Business Ethics and Social Responsibility

Business ethics is a form of applied ethics that examines just rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce. Generally speaking, business ethics is a normative discipline, whereby particular ethical standards are advocated and then applied.

It makes specific judgments about what is right or wrong, which is to say, it makes claims about what ought to be done or what ought not to be done. While there are some exceptions, business ethicists are usually less concerned with the foundations of ethics (meta-ethics), or with justifying the most basic ethical principles, and are more concerned with practical problems and applications, and any specific duties that might apply to business relationships.

Business ethics can be examined from various perspectives, including the perspective of the employee, the commercial enterprise, and society as a whole. Very often, situations arise in which there is conflict between one and more of the parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas, it would be bad for the company, society, or vice versa. Some ethicists see the principal role of ethics as the harmonization and reconciliation of conflicting interests.

Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards, as in the case of multinational companies that operate in countries with varying practices. The question arises, for example, ought a company obey the laws of its home country, or should it follow the less stringent laws of the developing country in which it does business?

To illustrate, United States law forbids companies from paying bribes either domestically or overseas; however, in other parts of the world, bribery is a customary, “accepted” way of doing business. Similar problems can occur with regard to child labor, employee safety, work hours, wages, discrimination, and environmental protection laws.

Business ethics should be distinguished from the philosophy of business, the branch of philosophy that deals with the philosophical, political, and ethical underpinnings of business and economics. Business ethics operates on the premise, for example, that the ethical operation of a private business is possible — those who dispute that premise, such as libertarian socialists, (who contend that “business ethics” is an oxymoron) do so by definition outside of the domain of business ethics proper.

The philosophy of business also deals with questions such as what, if any, are the social responsibilities of a business; business management theory; theories of individualism vs. collectivism; free will among participants in the marketplace; the role of self interest; invisible hand theories; the requirements of social justice; and natural rights, especially property rights, in relation to the business enterprise.

Business ethics is also related to political economy, which is economic analysis from political and historical perspectives. Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses from economic activity, and is the resultant distribution fair or just, which are central ethical issues.

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How to Build a Stronger Business? Align Your Business Ethics With Your Business Culture

Business code ethics need to be part of your organization’s culture; and recent business ethics cases prove that need. Stories of large business fraud to small business embezzlement are being reported with ever-increasing frequency; unfortunately business ethics are under attack.

How often in your business day do you need to make decisions? What is the basis for those decisions? Do you have a business vision statement and a mission statement that helps you with your decision making? That is, can you align your decisions to your vision and mission? Many business owners and managers face challenges in making decisions; not because they can’t decide, but because they need to make a decision without an ethical framework.

Developing a business code of ethics is necessary for all business ownership. You need to identify how you want your business to be operated. If you have your ethics code written and available, making tough decisions will become easier.

What should a business code of ethics include?

A focus on the organization’s long-term direction (the vision) and the shorter-term goals (the mission).
Identification of values that are important to the business. A sense of your business culture.
What ethics means to your business: your definition of business ethics.
Acceptable workplace activities and behaviors.
Unacceptable workplace activities and behaviors and the sanctions or consequences that will result if unacceptable behaviors occur.
Orientation and training that will be provided to support the values and culture and ethics of the organization.
The role of communication and ethics: how will employees and other stakeholders understand what you value, or don’t value, without communications.
The relationship and responsibility of the organization within its community.
Industry standards and practices; and how your organization is focused on meeting or over-achieving against those standards.

For the most part we all like to believe that we are ethical in our decisions, and that is likely very true where there are clear-cut right versus wrong decisions. But the bigger challenge lies in making ethical decisions between right versus right options. These types of decisions are often the most difficult.

For example, is it right to continue paying your executives a high salary while you cut the work hours (and therefore the net pay) of your lower-paid employees? Is it right to provide a price discount to one customer but not the other? Is it right to reward one employee with a gift certificate for work well done on servicing a large account when other employees have worked hard to support smaller assigned accounts?

Your code of ethics should be written in clear enough language that these, and other, decisions are easy to make and easy to support. Additionally your ethics code needs to provide a basis or framework for assessment. The framework could be questions to be asked and answered.

For example, if you are faced with a significant issue:

Identify and determine the different points of view on the situation.
Define what the cost is (both tangible and intangible) of the proposed solution(s)?
Affirm that your vision, mission and values statements clearly support your proposed solution(s); in other words, are they aligned? (If the answer to that question is no, then either your solution is wrong or your vision, values and missions statements don’t accurately reflect your culture).
Does the proposed solution or decision ‘do no harm’ (this is the basis for most ethical reasoning)?

Reports of recent business ethics cases highlight the need for businesses to operate in an ethical manner. Your business brand and identity is tightly connected to the values and the ethics you demonstrate, and commit to, in your business. Build a business code of ethics; and make sure you ‘live’ to your code; you will build a stronger, more effective and more sustainable business.

Kris Bovay is the owner of Voice Marketing Inc, the business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses and has worked hard to build a strong reputation for ethical business practices. Kris also teaches a business ethics and practices course at the largest post secondary institution in British Columbia, Canada.

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4 Challenges of ‘Teaching’ Business Ethics

The perpetual drone of news stories describing corporate scandals has lead to criticisms that business schools aren’t doing enough to teach ethics. This criticism is not surprising when you look at the self-interested microeconomic decision-making models we teach based on the rational choice tautology of marginal costs and marginal benefits. Yet, ultimately business is not physics. It cannot be explained with mechanical-mathematical models alone. Business is a social science that includes the values/ethics of individuals in the decision-making process and the actions businesses take. To teach ethics we have to know how these individual values are formed. However, reviewing the theories of value formation leads to one significant concern for those who wish to include ethics education in the business curriculum: Can ethics be ‘taught’ or only ‘learned’?

Challenge 1: Inherent Values and Cognition

The Kohlbergian perspective of values development suggests we have certain inherent values that develop with age. Unfortunately this development happens at a very early age and is largely dependent on, and limited by, the individual’s inherent cognitive ability to self-construct categories of ethics (like justice, duty, rights, and social order) and to determine which concepts of ethics are more developed (and therefore better) than others. Kohlberg’s individuals would infrequently be able to reach the level of a highly ethical person and would be more concerned with the macro-ethical formal structure of society (laws, roles, institutions, and general practices) than with treating individuals well and being empathetic. Ethical development would be more of an intrinsic process and not necessarily influenced directly (but perhaps indirectly) by others. In other words it is ‘learned’, but not necessarily ‘taught’.

Challenge 2: Unconscious Schemas

The Neo-Kohlbergian school asserts that most individuals don’t engage in abstract, philosophical thought prior to making a decision. Instead they automatically develop “schemas” that exist in the individual’s head or long team memory and are presumed to structure and guide an individual’s ethical thinking. These schemas are learned and developed over time, but through a largely unconscious process. The good news is others can influence these schemas, but not necessarily consciously.

Challenge 3: Selective Learning

Social learning theory provides more hope that business ethics can be taught. In this theory of values development we learn by observing role models throughout life and use conscious, cognitive processes to determine the values we adopt. The challenge, however, is that observational learning results in selectively and conditionally manifesting the characteristics of the model. In other words, if a university ethics professor is attempting to model ethical behavior through his or her lessons, students will sort through the information and determine which ethical characteristics (if any) they will adopt.

Challenge 4: It’s Voluntary

The problem is we can teach ethics, ethical decision-making, and ethical leadership, but we cannot force learning. Learning ethics under all three theories (and engaging in ethical behavior) has a significant voluntary component. Social learning theory provides the greatest evidence that ethical development is a conscious and ongoing process; yet individuals selectively and conditionally choose the characteristics of the model they wish to adopt, they do not simply parrot ethical behavior. Through the attentional process they determine what information they will pay attention to and extract, whether from role models or professors. An individual might actually choose to adopt the less ethical characteristics of one model rather than higher-level ethics being exhibited by a second model. Self-produced motivational processes are impacted by existing values and previous values formation. These preexisting values can also impact how an individual will transfer observations into ethical rules. In other words, while we can teach, previous learning will impact what an individual pays attention to, adopts, and utilizes. An individual’s existing schemas, learned values, and biases are always present and processing the information being taught to them.

A Final Thought

Teaching ethics is a lot more challenging than simply adding an ethics class to business programs. To ‘teach’ ethics is not enough. We need to convince business people as well as business students, it is in their best interest to learn and execute ethical practices. This happens by holding individuals and companies who engage in unethical practices accountable. The consequences should be so unpleasant that individuals want to learn to do business the right way. If business is a social science, then society must take some responsibility.

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Environmental Ethics and Business Ethics – Why They Must Be Used In Conjunction With Each Other

Ethics plays an ever increasing role in our society today, and environmental ethics and business ethics must be first and foremost. This has become more prevalent in our society today, especially after the Wall Street melt down a couple of years ago, and people have been swindled far too often by unethical business practices. Those unethical business practices have also carried over into environmental ethics, and bad corporate behaviors have contributed to many of our current environmental issues, While Wall Street and profit mongers control much of the business model, they must also include environmental ethics into their corporate strategies. This also boils down to social responsibilities, in that the bad effects of environmental neglect by corporations leads to a high degree of social issues arising from negligent corporate environmental actions.

In 2010 we experienced a wave of environmental disasters, some of which can be attributed to corporate environmental neglect. The BP Oil Spill and the Hungary Red Toxic Sludge Leak were part of world headlines, to name a couple. Weather disasters have also continued to fill the headlines, and not just for sensationalism, but for the true devastation created by these events. Whether or not they are related to climate change will never be determined, as climate change deniers and climate change supporters both will argue the facts until they are dead. Points can be made for both sides, but the point we should focus on is that it is happening, with no end in sight.

Both oil and coal are bad, not only for the environment, but for all living creatures, and they are both highly toxic in their natural raw state. They pollute the air and ground and water, and whether or not they are helping to create these natural disasters should be irrelevant. They are both finite, and will not last forever, and the sooner we rid ourselves of the need for these two demons, the better. While oil and coal companies continue to promote their products, and the best yet is clean coal, which is an unethical definition of something that just isn’t possible, their ethics come into question, especially environmental ethics. Most of the worlds ills are derived from both of these, with oil spills, mining accidents, fires, and now climate change and global warming.

With sound environmental ethics incorporated into the business ethics model, these issues would be addressed and would lead to better social responsibility by the companies that would follow this model. While profits remain king, I see ethical issues arising from this model. Profits are important, but at what cost? The cost for the polluting, poisoning, and now climate change we are experiencing should far outweigh the business needs for a few corporations. As the environmental cataclysm’s mount, so will the costs, in both human and financial numbers, which will by far surmount any profits made by these monomaniacal companies.

Hopefully we can learn from our past mistakes and consider that environmental ethics need to be just as important, if not more important a role as business ethics. Profits are all fine and dandy, and when everyone is making it they usually don’t ask questions about how it was made. I now consider the profits from coal and oil endeavors blood money, earned at the cost and disruptions to hundreds of millions, if not billions of people, up to and including their deaths.

While everyone was more interested in the stock market surges of the ’90′s and other surge periods, we looked the other way when it came to business ethics, and environmental ethics for that matter too. Now we have paid some of the price for this lack of a moral compass, at least financially. Now we are beginning to see the costs mount up for our lack of environmental ethics combined with business ethics, as death tolls and costs mount for the natural disasters we are currently experiencing. More people have died this year alone from natural, or, I would imagine in this case, less than natural disasters than have died in the last 40 years from terrorist attacks.

This bring me to my point, we must develop a plan that all would adhere to that would require businesses to incorporate an environmental ethics plan and include it with their business ethics model. Social responsibility by corporations should no longer be frowned upon, and needs to become the first and foremost priority of the business model for the future. I remember an old saying, do what you love and the money will follow! I can’t imagine anyone loving to hurt, maim, kill, or destroy their own home (Earth), neighbors, both human and animal, and families for generations to come. Now that should be a crime! In fact, in April of 2010, UK Lawyer Polly Higgins proposed to the United Nations that ecocide be recognized as an international Crime Against Peace, alongside Genocide, Crimes of Humanity, War Crimes, and Crimes of Aggression, triable at the International Crime Court. So plans are in the works to deal with these crimes, and criminal actions. Ecocide by the way, according to Wikipedia, the new proposed definition would be: “Ecocide: the extensive destruction, damage to or loss of ecosystem(s) of a given territory, whether by human agency or by other causes, to such an extent that peaceful enjoyment by the inhabitants of that territory has been severely diminished.” Patrick Hossay, a U.S. environmental activist and theorist implies that we are committing ecocide through industrialized civilizations effects on the environment on a worldwide scale.

So, in essence, the current business model doesn’t work anymore, not if we don’t want to destroy what we call home, our planet Earth. We must re-prioritize our responsibilities, and put our homes and welfare first, over greed and profits and the incessant need for stuff. We shouldn’t let the megalomaniacs dictate what is good for us, what we need, and what is good for the planet. We need to rein these folks in, and turn off the addictive, destructive behaviors we are currently engaged in and get a grip on our lifestyles and begin to treat our planet and home with the respect and care that we would our house, car, computer, stereo, iphone, and tv. Environmental ethics must play just as important a role as business ethics if we wish to continue to live in a ‘normal’ world, or at least what we are accustomed to. Without the convergence of these two ethical models, we may as well stick our heads between our knees and kiss our butts goodbye. The good news is that we can use all that blood money from oil and coal to start fires when the next ice age hits.

Brian is a writer, environmentalist, entrepreneur, activist, web developer and consultant. Current projects are related to the environment and creating a better understanding of it’s importance to all of us and to spread the word that it is in all of our best interests not to ignore what we are doing to our home, or think it is okay to dump toxic waste into our drinking water, or poison the air we breath, or the food we eat. There are many issues at stake here, and we must address these now, before we run out of options. There is still time to limit the amount of damage that will occur because of our negligent actions, but that time frame is diminishing with each and every day.

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Business Ethics Must Be Presented, Preserved and Promoted

Business ethics are an almost daily topic in the news, in business schools, in the workplace and in our homes. I pay close attention to business ethics and what is written about them in my daily life as a strategic thinking, planning and business coach. I am still astounded at the remarks of major corporations a few years ago when they said they “waived or suspended” the ethics code or requirements. I am still at a total loss at how anyone can “suspend or waive” ethics.
While I may not be able to explain the suspension or waiving of ethics, I do hope to provide some solid advice on what business and other organizations need to do today to present, preserve and promote ethics in their organizations. Here are ten action items I would recommend:

1. Present ethical behavior as a requirement, not an option. Major business corporations are standing trial, literally and figuratively, for very strong violations of ethics. Acting unethically means that eventually you will be caught. Today is a very opportune time to take advantage of the current business environment to present ethical behavior as a requirement, not an option.

2. Present ethics in all daily interactions with internal and external stakeholders. Unfortunately too many people perceive that ethics only need to be presented to “bad” companies that need to reform. Well, my experience indicates just the opposite. Companies with strong track records of ethical, responsible behavior have the most to gain from a well thought out system to assure the cultivating of ethical corporate culture. Every action by every employee in an ethical culture will reinforce and further the company’s positive reputation.

3. Present the desired ethical behavior in an ethics code of conduct. Ethical conduct of each employee must become a habit of every minute of every hour of every day. No exceptions, no waivers and no suspensions of the ethics code!

4. Preserve ethics to let everyone know ethics is here to stay. While there may be “newcomers” to embracing ethics in business, ethical and responsible conduct have always been the standard at many companies. Even when ethical conduct may fail to improve the bottom line as strongly as desired, the alternative of operating unethically is not a viable option. This commitment will preserve and extend the reputation that has been earned through consistent ethical conduct over time.

5. Preserve an ethical culture that serves as a foundation. If you are not put to a test, then it is easy to say you act ethically. However, what do you do when you are faced with the tough ethical decisions? A very positive affirmation that your ethics program is a success is when there is an embedded culture where people will make the right choices, even when those choices are difficult, inconvenient, or adverse to the short-term interests of the individual or company.

6. Preserve an ethical culture that perpetuates ethics. Consistent compliance with a strong code of ethical conduct will be a major stimulus to having ethics become self-perpetuating. A reversal of behaviors will also occur in that those who speak out against unethical behavior will be the majority, instead of the majority being those who simply ignore and do nothing when they observe unethical behavior. A true ethical culture will evolve into a self-regulating basis on a peer-to-peer level.

7. Promote ethics and their benefits. Too many companies will always look at the cost of something, without looking at the benefits. The same goes for ethics. Too many companies sadly will only look at embracing and enforcing a code of ethics in terms of what it costs, rather than the benefits it will gain. Ethical behavior and a culture of ethics will result in many benefits, including: improved employee relations, enhanced worker productivity, positive morale and an enhanced company image.

8. Promote ethics from the top. If you read Greek history and mythology, you may have come across a well-known Greek saying that a fish rots from the head. In today’s business world, the saying is applicable. The message, spoken and unspoken, from the top is critical to reinforcing positive, responsible, ethical conduct. If top executives and top executive management say one thing but do another, the message of ethical behavior gets very confusing. Top executives need to use their positions in the company to insist on and promote ethical conduct. The top executives must “walk the talk” and hold themselves to the same high standards of ethics they expect of others and demonstrate those high standards in everything they say and do.

9. Promote a company culture where ethics is for everybody. Ethics is not just reserved for your management. It is for everyone, every day. Everyone in your company needs to be trained and persuaded to act ethically. No exceptions!

10. Present, preserve and promote ethics by rewarding ethical behavior. Develop a compensation system that provides a component of benefits and rewards for ethical behavior integrated with performance-based incentives. People who consistently demonstrate they are driven by ethical behavior need to be recognized and celebrated. There must be a clear connection between ethical conduct and potential career advancement. The consequences of a person’s unethical behavior need to be discussed immediately and be accompanied by an alteration to their career advancement within the company.

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