Fact Sheet: Business Ethics
1. Introduction & Definition:
Core Idea: Business ethics involves understanding and choosing between right and
wrong in a business context. It's about "doing the right thing" even when it might cost
more or be difficult.
Ethics Defined: The set of moral principles guiding personal, social, and professional
conduct. It involves guidelines for behavior, studying moral choices/values, and
discerning right from wrong.
Business Ethics Defined: Applying ethical principles to business conduct, including
dealing with all stakeholders (customers, employees, suppliers, community, etc.) in an
ethical manner. It involves conforming to the organization's moral and professional
principles.
What Ethics is NOT: Simply judging others, family values, focusing only on outcomes, or
solely legal rights. Legal behavior is not always ethical behavior.
Western Perspective: While no universal global consensus exists (ethics can change with
time/place), core principles often include honesty, openness, responsiveness,
accountability, due diligence, and fairness.
2. Importance & Benefits of Business Ethics:
Builds Trust: Essential for building trust with customers, employees, investors, and other
stakeholders.
Good Image/Reputation: Creates a positive public image.
Attracts Stakeholders: Helps attract and retain customers, employees, and investors.
Legal Compliance: Ensures operations are within the law (a minimum standard). Ethical
behavior often goes beyond legal requirements.
Reduces Costs: Unethical behavior significantly increases the cost of doing business.
Social Responsibility: Fulfills the company's role as a responsible member of society.
Prevents Malpractice: Guides behavior away from harmful actions.
Improves Confidence: Boosts internal and external confidence in the organization.
Survival & Growth: Contributes to the long-term sustainability and success of the
business.
Protects Stakeholders: Safeguards the rights and interests of consumers, employees,
etc.
Healthy Competition: Promotes fair market practices.
Smooth Functioning: Leads to better internal operations and relationships.
Employee Engagement & Satisfaction: Fosters a positive work environment.
3. Ethical Behavior:
Definition: Behavior accepted as good and right within a governing moral code.
Conforming to organizational principles.
Characteristics: Doing the right thing and doing it right; honesty, fairness, equity;
respecting dignity, diversity, and rights; applying and adhering to standards.
Guiding Principles: Developing a 'Moral Compass', following intrinsic (for its own sake)
and instrumental (to achieve another value) values, adhering to the Golden Rule.
Key Areas of Choice: Value of Life, Goodness/Rightness, Justice/Fairness,
Truth-telling/Honesty, Individual Freedom.
4. Organizational Ethics & Culture:
Definition: How an organization ethically responds to internal/external stimuli;
interdependent with organizational culture; expresses the organization's values.
Code of Ethics: A formal statement of ethical principles and rules of conduct. Needed by
all organizations to establish an "Organizational Ethical Culture" (shared goal, honorable
behavior, shared beliefs). Codes are not necessarily universal and require context.
"Tone at the Top": Ethical leadership is crucial. Organizational ethics are the
responsibility of leadership, setting the example is vital but challenging.
Corporate Culture: The values, beliefs, ethics, and attitudes characterizing an
organization and guiding its practices.
Incentives & Opportunities: Pay structures and workplace opportunities can influence
ethical behavior (positive opportunities can reduce unethical acts).
5. Stakeholder Responsibilities:
Employers Owe Employees: Safe workplace/conditions, fair treatment, fair wages,
benefits, privacy.
Employees Owe Employers: Loyalty (to company, brand, customers),
discretion/confidentiality, positive atmosphere, financial integrity, honesty/respect,
responsible criticism/whistleblowing.
Responsibility to Customers: Fair competition, avoiding unethical means (e.g., collusion,
price-fixing), truthful advertising and labeling (e.g., FDA regulations).
Responsibility to Society (CSR): Providing safe products, creating jobs, protecting the
environment, contributing to the standard of living, acting beyond legal/economic
obligations (Ethical & Discretionary responsibilities).
6. Ethical Theories & Frameworks (Brief Overview):
Virtue Ethics: Living to achieve a "clear" ideal.
Utilitarianism: Ethics for the greater good; maximizing positive outcomes for the most
people.
Universal Ethics (Deontology): Certain universal principles apply universally (e.g., never
kill, lie, steal).
Four Views (Managerial): Individualism (long-term self-interest), Moral-rights
(maintaining fundamental rights), Utilitarian (greatest good), Justice (fairness and
impartiality). Note: Weaknesses exist in each theory.
7. Ethical Dilemmas:
Definition: A situation where choices have potential personal/organizational benefit but
may be considered unethical. Creates conflict between values.
Examples: Discrimination, sexual harassment, conflicts of interest, customer confidence
issues, misuse of organizational resources/proprietary info/expense accounts/assets,
quality control issues, pollution, drug/alcohol abuse.
Resolving Dilemmas (Steps):
1. Identify the dilemma.
2. Discover alternatives.
3. Identify affected parties.
4. Analyze consequences (short/long term, benefit/harm).
5. Analyze actions (fair, equal, honest, respectful?).
6. List probable effects.
7. Select the best alternative (one you can live with).
Key Questions to Ask: Is it illegal/against policy? What if everyone did it/how would I
feel? Sacrificing long-term benefits for short-term gains?
8. Unethical Practices (Examples in Promotion/Business):
Lack of clarity in pricing, dumping, price-fixing cartels, deceptive prize claims, "bait and
switch," high-pressure selling, deceptive advertising, counterfeit goods/brand piracy,
irresponsible credit practices.
9. Whistle-blowing:
Definition: Voluntary act by an insider disclosing malpractice or wrongdoing (e.g., crime,
corruption, safety dangers, cover-ups) to the public or authorities.
Purpose: Exposes misdeeds to preserve ethical standards and protect against
harm/illegality.
Protection: Laws protecting whistleblowers exist but vary.
10. Factors Influencing Ethical Behavior:
The Person: Family influences, religious values, personal standards/conscience, desire
for money/power, political views, friends.
The Organization: Policies, codes of conduct, behavior of supervisors/peers,
organizational culture, incentives.
The Environment: Government regulations, societal norms/values, ethical climate of the
industry.
