Business Ethics Definition

The word “ethics” is basically derived from a Greek word “ethos” which means “character”. Ethics can be defined as the moral values, by which the behavior of people can be judged. This set of social standards or values guides a person to behave and also to recognize responsibilities. Ethics are not a goal but it acts as a guideline for an individual.
The ethics can vary and factors like history, gender, race, language, environment, government, politics, economics, stability and religion can affect ethical values. Ethics is not an exact or strict set of values instead it is decided by the people according to their own religion, environment and standards. (Ethics, 2001)
How to behave towards any one is obviously a matter to think; whether to be friendly or reserve; whether to say true or lie and many other such decision that allows one to act with himself or with others comes under there moral and ethical values of a person. Morality can be the second name for ethics. Ethics is code of conduct or standards that is accepted by the public and they consider them to be right. This code of conduct is simply a compilation of rules that is then necessary to be followed by the members of any organization, society or company for which it has been set for.  (Business ethics, 2008)
Business Ethics:
Business ethics can be defined as written or unwritten codes of conduct and values that are then followed by the organization or company for taking decisions. Business ethics is a behavior that is adhered by a business in its daily dealings with the world. The ethics of any particular business can be diverse and can not be applicable over all businesses. Business ethics allows determining the process of performing different acts according to the set of values that are usually predefined.
In the world of business these standards or values are helpful for analyzing that the decision is good or bad. According to Drucker, the concept of business ethics is being able to look at your face in the mirror. The codes of conduct makes it easy to decide what should be done, when should be done and how should be done. The term business ethics is applied over an individual of an organization or over the whole organization. (Mary Gormandy White, n.d.)
Ethics in business is just the application of predefined values or standards in the business environment. These values or rules are applied in their day to day operations as well as in formulating their strategies. In today’s world the trend of doing business is increasing and the value of ethics in business can not be ignored.
It is necessary for the success and image of organization that it has strong codes of conduct and ethical values. Consumers and customers also want good behavior and morality so it is just like a pressure on today’s business that they have to set ethical policies. For getting more customers the organizations not only have to make codes of conduct but they also have to strictly follow them. (Business Ethics, n.d.)
Many businesses are not having a good reputation just because they are not paying attention towards their ethical values and codes of conduct. It is not enough to just start a business; the main thing is establishing the trust over the consumers and customers. There are many company or business holders that are just concerned with setting up a business and then their only interest is to make money by any means.
They are not interested in gaining the trust of the consumers and customers which is the bottom line. Earning money is not a bad thing but the means by which it is being earned does matter a lot and here the significance and importance of ethical behavior is highlighted. Strong business ethics should be a part of every organization. (Garry Crystal, 2003)
Code of ethics should be easy and well written so that the employees are able to understand it properly. In many of the businesses it is considered that code of ethics makes it easy to ensure that the employees are responsible and are punctual with their work. A business or company that is having some laws or codes of conduct is viewed very much favorably among the public and obviously the presence of code of ethics indicates that the business has a strong and sound decision process. (S.E. Smith, 2003)
History of Business Ethics:
There are many different ways in which the term ‘business ethics’ is used. The history of business ethics vary depending on what is the object that is under consideration and it also depends on the person’s perception. In the age today, every single professional whether he is an accountant or a shop keeper has got some codes of conduct that has to be followed by every one related to the work. But it was not always the same case. Many years ago there was no concept of codes of conduct.
Until about 1800, business or professional ethics was just concerned with character, respect, honor, dishonor, luck, virtue and vice. There was no concept of written or unwritten lawn or rules. All the professionals needed no written instructions and they knew very well that how they have to deal with the consumers or customers. But now ethics is getting to be the key element of any business, company or organization. (Code of ethics: some history, n.d.)
What is Ethical Behavior?
Different people have different perceptions and thoughts that what constitutes the ethical behavior. The provided codes of conduct basically explains that what is legal and what is illegal but the difference between right and wrong is sometimes not so much obvious. In these situations the ethical dilemmas are created. In such situations it should be analyzed that what will be the outcome of the decision that is taken according to the decision making process which is already defined. One way to deal with such dilemmas is to act over the following four way test that is used to evaluate the decisions. There are four questions that comprise of this test:
Is it a truthful decision?
Is this decision fair for everybody that is linked up?
Is it in the benefit of organization?
Is it beneficial to all the other parties that have invested?
If all these questions can be answered in a ‘Yes’ then this is surely an ethical decision and such a behavior will be known as ethical behavior. Another way of knowing that whether your decision is ethical one or not is to question yourself that what would you feel if your friends and family come to know about your decision. Will you be satisfied and proud of yourself? If yes, then it is an ethical decision for sure and in case of no you must rethink about your decision. All these questions are basically the analysis of an employee’s dedication to his work and for sure this analysis would provide the company sincere and devoted employees. (Mary Gormandy White, 2008)
Factors Affecting Business Ethics:
There are many factors that do have a strong effect over the ethical decisions made by the organizational professionals. Few of these factors include:
Culture of the organization.
Official or unofficial policies and standards.
Already existing written codes of conduct.
Norms for acceptable behavior.
Financial system
System for recognizing achievements.
Attitude of organization towards workers and employees.
Procedure of hiring staff.
Behavior of people associated with the business or company..
Emphasis over professionalism.
Decision making process.
Attitude or behavior of company’s head. (Mary Gormandy White, 2008)
Elements of Business Ethics:
For the development of strong ethics and moral values there are four key elements. The first one is the formation of strong codes of conduct. It is necessary to have a set of written laws or rules that can be used to guide every single person that is attached to the company. This written codes of conduct guides that whist should be done and for what they have to work hard. It also gives a picture of company’s leader about the image and objectives of the company.
This code of conduct is therefore very much helpful for the new employees as they get to know that what they have to do and what is their task. Strong codes of conduct need to contain both the general as well as particular values and principles. It is also necessary for the development of any organization that they should rewrite the codes of conduct whenever any updates are needed or whenever there is a requirement of changing the set of values according to some particular situation.
The second key element of developing strong business ethics is to provide training to the employees. This will help in integrating the ethics into the organization. No matter how well written the code of conduct is, if it is not being understood by the employees. Obviously if they are not able to understand it then they would not be able to practice it. So it is an essential element to provide training for the codes of conduct that has to be followed. The training should include the complete explanation of the rules and laws along with the different terms and conditions.
Many of the organization today have training departments that are destined to train the employees about the ethics of that particular organization. It is also a point to be noted that the trainer should himself be very much experienced so that he is able to train the other people efficiently and effectively. If there is no inbuilt training department in any company then it is also possible that the company hires a specialized ethics training company and arranges seminar and workshops for their employees. Most of the companies that are providing the services of giving ethics training are agreement based.
In these workshops and seminars they train the employees about what they should do and what they should avoid. Everyday there are new situations that are being faced by the companies and organization so instead of working over hard and fast rules and training the employees about any particular situation, it would be better to provide them with efficient decision making processes and analytical tools. This type of training is beyond the business level. It is also useful in a person’s daily life and his relations.
The third key element that is necessary for strong ethics is ethics coach. This can also be with in the organization itself or outside the organization. This will be basically a friendly and private resource for the employees that are facing ethical dilemmas. When difficult situations arise that are not being solved by the employee then such a help should be there so that the problem can be discussed. The ethics couch provides counseling to the employees and also provide them advices for their problems.
But the person that is providing this service must have sufficient experience of ethical perspectives, he must have to ability to analyze the things and he should also have strong decision making capabilities so that he can provide an ethical solution to the problem. But in such a case confidentiality is very much required. There are many cases in which the employees want to see the ethics coach; one of the reasons may be that they do not want to get back to their supervisors and ask for help and another can be the stigmatization by the fellow employees for seeking help. The person who is providing help must be very much known to the environment of the company and he must always keep the confidentiality.
The last but the most important key element of strong ethics in business is very much related to the third key element. It is called as anonymous reporting tip line. It provides the employees with a service that if there is any one in the company who misconducts or violates the codes of conduct then any employee who knows about it can report with out the fear of revenge. The name of the employee who has reported against the defaulter will not be disclosed. This service would be a great help to discourage the unethical activities that are being taking place in the company. The most beneficial part of this service is that the name of the person who is reporting will be kept in secret.
In the current age of development in businesses the concentration over the strong ethical values is of much importance. (Matt Pike, n.d.)
Management and Business Ethics:
Setting up of the ethical values and codes of conduct for a particular company, organization or business is the major and most important task of the management. The management has to decide what has to be done and how. If managers show that the most important task is to get profit then obviously the employees will work in that direction. They will never focus the name and respect of the organization but they will just work for earning huge profits.
The management here is responsible for setting up the standards of the company that how the employees have to work and behave. The managers should develop a healthy environment into the organization and should motivate the employees to work according to the ethical values and at the same time the employees should be rewarded for their good behavior. (Alhemoud Ali, 2007).
In order to establish such strong ethical environment in the company the managers should also act on these rules and provide the examples of their own to the employees. The management must follow the laws and principals for maintaining the ethical standards. Because if managers do not follow the rules then the employees will never think that what the policies say and what they are doing. (Mary Gormandy White, n.d.)
Importance of Business Ethics:
Many businesses have seen their downfall just because of lack of codes of conduct and ethical values. Due to the absence of ethical behavior they were never able to build their trust over customers and consumers. If there are ethical misconducts or there is violation of codes of conduct then it can end up the career more quickly. Lying and cheating are the things that are disliked across the world and the presence of such factors in a company or organization indicate that there are mishaps and immortal characters in the company or organization and such ill manners can extend instead of ending up and can affect all the business activities.
In order to take precautions for such activities there must be additional check and balance systems, verification systems and honest as well as strict supervision is also required. A person who follows the codes of conduct and rules in the company would also be good in relations with his friends and family. All the ethical systems are a mixture of moral as well as economic rules so it also makes a person’s character stronger.
A person that is engaged with a company should be very much sincere with his work and he should have precedence to company’s name over his own interests. If an employee works with such dedication then it means he will always work according to the codes of conduct and hence the company will b provided with an efficient and hard working employee. (Michael Mares, 2005)
Many of the people have a concept that establishment and practicing of business ethics is not harassment over business world but it is surely the first step of prevention or the first line of defense. A business can enhance its position in public sector as well as private sector if it has developed a strong set of ethics and codes of conduct. Establishing the rules or laws is not the only point that has to be given importance but it is also necessary that the company’s management should give time and provide training to the employees so that they can understand the codes of conduct and hence can act according to them. All these steps are beneficial for the development of business world. (Michael Mares, 2005)
Alhemoud Ali (2007). Business Ethics – The role of Ethics and Social responsibilities in Management Accessed October 24, 2008
Garry Crystal (2003). What is Business Ethics? Accessed October 24, 2008
Mary Gormandy White (n.d.). A Definition of Business Ethics. Accessed October 24, 2008
Matt Pike (n.d.). Business Ethics Foundations Accessed October 24, 2008
Michael Mares (2005). WebCPA – The Importance of Business Ethics. <> Accessed October 24, 2008
S.E. Smith (2003). What is a code of ethics? Accessed October 24, 2008

Prof. Angela


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