Business Ethics 1a

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What is Ethics? How is ethics related to economics. Why being unethical in doing business

Ethics may be defined as the set of moral principles that distinguish what is right from what is wrong.

Ethics has a twofold objective: it evaluates human practices by calling upon moral standards.

It may give prescriptive advice on how to act morally in a given situation.

Ethics are broadly described in the literature as moral principles about right and wrong, honorable behavior reflecting values, or standards of conduct.

Honesty, openness, responsiveness, accountability, due diligence, and fairness are core ethical principles.

Ethics are a branch of philosophy with no clear-cut definition of what behaviors are ethical and which are unethical when judging one’s behavior.

There is no general or global consensus for defining ethical behavior for individuals, as it may change from time to time and from one place to another place.

There is no universal measure or standard as to what constitutes ethical behavior.

Philosophers and writers viewed ethics as a matter of choice.

Individuals must make choices in their lives. This is important to note—businesses don't make choices. Choices are made or implemented by individuals within the economic enterprise.

People in government make choices, people in educational institutions make choices, people in businesses make choices, people with churches make choices; everyone is forced to make choices, and even the choice not to choose is a decision.

Ethical problems may vary from one person to another according to the factors influencing the Ethical Behavior:

Legal Interpretations: In secular societies, legal interpretations are based upon contemporary values and standards according to time, country or situation.

Organizational Factors: The organization too can affect or influence participant’s behavior based on the degree of commitment of the organization's leader conduct

Individual Factors: Individuals come to work with different values based on the personal values and morals, family influences, peer influence and life experiences.

Ethical issues may vary from one organization to another according to the factors influencing the Ethical Behavior: conflicts of interest, quality control issues, discrimination in hiring and promotion, misuse of proprietary information, abuse of company expense accounts, misuse of company assets, drug and alcohol abuse, environmental pollution, environmental destruction,etc.

Ethics at Workplace Business Ethics

There is increased interaction between the board of directors, audit committees, internal auditors, external auditors, executives, and employees in general regarding ethical conduct in the workplace.

Business ethics are most simply described as: a process of promoting moral principles and standards that guide business behavior.

Code of Ethics

All organizations, regardless of their mission (e.g., profit oriented,

nonprofit) and size (large vs. small), should establish an

“Organizational Ethical Culture.” that means:

(1) Organization, which is defined as a group of individuals or

entities bound to achieve a shared goal;

(2) Ethics, which is honorable behavior conforming to the norm of

the group;

(3) Culture, which is a pattern of shared beliefs adopted by the

group in dealing with its internal and external affairs.

Business Ethics Four different levels of business ethics have been identified based on what type of business and how their actions are evaluated.

1. The society level, which defines ethical behavior and assesses the effect of business on society.

2. The industry level, which suggests that different industries have their own set of ethical standards (e.g., chemical industry vs. pharmaceutical industry)

3. The company level, under which different companies have their own set of ethical standards

4. The individual manager level, at which each manager and other corporate participants are responsible for their own ethical behavior

CONSEQUENTLY, one feasible way to judge ethical behavior is to focus on determinants of business ethics and behavior such as corporate culture, incentives, opportunities, and choices.

Corporate Culture Companies should promote a spirit of integrity that goes beyond compliance.

Incentives Individuals within the company tend to act according to incentives provided to them in terms of rewards and the performance evaluation process.

Opportunities Effective corporate governance, internal controls, and enterprise risk management can reduce the opportunity for unethical conduct.

Choices Individuals, in general, are given the freedom to make choices and usually choose those that will maximize their well-being.

Sense of employee responsibility.Freedom to raise concerns without fear of

retaliation.Managers modeling ethical behavior and

expressing the importance of integrity.An understanding by leadership of the pressure

points that drive unethical behavior.Processes to find and fix these areas of

pressure.

Comply with a written code of business conduct. Provide sufficient training to all personnel within their

organization regarding personal responsibility under the code. Encourage internal reporting of violations of the code with the

promise of no retaliation for such reporting. Self-govern their activities by implementing controls to

monitor compliance with all applicable laws and regulations. Share their best practices in implementing the DII principles

through participation in an annual Best Practices Forum. Be accountable to the public, particularly through the

completion of an annual Public Accountability Questionnaire.

The Greatest Happiness Principle: “Actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness” –John Stuart Mill Happiness                =          pleasure, and the absence of painUnhappiness           =          pain, and the absence of pleasure  Happiness is the only thing that has intrinsic value “pleasure, and freedom from pain, are the only things desirable as ends...all desirable things are desirable either for the pleasure inherent in themselves, or as means to the promotion of pleasure and the prevention of pain.”

Utilitarianism (from the Latin utilis, useful) is a theory of ethics based on quantitative maximization of some good for society or humanity.

It is a form of consequentialism. This good is often happiness or pleasure, Utilitarianism is sometimes summarized as "The

greatest happiness for the greatest number."

The Moral Philosophy of Immanuel Kant

The Ethics of Duty and Reason

German philosopher Concerned with duty and reason Believed that the intentions behind an

action were more important than the consequences.

We cannot predict the consequences so we cannot judge a person good or bad based on the consequences of their actions.

Deon = duty (Greek). A theory based on our duty or our obligation

to do something. This is an approach to ethics that focuses

on the rightness or wrongness of actions themselves, as opposed to the rightness or wrongness of the consequences of those actions

All good moral acts must be grounded in good will.

Good will indicates that the act was carried out with the best of intentions.

Good will indicates a good action not because ultimately the consequences are good but because the intention is good in itself.

Good Will can only result from the proper use of reason

We must eliminate our own desires and needs from the decision and make it in everyone’s best interests

Do not follow gut instincts, they undermine rational thinking.

A moral person is one who acts from a sense of duty and not from what we personally would like to do.

Acting morally amounts to doing our duty regardless of what consequences may follow, even for ourselves.

This is a method based on practical reasoning. An imperative is an instruction or rule we can

work out using our reason A hypothetical imperative or instruction would

compel action in a given circumstance: If I wish to satisfy my thirst, then I must drink something.

A categorical imperative would suggest an absolute, unconditional requirement that exerts its authority in all circumstances.

It is best known in its first formulation:◦ "Act only according to that maxim (rule) whereby

you can at the same time will that it should become a universal law."

This is another word for the categorical Imperative.

It means that we should analyse our choice and ask would it still be a good act if every person on earth were to do it.

It is an a priori argument, meaning that you do not have to experience the action to understand it.

Kant's three significant formulations of the categorical imperative are:

Act only according to that maxim by which you can also will that it would become a universal law.

Act in such a way that you always treat humanity, whether in your own person or in the person of any other, never simply as a means, but always at the same time as an end.

Act as though you were, through your maxims, a law-making member of a kingdom of ends.

We must also respect all others and see people as the purpose of actions not as a means of achieving something.