CHAPTER 6 BUSINESS ETHICS BASIC CONCEPT OF BUSINESS ETHICS Business ethics refers to standards of moral conduct, behavior and judgment in business. It involves making the moral and right decisions while engaging in such business activities as manufacturing and selling a product and providing a service to customers. Business ethics is an area of corporate responsibility where businesses are legally bound and socially obligated to conduct business in an ethical manner. Business ethics is based on the personal values and standards of each person engaged in business. PURPOSES OF BUSINESS ETHICS Main Purpose The main purpose of business ethics is to help business and would-be business to determine what business practices are right and what are wrong. Hopefully, they are going to use this knowledge to guide them in making the right business decisions. Special Purpose There are other purposes which are corollary to the main purpose. These purposes include the following: 1. To make businessmen realize that they: cannot employ double standards to the actions of other people and to their own actions. To show businessmen that common practices which they have thought to be right because they see other businessmen doing it, ae really wrong. 3. To serve as a standard or ideal upon which business conduct should be based.Business Ethics 105 Except for some country’s organizations, professionals which have formulated and implemented their Code of Ethics, the business world today does not have one universal standard code of ethics, Each man has to evaluate a situation according to his own belief. Often, because there is no code of ethics to guide them, businessmen take actions that may be wrong. Therefore, one of the specific purposes of business ethics is to assist the business world in formulating codes of conduct — personal, company and professional — which can be used as a guide in formulating business plans and strategies and in making business decisions. SCOPE AND IMPACT OF BUSINESS ETHICS. Business ethics covers all conduct, behavior and judgment in business. This includes the slightest deviation from what is right to illegal and dishonest acts that are punishable by law. It involves making the right choices while engaging in such business activities as manufacturing and selling a product or selling and rendering a service. Generally, actions that are not forbidden by law are ethical. In some cases, however, what is legal (not forbidden by law) may be unethical. Business ethics therefore covers even acts that may be legal but which are wrong because they violate ethical principles Business ethics is based on the personal values and standards of each person engaged in business. Since individual values differ, what is ethical or unethical in making profit also varies from person to person. And here lies the problem. There is still no uniform standards of right and wrong from which all busi may base their actions. The businessman who provides fair business competition is the most likely to hical rules of conduct, behavior and judgment. Fair hieving success solely by offering better products, ompetitor. It is a form of business competition observe the business etl business competition means ac! services and terms than the comp ; t where success is gained by the merits of one's goods or services.106 Chapter 6 Economic Impact A business has an economic impact on society through the wages it pays to its employees, the materials that it buys from their suppliers and the prices it charges its customers. It would have a positive social impact on its employees if they are paid fair living wages and benefits. It will have a positive effect on its suppliers that they paid fairly and on time for their supplies. The effect on its customers is positive if the business gives them good value for the price they pay for the products and services. Social Impact The social impact of corporate governance contributes to the ethical climate of society. If businesses offer bribes to secure work or other benefits, engage in accounting fraud or breach regulatory and legal limitations on their operations, the ethics of society suffer. In addition to a deteriorating ethical environment, such as corruption may unfairly raise the price of goods for consumers or the quality of the product or service compromised. Environmental Impact Environmental protection. is a key area of business influence on society. Businesses that implement good environmental policies to use energy more efficiently, reduce waste and in general lighten their environmental footprint can reduce their internal costs and promote a positive image of their company. The environmental initiatives of a business leader often force competitors to take similar action for an increased beneficial effect on the environment. Impact on Business Managers ‘The concepts and principles for the ethical conduct in business are relegated to the managers of the business enterprise. Thus, although the manager is expected to act in the best interest of the business, he cannot be expected to act in a manner that is contrary to the law or to his conscience. In particular, a manager should: * acknowledge that his role is to serve the business enterprise and the community; * avoid all abuse of executive power for personal gain, advantage of prestige;Business Ethics 107 . reveal the fact to his Superior whenever his personal business of financial interests conflict with those of the company; © be actively concerned with the difficulties and problems of subordinates, treat them fairly and by example, lead them effectively, assuring to all the right of reasonable access and appeal to superiors; . recognize that his subordinates have a right to information on matter affecting them, and make provision for its prompt communication unless such communication is likely to undermine the security and efficiency of the business; fully evaluate the likely effects on employees and the community of the business plans for the future before taking a final decision and cooperate with his colleagues and not attempt to secure personal advantage at their expense. ETHICAL CHALLENGES IN TODAY’S WORLD In an article, “Ethical Challenges in Today’s World” written by Ms. Mercedes B. Suleik published in the Business Mirror on February 13, 2018 the author expressed her insights on “Business Ethics” where an inherent conflict between ethics and the pursuit of profit is more pronounced. Cited in this article is the message of Pope Francis in his Ecumenical, Evangeli Gaudium “Humanity is experiencing a turning point in its history as can be seen from the advances occurring in the sciences and technology. We are in ‘age of knowledge and information and that this has led to new and ofien anonymous kinds of power. We have today an economy of exclusion and inequality”. “In a system that idolizes increased profit, everything that stands in its way is pushed aside. Behind this attitude lurks a rejection of ethics Eihics hes come to be viewed with derision as being counterproductive Ethics is felt to be a threat because it condemns the manipulation and debasement of the person arid that ethics leads to a call for a commited response, which is outside ofthe categories of the marketplace,108 Chapter 6 She also quoted Pope Benedict XVI's Encyclical Caritas in Veritate "Humanity has a mission and the means to transform the world in justice and love in human relations, even in the social and economic Sield. Market economics must be underpinned by commitments fo particular moral goods and a certain version of the human person if it is to serve rather than undermine humanity's common good. The economy needs ethics in order to function correctly — not an ethics which is people- oriented.” REVIEW QUESTIONS Questions I 5 What does business ethics mean? What is the main objective of observing ethical behavior in business? Name the other purpose of business ethics. What is the scope of business ethics? Explain the economic impact of observing business ethics. What is the impact of business ethics to society in general? Explain how business managers could act ethically, Describe the inherent conflict between ethics and pursuit of profit.