Values n Ethics

8/3/2019 Values n Ethics

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Values and ethics in simple words mean principle or code of conduct that govern transactions; in this casebusiness transaction. These ethics are meant to analyse problems that come up in day to day course of businessoperations. Apart from this it also applies to individuals who work in organisations, their conduct and to theorganisations as a whole.

We live in an era of cut throat competition and competition breeds enmity. This enmity reflects in business operations,code of conduct. Business houses with deeper pockets crush small operators and markets are monopolised. In such

a scenario certain standards are required to govern how organizations go about their business operations, thesestandards are called ethics.

Business ethics is a wider term that includes many other sub ethics that are relevant to the respective field.For example there is marketing ethics for marketing, ethics in HR for Human resource department and the like.Business ethics in itself is a part of applied ethics; the latter takes care of ethical questions in the technical, social,legal and business ethics.

Origin of Business Ethics

When we trace the origin of business ethics we start with a period where profit maximisation was seen as the onlypurpose of existence for a business. There was no consideration whatsoever for non-economic values, be it thepeople who worked with organisations or the society that allowed the business to flourish. It was only in late 1980sand 1990s that both intelligentsia and the academics as well as the corporate began to show interest in the same.

Nowadays almost all organisations lay due emphasis on their responsibilities towards the society and the nature andthey call it by different names like corporate social responsibility, corporate governance or social responsibilitycharter. In India Maruti Suzuki, for example, owned the responsibility of maintain a large number of parks andensuring greenery. Hindustan unilever, similarly started the e-shakti initiative for women in rural villages.

Globally also many corporations have bred philanthropists who have contributed compassion, love for poor andunprivileged. Bill gates of Microsoft and Warren Buffet of Berkshire Hathaway are known for their philanthropiccontributions across globe.

Many organisations, for example, IBM as part of their corporate social responsibility have taken up the initiative ofgoing green, towards contributing to environmental protection. It is not that business did not function before theadvent of business ethics; but there is a regulation of kinds now that ensures business and organisations contributeto the society and its well being.

Nowadays business ethics determines the fundamental purpose of existence of a company in many

organisations. There is an ensuing battle between various groups, for example between those who consider profit orshare holder wealth maximisation as the main aim of the company and those who consider value creation as mainpurpose of the organisation.

The former argue that if an organisations main objective is to increase the shareholders wealth, then considering therights or interests of any other group is unethical. The latter, similarly argue that profit maximisation cannot be at theexpense of the environment and other groups in the society that contribute to the well being of the business.

Nevertheless business ethics continues to a debatable topic. Many argue that lots of organisations use it to seekcompetitive advantage and creating a fair image in the eyes of consumers and other stakeholders. There areadvantages also like transparency and accountability.

Ethics may be defined as the set of moral principles that

distinguish what is right from what is wrong. Ethics has atwofold objective: it evaluates human practices by calling upon

moral standards; also it may give prescriptive advice on how to

act morally in a given situation. Ethics, therefore, aims to study

both moral and immoral behaviour in order to make well-


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founded judgments and to arrive at adequate

recommendations. Sometimes ethics is used synonymously

with morality. An action, which is morally right, is also called an

ethical one. Codes of morality are called ethical codes. Business

ethics can also be defined as business morality.

Business Ethics

Business Ethics is the branch of ethics that examines ethical rules and principleswithin a commercial context; the various moral orethical problems that can arise in

a business setting; and any special duties or obligations that apply to persons engaged

in commerce. Generally speaking, business ethics is a normative discipline, whereby

particular ethical standards are formulated and then applied. It makes specific

judgments about what is right or wrong, which is to say, it makes claims aboutwhat oughtto be done or what ought notto be done. Generally speaking, business

ethics is concerned with the study of what is good and bad, right and wrong, and justand unjust in business.

Ethics is based on a set of moral and ethical values. These valuesmust be absolute - that is, you must take them seriously enough tooverride any human rationalization, weakness, ego, or personalfaults. When all else fails, you will always look back to these core

values to guide you. Unfortunately, life is not that easy and there'salways disagreement about what values should reign supreme.

Luckily, in the world of business ethics, your employer helps you. Ina nutshell, their values are your values (in the context of work).Your freedom to choose your own ethical values is somewhatlimited. Considering the rash of corporate scandals these days, thethought of following the corporation's values might not be toocomforting. Problem: Whose or what values can you trust?

Look behind successful, honest businesses and you will see a set ofvalues that have stood the test of time. Think about how thesevalues are communicated in your organization and what you can doto support them.


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Honesty. The old adage, "honesty is the best policy" is true todaymore than ever. It's not just lip service. Employee manuals frommost scandalized corporations are likely to contain slogans touting

its commitment to honesty. Claiming to be honest in an employeemanual is pass. You're either honest or not. Even if you haven'tgot caught yet, most people know who is and who isn't.

Integrity. Integrity connotes strength and stability. It means takingthe high road by practicing the highest ethical standards.Demonstrating integrity shows completeness and soundness in yourcharacter and in your organization.

Responsibility. Blaming others, claiming victimhood, or passing thebuck may solve short-term crises, but refusal to take responsibilityerodes respect and cohesion in an organization. Ethical people takeresponsibility for their actions. Likewise, actions show the ability tobe responsible both in the little and big things.

Quality. Quality should be more than making the best product, butshould extend to every aspect of your work. A person whorecognizes quality and strives for it daily has a profound sense ofself-respect, pride in accomplishment, and attentiveness that affectseverything. From your memos to your presentations, everythingyou touch should communicate professionalism and quality.

Trust. There's no free ride. Trust is hard to earn and even harder toget back after you've lost it. Everyone who comes in contact withyou or your company must have trust and confidence in how you do

business.

Respect. Respect is more than a feeling, but a demonstration ofhonor, value, and reverence for something or someone. We respectthe laws, the people we work with, the company and its assets, andourselves.


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Teamwork. Two or more employees together make a team. It is abusiness necessity to work openly and supportively in teamswhether formal or informal.

Leadership. How many hardworking, honest employees have beentainted and led astray by corporate leadership failings? Managersand executives should uphold the ethical standards for the entireorganization. A leader is out front providing an example that otherswill follow.

Corporate Citizenship. A foundational principle for every company

should be to provide a safe workplace, to protect the environment,and to become good citizens in the community.

Shareholder Value. Without profitability, there is no company. Everyemployee should understand how he or she fits into the profitabilitypicture. Everyone's common goal should be to build a strong,profitable company that will last.

The real test of these values comes from the resulting action. Ittakes a concerted, company-wide effort, beyond inserting thesewords in an employee manual, to make it happen.

First, management must lead by example. Good ethics should bemost noticeable at the top. Every employee must be accountable tothe same rules.

Second, a corporate values or ethics initiative must be "sold" and"marketed" aggressively throughout a company. Every forum andmedium should be used to spread the good message. Of course, itwill only be credible if the company is practicing what it preaches.


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Third, training must be provided to get everyone on the same page.It's easy to ignore a motivational speech or pass by a poster, butspending time learning about the issues will have a lasting impact.

Fourth, both you and the company must be in it for the long haul.The ethics fervor should extend to the next generation ofemployees. The longer it lasts, the more ingrained the principles willbecome.

Despite failings of some, there is plenty of room at the table forgood ethics and profitable business to reside. Together they can lay

the cornerstone for a secure and prosperous society. These tenvalues you can put in the employee manual and mean it.

Leaders know what they value. They also recognize the importance of ethical behavior. The best leaders exhibit both their valuesand their ethics in their leadership style and actions. Your leadership ethics and values should be visible because you live them inyour actions every single day.

A lack of trust is a problem in many workplaces. If leaders never identified their values in these workplaces, the mistrust isunderstandable. People don't know what they can expect. If leaders have identified and shared their values, living the valuesdaily, visibly will create trust. To say one sentiment and to do another will damage trust - possibly forever. In Trust Rules: TheMost Important Secret, three constructs of trust are explored. Dr. Duane C. Tway calls trust a construct because it is

"constructed" of these three components: the capacity for trusting, the perception of competence, and the perception of

intentions.

Workplace ethics take the same route. If the organization's leadership has a code of conduct and ethical expectations, theybecome an organization joke if the leaders fail to live up to their published code. Leaders that exhibit ethical behavior powerfullyinfluence the actions of others.

Choose Your Leadership Values

The following are examples of values. You might use these as the starting point for discussing values within your organization:

ambition, competency, individuality, equality, integrity, service, responsibility, accuracy, respect, dedication, diversity,improvement, enjoyment/fun, loyalty, credibility, honesty, innovativeness, teamwork, excellence, accountability, empowerment,

quality, efficiency, dignity, collaboration, stewardship, empathy, accomplishment, courage, wisdom, independence, security,challenge, influence, learning, compassion, friendliness, discipline/order, generosity, persistency,optimism, dependability,flexibility

As a leader, choose the values and the ethics that are most important to you, the values and ethics you believe in and that defineyour character. Then live them visibly every day at work. Living your values is one of the most powerful tools available to you tohelp you lead and influence others. Don't waste your best opportunity.


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Characteristics of a Successful Leadership Style

Much is written about what makes successful leaders. I will focus on the characteristics, traits and actions that, I believe, are key.

y Choose to lead.

y

Be the person others choose to follow.y Provide vision for the future.

y Provide inspiration.

y Make other people feel important and appreciated.

y Live your values. Behave ethically. (Current article - you are here.)

y Set the pace through your expectations and example.

y Establish an environment of continuous improvement.

y Provide opportunities for people to grow, both personally and professionally.

y Care and act with compassion.

y Business ethics(alsocorporate ethics) is a form ofapplied ethicsorprofessional ethicsthat

examines ethical principles and moral or ethical problems that arise in a business environment. It

applies to all aspects of business conduct and is relevant to the conduct of individuals and entire

organizations.

y Business ethics has bothnormativeand descriptive dimensions. As a corporate practice and a

career specialization, the field is primarily normative. Academics attempting to understand

business behavior employ descriptive methods. The range and quantity of business ethical issues

reflects the interaction of profit-maximizing behavior with non-economic concerns. Interest in

business ethics accelerated dramatically during the 1980s and 1990s, both within major

corporations and within academia. For example, today most major corporations promote their

commitment to non-economic values under headings such as ethics codes and social

responsibility charters. Adam Smith said, "People of the same trade seldom meet together, even

for merriment and diversion, but the conversation ends in a conspiracy against the public, or in

some contrivance to raise prices."

[1]

Governments use laws and regulations to point businessbehavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and

details of behavior that lie beyond governmental control.[2]The emergence of large corporations

with limited relationships and sensitivity to the communities in which they operate accelerated the

development of formal ethics regimes.[3]

y Business ethical norms reflect the norms of each historical period. As time passes norms evolve,

causing accepted behaviors to become objectionable. Business ethics and the resulting behavior

evolved as well. Business was involved inslavery,[4][5][6]colonialism,[7][8]and thecold war.[9][10]

y The term 'business ethics' came into common use in the United States in the early 1970s. By the

mid-1980s at least 500 courses in business ethics reached 40,000 students, using some twenty

textbooks and at least ten casebooks along supported by professional societies, centers andjournals of business ethics. The Society for Business Ethics was started in 1980. European

business schools adopted business ethics after 1987 commencing with the European Business

Ethics Network (EBEN).[11][12][13][14]In 1982 the first single-authored books in the field

appeared.[15][16]

y Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to

distance themselves from the business scandals of the day, such as thesavings and loan crisis.


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The idea of business ethics caught the attention of academics, media and business firms by the

end of theCold War.[12][17][18]However, legitimate criticism of business practices was attacked for

infringing the "freedom" ofentrepreneursand critics were accused of

supportingcommunists.[19][20]This scuttled the discourse of business ethics both in media and

academia.[21]

y [edit]Overview

y Business ethics reflects thephilosophy of business, one of whose aims is to determine the

fundamental purposes of a company. If a company's purpose is to maximize shareholder returns,

then sacrificing profits to other concerns is a violation of itsfiduciary responsibility. Corporate

entities are legally considered as persons in USA and in most nations. The 'corporate persons'

are legally entitled to the rights and liabilities due to citizens as persons.

y Economist Milton Friedman writes that corporate executives' "responsibility... generally will be to

make as much money as possible while conforming to their basic rules of the society, both those

embodied in law and those embodied in ethical custom".[22]Friedman also said, "the only entities

who can have responsibilities are individuals ... A business cannot have responsibilities. So thequestion is, do corporate executives, provided they stay within the law, have responsibilities in

their business activities other than to make as much money for their stockholders as possible?

And my answer to that is, no, they do not."[22][23][24]A multi-country 2011 survey found support for

this view among the "informed public" ranging from 30-80%.[25]Duska views Friedman's

argument asconsequentialistrather thanpragmatic, implying that unrestrained corporate

freedom would benefit the most in long term.[26][27]Similarly author business consultantPeter

Druckerobserved, "There is neither a separate ethics of business nor is one needed", implying

that standards of personal ethics cover all business situations.[28]However, Peter Drucker in

another instance observed that the ultimate responsibility of company directors is not to harm

primum non nocere.[29]Another view of business is that it must exhibitcorporate social

responsibility(CSR): an umbrella term indicating that an ethical business must act as aresponsible citizen of the communities in which it operates even at the cost of profits or other

goals.[30][31][32][33][34]In the US and most other nations corporate entities are legally treated as

persons in some respects. For example, they can hold title to property, sue and be sued and are

subject to taxation, although theirfree speechrights are limited. This can be interpreted to imply

that they have independent ethical responsibilities.[citation needed]Duska argues that stakeholders

have the right to expect a business to be ethical; if business has no ethical obligations, other

institutions could make the same claim which would be counterproductive to the corporation.[26]

y Ethical issues include the rights and duties between a company and itsemployees, suppliers,

customers and neighbors, itsfiduciaryresponsibility to itsshareholders. Issues concerning

relations between different companies includehostile take-oversandindustrial espionage.Related issues includecorporate governance;corporate social entrepreneurship;politicalcontributions; legal issues such as the ethical debate over introducing a crime ofcorporate

manslaughter; and the marketing of corporations' ethics policies.[citation needed]

....a sting operation, executed by a foreign channel, has brought to the fore, yet again, that unless we do something

Ethics and Values is fading fast and soon going to become extinct from the Corporate World .... in my opinion it would

be the bureaucracy(Govt), and EV (Ethics and Values) which shall spell havoc on the corporate world....


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....irrespective of any profession EV (Ethics and Values) is simply vapourising.... doctors are chopping absolutely

normal limbs (to "convert" these patients into "effective" beggars) for a few thousands, politicians are willing to

transport drugs and top notch defense personnel are approving C grade rations for our soldiers who lay their lives for

us....

...recent incidents in the BPO industry must have put a questionmark in the minds of offshore clients and the industry

into a trauma centre.....Even if it may be a stunt or a sting operation with a malafied intention but the fact remains thatdata has been made available in the past.....and that doesnt speak good for the corporate world....

....the picture is so dismal that nowadays organisations have to hire Information services (Good for them) to check the

credibility of the employees especially at Middle,Senior and definitely at the Top Management.....top jobs are not

available unless the references check out.The recent Job Portals accept profiles only if they come along with at least

3-5 references.....

....in every training project that we have executed the board/top management has always given me requisitions for

people with EV and ambition....Professionals with EV has become a rare specie and therefore shall have an

unprecedented premium and position in the corporate world...but one cannot claim to be practising EV in professional

life and not implimenting it in personal life too....this reminds of a famous caption of a TV Ad...of being a Complete

Man/Woman....

As I always say...

Business ethics is the behavior that a business adheres to in its daily dealings with the world.

The ethics of a particular business can be diverse. They apply not only to how thebusiness interacts

with the world at large, but also to their one-on-one dealings with a single customer.

Many businesses have gained a bad reputation just by being in business. To some people,

businesses are interested in making money, and that is the bottom line. It could be

calledcapitalism in its purest form. Making money is not wrong in itself. It is the manner in which

some businesses conduct themselves that brings up the question of ethical behavior.

Good business ethics should be a part of every business. There are many factors to consider. When

a company does business with another that is considered unethical, does this make the first

company unethical by association? Some people would say yes, the first businesshas aresponsibility and it is now a link in the chain of unethical businesses.

Many global businesses, including most of the major brands that the public use, can be seen not to

think too highly of good business ethics. Many major brands have been fined millions for breaking

ethical business laws. Money is the major deciding factor.

If a company does not adhere to business ethics and breaks the laws, they usually end up being

fined. Many companies have broken anti-trust, ethical and environmental laws and received fines

worth millions. The problem is that the amount of money these companies are making outweighs the

fines applied. Billion dollar profits blind the companies to their lack of business ethics, and the dollar

sign wins.A business may be a multi-million seller, but does it use good business ethics and do people care?

There are popular soft drinks and fast food restaurants that have been fined time and time again for

unethical behavior. Business ethics should eliminate exploitation, from the sweat shop children who

are making sneakers to the coffee serving staff who are being ripped off in

wages. Business ethics can be applied to everything from the trees cut down to make the paper that

a business sells to the ramifications of importing coffee from certain countries.


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In the end, it may be up to the public to make sure that a company adheres to

correctbusiness ethics. If the company is making large amounts of money, they may not wish to pay

too close attention to their ethical behavior. There are many companies that pride themselves in their

correct business ethics, but in this competitive world, they are becoming very few and far between.

there are many ways that people understand business ethics, but not all of them are right. in order toreally understand business ethics, one should go over the examples of Enron, Cadbury, Walmart,Starbucks, etc. This is how one can really understand the need of business ethics and the impact ithas on major businesses.one more thing: business ethics cannot always be seen in a negative perspective. for example, The

Body Shop stopped animal testing and has dedicated itself for the good of the society. that is one

promising business ethic. TAHA

If you personally want others to treat you in the right way that you deserve but not in the wrong way,it means that you want people should treat you in an ethical way.

As such, business ethics are similar. It should treat with others, whether internal or external, in the

right way without crossing the lines, and this means business should be ethical as it exists.

the above article is short but it is good and moral. Business not only for making money it is much

higher than that. It is all about reputation in market, rapport with suppliers of yours and mostly

probably customer count. Always the proverb is true and proves that the customer or client or guest

is treated as God and God is happy, then all is well. Business is a way to make good relations with

all, even if it is concern about finance, relations with supplier or guest or costumer. --Neeraj

business ethics often is an oxymoron. fortunately, there are some businesses that still demand

ethical behavior among its employees, and that's heartening. also, i think one of the number one

priorities is treating employees well, and they are often forgotten by employers.

The vast majority of businesses are ethical. We should not condemn all businesses for the actions of

a few. An honest statistical analysis of good versus bad would confirm this point. Just ask yourself

this question: Are you working for an overtly unethical company? If you answered yes, then you are

part of the problem.

People like milton friedman can be directly held responsible for the business disasters like the

bhopal tragedy and enron scandal, as he believed and propagated the concept that business people

should only make profits as they don't have expertise in social tasks, meaning make profit forget

ethics. This is evident from the unhindered advance of the corporates in exploiting the resources

world over.

Ethics is as much a part of business as oil is a part of water. It is inevitable that a business shouldwork with or against the moral standard. Simply put, a rim of paper here is one less tree there. Morals have no mediation because they measure human emotion. Business is a measure of

quantified values.

In the end, where business is binary, then ethics is analog.


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A business is only as ethical as the people who run it. No, that is wrong. A business is only as ethical

as the bad taste it leaves in your mouth when you've swallowed the good stuff.

Among the many types of business ethics violations are those that create a hostile business

environment, such as the intimidation or sexual harassment of workers. Stealing, lying and

mismanaging funds are included among ethical principals that are sometimes broken within thebusiness world. The violation of many core business ethics, such as wiretapping and bribery, are not

only considered to be poor business conduct, but are also illegal in most jurisdictions.

When businesses adhere to a high standard of professional ethics, consumers tend to feel

comfortable continuing business relationships with them. When business ethics violations occur,

however, the opposite is generally true and companies revealed to have broken core business

values tend to experience public backlash. Additionally, since disregarding corporate ethics can be

illegal, some companies and business executives end up being sued or receiving jail time for

violations. There are, therefore, business ethics violations that are merely breaking a previously

established business code, such as colleagues stealing clients, whereas other violations are actually

criminal offenses.

Some business ethics violations are not so clear cut as to immediately appear to be illegal. In these

cases, a court is often asked to decide whether a violation has occurred or not. In the early history of

music sharing, the issue of ethics and the legalities of sharing music files over the Internet was one

such instance where the actions of sites dedicated to this practice were seen by many to be

engaging in business ethics violations and were left to courts to decide.

It is not uncommon for businesses to establish their own code of ethics of which employees are

expected to adhere. While disregarding such ethics may be cause for dismissal, this type is not

necessarily illegal. An example of this type of violation may include two employees of the same

status within an organization engaging in a consensual romantic relationship despite agreeing to not

do so per a companys ethical standards. Business ethics violations like this often result in thedismissal of one or both employees, but do not typically require either employee to be criminally

prosecuted.

Business ethics violations such as discrimination, safety violations, poor working conditions and

giving away proprietary information often result in a lawsuit against the offender. When successful,

monetary damages are usually rewarded to a victim to dissuade further violations. In an effort to

assure that business ethics violations do not occur, ethical expectations are printed and distributed

to a companys executives and employees.

1

Why Business Ethics?

John Hooker

Carnegie Mellon University

April 2003


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Everyone agrees that business managers must understand finance and marketing. But is

it necessary for them to study ethics?

Managers who answer in the negative generally base their thinking on one of three

rationales. They may simply say that they have no reason to be ethical. They see why they

should make a profit, and most agree they should do so legally. But why should they be

concerned about ethics, as long as they are making money and staying out of jail?

Other managers recognize that they should be ethical but identify their ethical duty with

making a legal profit for the firm. They see no need to be ethical in any further sense, and

therefore no need for any background beyond business and law.

A third group of managers grant that ethical duty goes further than what is required by

law. But they still insist that there is no point in studying ethics. Character is formed in

childhood, not while reading a college text or sitting in class.

These arguments are confused and mistaken on several levels. To see why, it is best to

start with the question raised by the first one: why should business people be ethical?

Why Should One Be Ethical?

There is already something odd about this question. It is like asking, Why are bachelors

unmarried? They are unmarried by definition. If they were married, they would not be

bachelors. It is the same with ethics. To say that one should do something is another way of

saying it is ethical. If it is not ethical, then one should not do it.

Perhaps when business people ask why they should be ethical, they have a different

question in mind: what is the motivation for being good? Is their something in it for them?

It is perfectly all right to ask if there is a reward for being good, but this has nothing to do

with whether one should be good. It makes no sense to try convince people that they should be

good by pointing to the rewards that may follow. One should be good because good is, by

definition, that which one should be.


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As for motivation, good behavior often brings a reward, but not every time. Think about

it. If it were always in ones interest to be good, there would be no need for ethics. We could

simply act selfishly and forget about obligation. People invented ethics precisely because it does

not always coincide with self interest. 2

Doing Well by Doing Good

Although ethics is not the same as self interest, business executives often want to be

assured that it is the same. They want to make certain that one can do well by doing good,

meaning that one can succeed in business by being ethical.

There is no denying that one can often do well by doing good. An ethical company is

more likely to build a good reputation, which is more likely to bring financial rewards over the

long term. But good behavior cannot be grounded in tangible reward alone. People who are

interested only in reward will behave ethically when it suits their purpose, but they will go astray

whenever the incentives change.

There is a deeper confusion here, too. To look to ethics for motivation is to

misunderstand what ethics is all about. It is like studying finance to find a reason to make money.

Finance does not teach one to want to be rich. It teaches one how to be rich, assuming one wants

to be rich. So it is with ethics. Ethics teaches one how to be good, assuming one wants to be

good.

It is important to know that one can normally do well by doing good. Otherwise ethical

people could go into business only with a high risk of failure. Business ethics, however,

addresses the opposite question: how can one do good by doing well? It begins with the premise

that managers want to do something good with their lives and investigates how to accomplish this

through business. In other words, it treats profit and business success as means to a greater end:

making the world a little better.


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The Duty to Make Money

Granting that a business persons ultimate objective is to make the world better, how is

this best achieved? A common view is that it is achieved by making as much money as possible.

The best thing business people can do for society is to be good business people, which is to say,

to maximize the companys profit. They should therefore stick to finance, marketing and

operations management rather than waste time with ethics.

Economist Milton Friedman articulates this view in an essay that is quite popular with

business students, The Social Responsibility of Business Is to Increase its Profits.

1

According

to Friedman, corporate officers have no obligation to support such social causes as hiring the

hard-core unemployed to reduce poverty, or reducing pollution beyond that mandated by law.

Their sole task is to maximize profit for the company, subject to the limits of law and rules of

the game that ensure open and free competition without deception or fraud.

Friedman advances two main arguments for this position. First, corporate executives and

directors are not qualified to do anything other than maximize profit. Business people are expert

at making money, not at making social policy. They lack the perspective and training to address

complex social problems, which should be left to governments and social service agencies.

1

Milton Friedman, The Social Responsibility of Business Is to Increase its Profits, New York Times

Magazine (September 13, 1970). Reprinted in Thomas Donaldson and Al Gini, eds., Case Studies in

Business Ethics, 4

th


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ed., Prentice-Hall (19xx) 56-61. 3

Second, and more fundamentally, corporate officers have no right to do anything other

than maximize profit. If they invest company funds to train the chronically unemployed or

reduce emissions below legal limits, they in effect levy a tax on the companys owners,

employees and customers in order to accomplish a social purpose. But they have no right to

spend other peoples money on social welfare projects. At best, only elected representatives of

the people have such authority. Sole proprietors can spend the companys money any way they

want, since it is their money, but fiduciaries and hired managers have no such privilege. If they

contribute corporate money to arts or community development, it must be with an eye to

increasing profit, perhaps by attracting better employees or improving the companys image. If

they want to contribute to other social causes, they are free to join civic organizations and donate

as much of their own money as they please.

It would be nice if the world were so simple. What happens, for example, when laws

permit anti-social behavior? Should businesses not restrain themselves voluntarily, even if it

imposes a cost on company stakeholders? Friedmans reply is that they must not, again on the

libertarian principles just described. But suppose a hurricane hits a town and cuts off routes to the

outside world. There is a desperate need for portable electric generators, and the only local seller

takes the opportunity to charge an exorbitant price. (Something like this happened when

Hurricane Andrew hit southern Florida.) Since this sort of price gouging is legal, the store

manager has no right, on Friedmans view, to tax the owners by charging less than the market

will bear. He does, however, have a right to ask the buyer to pay more, since the purchase

decision is voluntary in a free market.

This little example reveals two fallacies of Friedmans position. One is the idea that

company officers somehow usurp authority when they act ethically at the expense of owners. To

refute this idea, let us agree that it is wrong for an individual to exploit hurricane victims by


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demanding a high price. (If we cannot agree on this, we can change the example.) Friedman

admits that it is perfectly all right for a sole proprietor to sacrifice potential profit in order to be a

decent human being. But suppose the owner has turned the business over to professional

managers. Does ethical obligation to victims suddenly vanish? Is it permissible for the owner to

exploit victims of disaster through agents, when it would be wrong to do it personally? Of course

not. The owner cannot escape obligations simply by hiring someone to run the business. One

might as well argue that an organized crime boss can avoid responsibility for murder by hiring a

hit man to do the deed. Agents who act ethically at company expense therefore do not usurp the

authority of owners. On the contrary, they carry out duties that the owners are bound to observe,

whether they run the business themselves or through agents.

This is not to say that managers should use company funds to support any cause that

strikes the owners fancy, such as the Irish Republican Army or the Sierra Club. The reason is

that the owners have no obligation as business people to support these causes. They may have

such an obligation as human beings, but it is not part of business ethics. Since owners hire

managers specifically to run a business, they transfer only their business-related obligations, such

as the obligation not to exploit disaster victims by price gouging. Managers must of course know

how to recognize what sorts of obligations are imposed specifically by business ethics. This is

precisely why they should study business ethics as well as finance, marketing and operations!

The second major fallacy in Friedmans position is his misapplication of libertarian

principles. He states that spending the owners money in the service of ethics is coercion and

therefore wrong, while operating in a free market to increase their wealth compromises no ones

freedom and is therefore permissible. The electric generators provide a clear counterexample.

Although no one compels hurricane victims to purchase generators, price gouging is coercive. It 4

forces the victims to choose between paying ridiculous prices and letting a warehouse full of food

spoil. It takes money from them no less surely than lower prices take money from the owners.


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The point is even sharper when a company decimates a community by moving a plant

abroad. No one forced these people to work for the company in the first place. Yet the company

limits their choices by putting them out of work, particularly the older ones, more than it limits

stockholders choices by reducing their dividends. To limit choices is to reduce freedom.

It is clear that maximizing profit can tax the broader community no less than ethical

choices can tax the owners. The business executive has a special obligation to owners, but it is

not grounded in libertarian principles. It is based simply on the fact that the executive acts on

behalf of the owners.

The inadequacy of Friedmans philosophy is particularly evident in international

business, where there are fewer legal restrictions. A famous case study describes how the Nestl

Corporation marketed its infant formula in parts of Africa by hiring nurses in local clinics to

recommend formula over breast feeding. The nurses convinced mothers that using formula was

sophisticated and Western, while breast feeding was primitive and third-worldish. Unfortunately

clean water was often unavailable to mix with the powdered formula, and babies often became ill.

The company continued its marketing efforts despite worldwide protests and relented only after

years of massive consumer boycotts of its products. On Friedmans theory, the companys

intransigence was perfectly justified. Its directors had no right to withdraw a profitable and legal

product, even though it caused innocent babies to suffer, until boycotts changed the financial

equation. Similar examples abound, such as pollution in Nigerian oil fields, worker exploitation

in Southeast Asia sweat shops, and bribery around the world.

There is clearly an important element of truth in Friedmans position. Business people

are not only at their best when making a profit, but in doing so they make an enormous positive

contribution. Although Friedman says little about this in his essay, businesses provide a vast

array of products and services that make life far better for millions worldwide. They can


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accomplish this largely through the expertise of managers who can run an efficient operation in a

competitive environment. The primary ethical duty of managers is to apply their business skills

and keep up the good work. At the same time, however, they must pay attention to whether their

business in fact has this kind of positive effect. They are not experts in social policy, and it is

often unobvious how far their social obligations extend. But this is one reason we have business

ethics.

The Rules of the Game

The task of business ethics, then, is to identify the duties that business people have as

business people. What are these duties? One can begin with the most basic ones mentioned by

Friedman: the duty to obey the law and the rules of the game, which provide for open and free

competition without deception or fraud.

Yet even these basic obligations are disputed. Albert Carrs very popular essay, Is

Business Bluffing Ethical? argues that deception, for example, is a legitimate part of business.

2

Business, he says, is like a poker game. There are rules, but within the rules it is permissible to

2

Albert Z. Carr, Is Business Bluffing Ethical, Harvard Business Review (January-February, 1968) 2-8. 5

bluff in order to mislead others. In fact one must do so or lose the game. The ethical rules of

everyday life therefore do not apply to business.

Using examples from the 1960s era in which he wrote the paper, Carr defends:

food processors that use deceptive packaging of numerous products;

automobile companies that for years have neglected the safety of car-owning

families, as described in Ralph Naders famous book Unsafe at Any Speed;


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utility companies that elude regulating government bodies to extract unduly

large payments from users of electricity.

As long as they comply with the letter of the law, he says, they are within their rights to

operate their businesses as they see fit.

Carr tells of a sales executive who made a political contribution he did not believe in, to

keep an important client happy. When the executive told his wife about it, she was disappointed

with her husband and insisted he should have stood up for his principles. The executive

explained to her how he must humor clients to keep his job. She understood the dilemma but

concluded that something is wrong with business. Carr analyzes the incident as follows:

This wife saw the problem in terms of moral obligation as conceived in private life; her husband

saw it as a matter of game strategy. As a player in a weak position, he felt that he could not afford

to indulge an ethical sentiment that might have cost his seat at the [poker] table.

3

Carr not only expects the executive to make such choices but cautions him not to agonize over

them. If an executive allows himself to be torn between a decision based on business

considerations and one based on his private ethical code, he exposes himself to a grave

psychological strain.

Carr, like Friedman, has a point. Bluffing is expected in many business contexts, no less

than in poker. No one expects negotiators to put all their cards on the table, or advertisers to tell

the whole truth about their product. What the poker analogy actually tells us, however, is that

deception is not really deception when everyone expects it as part of the game. Nobody is

deceived when advertisers say their product is the best on the market; everyone says that. So Carr

does not actually defend deception. Hiding a card up ones sleeve, on the other hand, is truly

deception because it breaks the rules of poker and no one is expecting it. Carr agrees that this sort


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of behavior, which he calls malicious deception, is wrong.

One problem with Carrs poker analogy is that he overextends it. In a poker game

everyone knows the rules, but business situations can be very ambiguous. If a food processor

places false labels on packaging, it is highly unclear that consumers are in on the game and

expect this sort of thing. If Mom and Dad take the kids to school in the family car, it is hard to

argue that they expect the car to be unsafe, as was the Ford Pinto with its famous exploding gas

tank. Such practices are now illegal precisely because they genuinely deceived customers,

sometimes with deadly results.

The example of the political contribution, as well as several others in his article, suggest

that Carr is making an even stronger claim. He seems to argue that the business game justifies a

whole range of activities beyond bluffing, such as perversion of the political process. The

3

Carr, page 8. 6

difficulty with this argument is that it proves too much. It implies that executives can do anything

they want if it is part of a business game in which people play by the rules. But suppose the game

is a shakedown racket, and everyone in town understands the rules: one must pay protection

money or get roughed up by company thugs. This does not make it all right to participate in the

racket, even if it is legal, which it is not. In fact, it is illegal precisely because it is the wrong kind

of game to play.

The unavoidable fact is that some business games are good and some are bad. The right

kind of competition, for example, can allow everyone to come out ahead, while the wrong kind

can be destructive. When one plays the wrong game, then indeed something is wrong with

business. How does one know which game to play? There is a field that deals with this issue,

and it is called ethics.


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Carr compounds his error when he advises executives not to agonize over business

decisions. He is right to say that they must not let personal sentiment cloud their judgment,

particularly when it comes to such unpleasant duties as laying off employees or shutting down a

plant. They certainly should not be paralyzed by indecision and doubt. But they must

nonetheless struggle with the alternatives. Hard decisions are part of life. Sometimes the game

of business requires one to compromise oneself in order to make a larger contribution. Perhaps

the sales executive can promote an exciting new product only by putting up with little indignities

like kowtowing to his clients. But he should never compromise his values without soul

searching, which is to say, without carefully reviewing the ethical situation. Carrs assertion to

the contrary is profoundly unwise.

Why Study Ethics?

Even granting that business ethics is important, many seem to believe that there is no

point in studying the subject. Ethics is something you feel, not something you think. Finance,

marketing, operations, and even business law lend themselves to intellectual treatment, but ethics

does not.

The idea that ethics has no intellectual content is odd indeed, considering that some of the

most famous intellectuals in world history have given it a central place in their thought

(Confucius, Plato, Aristotle, Maimonides, Thomas Aquinas, etc.). Ethics is in fact a highly

developed field that demands close reasoning. The Western tradition in particular has given rise

to sophisticated deontological, teleological and consequentialist theories of right and wrong. No

one theory explains everything satisfactorily, but the same is true, after all, in the natural sciences.

Even when they grant that ethics has intellectual content, people often say that studying

the field will not change behavior. Character is formed in early childhood, not during a

professors lecture.

If the suggestion here is that college-level study does not change behavior, we should


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shut down the entire business school, not only the ethics course. Presumably the claim, then, is

that studying finance and marketing can influence ones conduct, but studying ethics cannot.

This is again a curious view, since ethics is the one field that deals explicitly with conduct.

Where is the evidence for this view? The early origins of character do not prevent finance and

marketing courses from influencing behavior. Why cannot ethics courses also have an effect? 7

Ethics courses have a number of features that seem likely to influence behavior. They

provide a language and conceptual framework with which one can talk and think about ethical

issues. Their emphasis on case studies helps to make one aware of the potential consequences of

ones actions. They present ethical that theories help define what a valid ethical argument looks

like. They teach one to make distinctions and avoid fallacies that are so common when people

make decisions. They give one an opportunity to think through, at ones leisure, complex ethical

issues that are likely to arise later, when there is no time to think. They introduce one to such

specialized areas as product liability, employment, intellectual property, environmental

protection, and cross-cultural management. They give one practice at articulating an ethical

position, which can help resist pressure to compromise.

None of this convinces one to be good, but it is useful to those who want to be good. It

may also improve business conduct in general. How many of the recent business scandals would

have occurred if subordinates had possessed the skills, vocabulary and conceptual equipment to

raise an ethical issue with their coworkers?

Ethics not only should be studied alongside management, but the two fields are closely

related. Business management is all about making the right decisions. Ethics is all about making

the right decisions. So what is the difference between the two? Management is concerned with

how decisions affect the company, while ethics is concerned about how decisions affect

everything. Management operates in the specialized context of the firm, while ethics operates in

the general context of the world. Management is therefore part of ethics. A business manager


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cannot make the right decisions without understanding management in particular as well as ethics

in general. Business ethics is management carried out in the real world. This is why business

managers should study ethics.

One real change that is just starting to develop in the economy is the return of the small, family-owned business.

Ten years ago, these businesses appeared to be fading fast almost to extinction. The Walmarts, Dominos, and

Starbucks of the world were fast conquering their markets. How could the small pizzeria possibly compete with the

advertising, buying power, and brand of these Goliaths? Yet, shifts in technological and generational character are

fueling a renewed interest and growth of the small business.

So what has led to this change? First, the younger generations desire smaller, independent businesses that deliver

not only a quality product and service, but also an atmosphere based on values. Generation Y and X are flocking to

local restaurants or coffee shops that have a certain feel that they enjoy, rather than the fast food, mass

marketed brands. They want to support businesses that stand for something and that demonstrate community

activism and support. Seeing a company give back through volunteerism or money to the community helped

consumers justify spending a little more for the product.

Second, technological developments are leveling the playing field for smaller businesses. The rise of social media,

smartphones and their applications, and organic marketing enables smaller companies to compete with the larger

ones, without requiring the same capital. Since the 1950s, marketing your company meant a Yellow Pages ad, a

mass mail piece, print and air advertising, and then Web and e-mail channels. But now, the development of social

networking and smart phones is bringing back the word of mouth marketing, but on a mass scale.

To take advantage of this growing move toward values-based consumerism, business owners and leaders

regardless of the size of your company need to ensure that your employees know what you stand for, and

exemplify it. If you do not know what you stand for, step back and ask yourself, Why am I doing this? Ask your

staff why they are working for you. And ask your customers why they support your business. Is it price? Feel?

Quality? Without knowing this, you could be missing a real opportunity.

Also, do not just jump into the latest trend currently, Facebook, Twitter, and other social media sites until

you have answered your values question. Otherwise, you may spend dollars in the wrong place. Remind yourself

that you need to know where you are going before you start walking forward.

Sincerely,

Bill Fournet

Date post:	06-Apr-2018
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