5.5: Personal and Business Ethics

Ethics is the philosophical discipline concerned with what is morally good and bad, and morally right and wrong. Ethics, morals, and values are complex principles. Depending on the person, culture, time, situation, age, gender, business, or context, these concepts can change. People’s morals or ethics are shaped when they are relatively young and are influenced not only by parents but by society, culture, and in some cases by religion as well. Ethics can present challenges, dilemmas, and lapses of judgment. These challenges occur because these influences complicate how people make ethical decisions or think about ethics personally or professionally.

Ideally, prison terms, heavy fines, and civil suits would discourage corporate misconduct, but, unfortunately, many experts suspect that this assumption is a bit optimistic. Whatever the condition of the ethical environment in the near future, one thing seems clear: the next generation entering business, which includes most of you, will find a world much different than the one that awaited the previous generation. Recent history tells us in no uncertain terms that today’s business students, many of whom are tomorrow’s business leaders, need a much sharper understanding of the difference between what is and isn’t ethically acceptable. As a business student, one of your key tasks is learning how to recognize and deal with the ethical challenges that will confront you. Asked what he looked for in a new hire, Warren Buffett, the world’s most successful investor, replied: “I look for three things. The first is personal integrity, the second is intelligence, and the third is a high energy level.” He paused and then added: “But if you don’t have the first, the second two don’t matter”.^[1] As business students, it is important to begin to understand how ethics affects you — what are your ethics like? If you had a compass, where would you fall? Studying ethics will help you understand this.

From a business perspective, ethics is even more complex. How do organizations know how to do the right thing? How do they know how to be socially responsible or how to practice effective corporate social responsibility? Part of this knowledge has to do with the leaders and culture of the organization. Part of the challenge is that things like conflicts occur, such as conflicts of interest, when individuals must choose between taking actions that promote their personal interest over the interests of others or conflicts of loyalty, when individuals have a responsibility to be loyal to a friend, family member, or employer and that conflicts with their ability to act ethically. These types of conflicts present real ethical dilemmas that make it very challenging to figure out how to do what’s right.

It’s in the best interest of a company to operate ethically. Trustworthy companies are better at attracting and keeping customers, talented employees, and capital. Those tainted by questionable ethics suffer from dwindling customer bases, employee turnover, and investor mistrust. Acting ethically in business means more than simply obeying applicable laws and regulations. It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your company, its owners, and its workers. If you’re in business, you obviously need a strong sense of what’s right and wrong. You need personal conviction to do what’s right, even if it means doing something that’s difficult or personally disadvantageous.