certain rights that exist under certain conditions regardless of any external circumstances. These rights serve as guides when making individual ethical decisions. The term human rights implies that certain rights—to life, to freedom, to the pursuit of happiness—are bestowed at birth and cannot be arbitrarily taken away. Denying the rights of an individual or group is considered to be unethical and illegal in most, though not all, parts of the world. Certain rights are guaranteed by the government and its laws, and these are considered legal rights. Legal rights are to be applied without regard to race, colour, creed, gender, or ability.
“2.1 Understanding Business Ethics” from Introduction to Business by Open Stax- Rice University is licensed under a Creative Commons Attribution 4.0 International License.
