Business Ethics and Issues Essay
Business Ethics and Issues
Ethics is a branch of philosophy which seeks to find answers about the moral concepts like bad, good, evil, right, wrong, etc. According to OEC (2011) ethic is defined as “a moral philosophy which is concerned with what is right or wrong, good or bad, fair or unfair, responsible or irresponsible, obligatory or permissible, praiseworthy or blameworthy”. Many scholars have associated it with the various feelings and emotions like guilt, indignation, empathy etc. The ethics deals in the way of doing things and with the generalized matters related to the public policies and the personalized issues. It is based on the social practices and laws, religious matters and conscience. These social practices give strength to this branch of philosophy. It seems to be very general matter but due to its connection to various social issues, it is often termed to be very complex and difficult to employ. With the passage of time, many companies have started giving importance to the corporate ethics and their responsibility towards the society and communities. Today, many businesses have gained lot of reputation and recognition by being in business and following the morals when conducting their business activities while many others have lost their reputation only because of bad business practices. To many, business is an economic activity to maximize their profits and the main focus for them behind this activity is money. There is nothing wrong with the money itself but the some businesses acquire money and gain profits matters most and their manner raises several questions related to the ethical behavior. Business Ethics
Business ethics strives to understand whether or not a specific business practice is morally and ethically acceptable. The American Heritage Dictionary has defined business ethics as “the philosophy of human conduct with the emphasis on determining right and wrong. It specifies the rules or standards governing the conduct of the members of a profession” (Ferrell et al, 2009).
It is necessary for the entrepreneurs to follow good business ethics for
every part of their business. There are several global entities, that offer brands to the public for general and specialized use, are engaged in the bad business practices and many of them have been fined by the related authorities which accounts for millions. The companies are fined due to their failure to adhere to the business ethics and ethical laws. The main problem with these companies is the amount of money they generate is much higher than the fines imposed on them. This outweighs the opportunity costs associated in their business and they happily pays off all the fines. It is therefore necessary for the authorities to force business ethics over all the business entities and their business units. Business ethics can remove the minor issues like the lower wage rates, work force exploitation as well as the big issues like the children in sweat shops making sneakers or footballs for the large companies. The above discussed implications explain some of the important facts related to the business ethics. The importance of ethical business practices is forced by many local, regional and state level governments to the companies. Importance of Business Ethics
Being a good person or a person of values, in one’s own opinion, being a person of good ethical and moral values is not enough in the today’s business scenarios and it is not helpful to handle the issues related to the ethics that may arise in the organizations. It is very important for the companies to understand and recognize the relationship between the decision related to ethics and the legal aspects of business organizations.
The importance of business ethics was first recognized, during the 1960’s, when the social issues in business rise to large extent in the American societies. There were increased issues related to the public safety, and ecological problems related to the pollution, waste management system, disposing the toxic wastes etc. in these societies. The then president of America, John F. Kennedy, gave a special message to the general public and the companies to safeguard the consumer rights of safety, the right to be informed and right to choose, which is widely known as consumer bill of rights. In the late nineties, business ethics became an emerging field in the societies. Lot of emphasis on this field was placed by the theologians and philosophers who suggested that some of the principles of ethics are
applicable to business activities. This gave rise to the academic and research writings about Corporate Social Responsibility of a company (Ferrell et al, 2009).
The importance of ethical practices can be recognized by considering the fact there is an international Federation Sentencing Guidelines for Organizations (FSGO) which was established in late 90’s to set the standards and code of conduct for the companies working in the business environments. There are ten basis guidelines for the organizations specified by FSGO which must be followed by the companies in order to remain ethical in the business (Ethics Resource Center, 2005). Ethical Issues in Business
Due to increased emphasis on the business ethics over last three decades, this field is suffering and is troubled by the lack of proper directions and is struck, just like Alice in the wonderland, in the issues like logic, reasons etc. Much of the research emphasis is given on the two basis approaches to understand the relationship between ethics and the business practices. These approaches used by the researchers are termed as normative approach and empirical approach (Donaldson and Dunfee, 1994). The past conception of the companies about the ethical issues in business was related to the administration of rules, regulations in the organizations and making sure that the people are complying with these rules or adhere to the standards set by the organizations to stay ethical. This conception is now nowhere implemented, today, people from the top management level and the business owners have understood that this concept of ethical issues in business is far superior than handling the rules and regulations and their effective implementation. There are wide ranges of issues related to the business ethics currently observed by the market analysts. According to the online report published by UK Energy Saving Website (2011), today, there is wide range of areas listed under the head of ethical issues in business. These issues can be of varying nature ranging from professional ethics which may include the moral duties of engineers, doctors, and architects, lawyers as well as the employee right issues. The issues related to employee rights may further be divided into various categories like issues related to wages, safe working environment, non-discriminatory policies etc. The functional
areas of business like marketing, management, accounts etc. also reported to have ethical business issues.
Due to the varying natures of these issues, it is difficult to conclude whether or not any company or a supply chain partner is adhering to the ethical principles. In the current business environment, the issues like fairness, justice and honesty are the main issues that are posing complex dilemma to the businesses. Any wrong or biased decision can have a profound impact on the goodwill of the company as well as its market position. To deal with such issues, many companies follow the ethical guidelines so that they “do not lose sight on the essential value of fairness. However, if they choose to use legality and profitability as their measurement in determining what is right from wrong then business ethics will surely become irrelevant” (CFA, 2009). Business Function Ethics: Marketing Ethics
Marketing is among the most crucial functions of a business in an organization. The function of this business unit is to provide understanding about the four basic aspects of a business- Product, Price, Place and Promotion. It provides interface to the management related not only to the customers but the other related parties like media, investors, distribution system, supply chain partners, legal framework, as well as others. The importance of marketing ethics is vital to the organization due to the diverse nature of stakeholders associated with this business function (Ferrell, 2007). While Ethic deals in the determination and study of what is right, wrong, good, evil etc., for marketing managers, workplace ethics deals with the rules, regulations, principles for governing the code of conduct of the members of an organization (Ferrell, 2005). Therefore, ethical marketing can be defined as “practices that emphasize transparent, trustworthy, and responsible personal and organizational marketing policies and actions that exhibit integrity as well as fairness to consumers and other stakeholders” based on normative perspective (Murphy et al, 2005). The concept of marketing ethic emphasizes on the practices and standards that are deemed acceptable in the marketing conduct. These operative standards are usually determined by the stakeholders and the organization as a whole which is responsible for the marketing related activities. The
marketing team is required to adhere to these standards and make sure that these prescribed standards are in fit with the societal needs and expectations. According to Ferrell (2005) the ethical marketing practices are most significant in establishing and retaining long term relationship, and development of customer trust. The nature of marketing is very diverse which in turn started large numbers of ethical issues incurred by the businesses today. Key Issues in Marketing Ethics
As the 21st century started, the companies and business started to give more importance to the business ethics due to the various scandals emerge early this century related to Enron, Tyco, and Sunbeam etc. most of the business scandals were related to the accounting frauds or supply chain management. During this phase, the journal of marketing consisted of wide range of articles that were associated not only to ethics but especially to the issues related to business ethics (Klein, Smith and John, 2004). The marketing ethical issues are defined by the stakeholders and the company and therefore these issues must be resolved in the timely manner to improve the level of trust and build long term relationships with these people. Murphy et al (2005) suggested that due to the nature of marketing issues, the marketers are sometimes need to deal with the choices that are subjective and moral in nature requiring them make decision regarding the moral standards. Due to these ethical standards, the companies and their stakeholders must conform to the moral principles. Many companies have started fair trade system to operate ethically with their supply chain partners. For example, the star bucks has started the fair trade system to engage with their farmers by offering right prices and maintaining business relations as well as direct purchasing options (Starbucks, 2011). When applying ethics to the marketing practices some factors are important to be considered. First, the marketers should understand the objectives of the company. Second, they must balance the marketing practices with the objectives of the company. The balancing may involve compromise at any point of business or tradeoffs (Ferrell, 2007). Most of the marketing ethics are related to the fairness, justice and honesty as well as conflict of interest, fraud, discrimination and privacy etc. Talking about the global business practices, many countries trade departments have established
regulatory groups like better business bureau etc that mainly deals with the issues related to the ethical marketing. The governments have also developed trade commissions that forces laws related to the consumer protection. These government regulated bodies includes Federal Trade Commission, Food and Drug Administration etc. these organizations strives to help the consumer in identifying fraud, deception and public safety. These and many other related agencies focus on identifying the major issues that are of ethical concern for the marketers. Examples of these issues includes the communication practices adopted for marketing, wrong advertising, hidden pricing, wrong information presentation in the internal and external communication system, misleading ads, etc. to deceive the customers (Ferrell, 2007; Leclair, Ferrell and Fraedrich, 1998).
A lot of progress is been made in the field of ethical marketing based on research and theory. In order to obtain promising results various codes of conducts have been developed by the organizations like American Marketing Association, Marketing Research Association etc. which has elevated the marketing practices. Moreover, many organizations have developed code of ethics which helps them address various marketing practices related ethical risk areas.
CFA (2009) Ethical Issues in Business and the Importance of Ethics, retrieved on July 29, 2011 from http://cfagbata.com/ethical-issues-in-business-and-the-importance-of-ethics/ Donaldson, T. and Dunfee, T. W. (1994) Toward a unified conception of business ethics: integrative social contracts theory, The Academy of Management Review, Vol. 19, No. 2, pp.252-284 Ethics Resource Center (2005) Federal Sentencing Guidelines for the organization, ethics org, retrieved on July 29, 2011 from http://www.ethics.org/resource/federal-sentencing-guidelines
Ferrell, O.C. (2005). A Framework for Understanding Organizational Ethics. In Business Ethics: New Challenges for Business Schools and Corporate Leaders. R.A. Peterson and O.C. Ferrell, (eds.) Armonk, New York: M.E. Sharpe, 3-17.
Ferrell, O. C. (2007) nature and scope of marketing ethics. In G. Gundlach, L. Block & W. Wilkie (Eds), Explorations of marketing in society, Mason, OH: Texere/ Thomson South Western Ferrell, O. C., Fraedrich, J. and Ferrell, L. (2009) Business Ethics: Ethical Decision Making and Cases, 7th edition, USA: South Western Cengage Learning Klein, J.G., N.C. and John A. Smith. (2004). Why We Boycott: Consumer Motivations for Boycott Participation. Journal of Marketing, 68 (3): 92-110. LeClair, D.T., O.C. Ferrell, and J.P. Fraedrich. (1998). Integrity Management: A Guide to Managing Legal and Ethical Issues in the Workplace. Tampa, Florida: University of Tampa Press. Murphy, P.E., G.R. Laczniak, N.E. Bowie, and T.A. Klein. (2005). Ethical Marketing, Upper Saddle River, New Jersey: Pearson Prentice-Hall.
OEC (2011) Defining Ethics and Morality, OEC org, retrieved on July 29, 2011 from http://www.onlineethics.org/Education/precollege/scienceclass/sectone/chapt2.aspx UK Energy Saving (2011) Ethical Issues in Business, retrieved on July 29, 2011 from http://www.uk-energy-saving.com/ethical-issues-in-business.html Starbucks (2011) Fair Trade, retrieved on July 29, 2011 from http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf
1. Business Ethics Cases:
http://www.scu.edu/ethics/practicing/focusareas/cases.cfm?fam=BUSI 2. Performance Appraisal case:
http://www.scu.edu/ethics/dialogue/candc/cases/performance.html 3. Applied Ethics Resources:
4. Business Ethics:
5. Cutting-edge issues in business ethics: continental challenges to tradition: http://books.google.com/books?id=RsBfMI6di8gC&pg=PA87#v=onepage&q&
;f=false 6. A companion to business ethics:
http://books.google.com/books?id=PDXVnfyKHBIC&pg=PA178#v=onepage&q&f=false 7. Harvard Business Reviews: Business Ethics:
http://www.businessweek.com/managing/company/business_ethics/ 8. Business Ethics and Stakeholder Analysis:
http://www53.homepage.villanova.edu/james.borden/vsb1001/Goodpaster.pdf 9. Ethical Decision Making
10. Importance of Ethics in Business
http://www.accountantnextdoor.com/importance-of-business-ethics-importance-of-ethics-in-business-investment/ 11. The Critical Importance of Business Ethics For Effective Leadership http://www.businessexpertwebinars.com/content/view/471/29/
12. Business Ethics Manual