In r terms, business ethics fundamentally epitomizes the organizations codes of corporate governance. It stipulates the morality standards and behavioral patterns expected of iniduals and the business as a whole. These moral benchmarks can be perceived in terms of the microenvironment and macro environment of the business.
When these four questions can truthfully be answered with a yes, it is likely that the decision is an ethical one.
There have been many instances in the past when businesses experienced catastrophic consequences for ilure to adhere to ethical business practices. News Corp, a New Yorkbased international media company owned by Rupert Murdoch, provides a vivid example of the disastrous consequences of unethical business behaviors. In June , the world was treated to a shock when accusations that the companys team of journalists collected news stories through illegal hacking into telephone communications of unsuspecting victims. The phone hacking conspiracy affected Britains general population as well as the royal mily and prominent celebrities. This scandal was allegedly committed by employees of News International, a subsidiary of News Corp in Britain.
The phrasecorporate social responsibilityis often used in discussions of business ethics. The idea behind this concept is the belief that companies should consider the needs and interests of multiple stakeholder groups, not just those with a direct financial stake in the organizations profits and losses.
When ced with ethical dilemmas, its important to consider outcomes of the decision process. One way of dealing with ethical dilemmas is to use the four way test to evaluate decisions. This test involves asking four questions
According toKirk O. Hanson, a renowned ethics expert who also doubles as the Executive Director of the Markkula Center for Applied Ethics, business ethics is the study of the standards of business behavior which promote human welre and the good.
Companies and business people who wish to thrive longterm must adopt sound ethical decision practices. Companies and people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits. Knowing the difference between right and wrong and choosing what is right is the foundation for ethical decision . In many cases, doing the right thing often leads to the greatest financial, social, and personal rewards in the long run.
Organizations that approach business ethics from a stakeholder perspective consider how decisions impact those inside and outside the organization. Stakeholders are iniduals and groups who affect or who are affected by a companys actions and decisions. Shareholders are definitely stakeholders, but they are not the only ones who ll under the definition of stakeholder.
The prioritization of the shareholder perspective, however, may sometimes compromise business ethics. The perspective, indeed, is influenced by the profitdriven motives that are biased toward the optimization of the interests of shareholders. Such biases can prompt corporate managers to commit or omit extremely consequential actions.
Managers who want employees to behave ethically must exhibit ethical decision practices themselves. They have to remember that leading by example is the first step in fostering a culture of ethical behavior in their companies. No matter what the formal policies say or what they are told to do, if employees see managers behaving unethically, they will believe that the company wants them to act in a like manner.
Business ethics is the accepted set of moral values and corporate standards of conduct in a business organization. The specifics of what this actually means can vary from one organization to another.
The scandal led to the arrest of some of News Internationals top executives while a number of highranking personalities in Britains security enforcement agencies were sent packing. Murdoch and his son, James, experienced more embarrassments when they were summoned for questioning before a committee of the British Parliament. These unfortunate experiences that came out of the phone hacking scandal demonstrate the significance of ethics in business.
There are two schools of thought regarding how companies should approach a definition for business ethics the shareholder perspective and the stakeholder perspective. The underlying frameworks of the shareholder and the stakeholder perspectives are primarily enshrined in the principal objectives and activities of the business.
Business ethics manifests both as written and unwritten codes of moral standards that are critical to the current activities and future aspirations of a business organization. They can differ from one company to another because of differences in cultural perspectives, operational structures and strategic orientations. The guiding framework of business ethics permeates all levels of the organization. It is about having the wisdom to determine the difference between right actions and wrong decisions.
Different people have different beliefs about what constitutesethical behavior. The law defines what is and is not legal, but the distinctions between moral right and wrong are not always so clear. In many situations lines between right and wrong are blurred. Such situations can lead to ethical dilemmas.
Stakeholders may include employees, suppliers, customers, competitors, government agencies, the news media, community residents and others. The idea behind stakeholder based ethical decision is to make sound business decisions that work for the good of all affected parties.
Those who approach ethical decision from a shareholder perspective focus on decisions that are in the owners best interest. Decisions are guided by a need to maximize return on investment for the organizations shareholders. Iniduals who approach ethics from this perspective feel that ethical business practices are ones that make the most money.
Another way of sure decisions are truly ethical is by using the publicity test. Ask yourself how you would feel if your actions were published in your hometown news. If you would be comforle having your parents, grade school teachers, and other people find out what you did, chances are that your decision is an ethical one. However, if you would not want these iniduals to learn about your actions, you probably need to rethink your decision.
A companys managers play an important role in eslishing itsethical tone. If managers behave as if the only thing that matters is profit, employees are likely to act in the same manner. A companys leaders are responsible for setting standards for what is and is not acceple employee behavior. Its vital for managers to play an active role in creating a working environment where employees are encouraged and rewarded for acting in an ethical manner.
The public anger and hostility that soared in Britain within days of the revelations was too unbearable for Murdoch that he ordered the closure of News of the World newss. News of the World, a leading print media that had been in existence for years, was News Internationals flagship brand. News International even abandoned its pursuit of a billiontakeover bid for the British Sky Broadcasting.
In , for example, Enron Corporation collapsed following the revelation of a mega scandal that involved authoring financial reports to hide the companys losses from shareholders. In a bid to please shareholders, the management of the giant energy conglomerate at the time published lse financial information that reported profiility when the company was actually incurring huge losses. Enron finally collapsed in when a whistleblower voluntarily revealed the unethical business practices.A Defidefinition of businessnition for Business Ethics