Business Ethics

Business ethics is a study concerning the morality that involves business organizations and the activities of its workers.

Why Business Ethics Matter?

Plenty of people question the role of ethics in business practice; as a result, there are two ways of approaching this issue:

1. The positive way
   • Provides reasons to justify the importance of ethics in business
2. The negative way
   • Responds to the objections against the application of ethics in business

Moral Features of Business Acts

Business refers to the activity involving the production and sales of goods and services for the sake of profit. It comes in three forms:

1. entrepreneurship
2. partnership
3. corporation

Business is integral in society for reasons including the following:

1. it creates wealth that serve as a means for societies to maintain economic stability and political autonomy; and
2. it is one of the most pervasive elements in society, thereby members of society will inevitably be affected by and/or involved with it.

In terms of widespread effects in society, business

• influences our values and well-being;
• shapes our social policies; and
• significantly impact our natural environment.

Nonetheless, we ought to subject them to moral evaluation mainly because of their possession of morally relevant features, namely the following:

1. Business acts are performed by moral agents; therefore, these agents should be held morally accountable for their actions. They possess rationality—the capacity to know and act freely—and, as such, also have moral duties.
2. Business acts can engender serious harm to humans; hence, they can appropriately be subjected to moral evaluation using a consequentialist approach.
3. Business acts can violate moral rights, which makes them appropriate for moral evaluation using deontological standards.
4. Business acts can lead to unfair distribution of benefits and burdens, which makes them appropriate for moral evaluation under the standard of justice.
5. Business acts can damage the environment, which makes them appropriate objects of moral evaluation using the principles found in environmental ethics.

Even with these reasons, many still find business ethics objectionable; as a consequence, ethicists formulated relevant responses against these objections.

Objections to Business Ethics and Replies

There are 4 prominent arguments made against business ethics:

1. The Invisible-hand Argument
2. The Legal Argument
3. The Amorality Argument
4. The Immorality Argument

The Invisible-hand Argument

• Contention
  • According to Adam Smith, economic forces (e.g., the law of supply and demand) will ensure that business—if successful—will result in social/common good, even if they do not necessarily intend to. For this reason, applying ethics is to it unnecessary.
• Reply
  • This only works under ideal conditions, where businesses only cater to human needs; however businesses, in reality, also cater to destructive human desires.

The Legal Argument

• Contention
  • The law prevents the business from doing something immoral (as long as it is followed). In addition, Milton Friedman contends that businesses are only socially responsible for engaging in activities that generate profit. Hence, Norman Bowie believes that businesses are not obligated to protecting the environment, but only what the law requires.
• Reply
  • What is legal is not necessarily moral; therefore, we should not conflate the two. The issue becomes clear when we consider cases of actions being legal despite being immoral (e.g., slavery in the past).

The Amorality Argument

• Contention
  • Businesses cannot be meaningfully wrong or right because moral principles do not apply to it—it has its own set of rules.
• Reply
  • The game analogy does not work because players are sometimes unaware of the rules (e.g., misleading ads).
  • Games are not exempted from moral evaluations, like in cases where they violate moral rights.

The Immorality Argument

• Contention
  • Business and morality have contradicting motives: business is essentially selfish (it focuses on producing profit), whereas morality is essentially selfless.
• Reply
  • Selfishness may be vicious or non-vicious: vicious selfishness leads to the violation of moral rights, while non-vicious selfishness do not. Because the motive of business is profit, it does not require a vicious form of selfishness.

Some Ethical Issues in Business

The general kinds of issues in business ethics include the following:

1. Systemic issues
   • Issues concerning the economic, social, and political systems within which business operates.
2. Corporate issues
   • Issues concerning the activities of corporations.
3. Individual issues
   • Issues concerning the actions of individuals in a business context.

Systemic Issues

Morality of Capitalism

Capitalism loses its moral justification when it deviates from perfect competition—the market’s state of equilibrium—where prices of goods tend to be fair. In an imperfect competition, prices tend to be unfair, which sometimes result in the violation of moral rights. This can occur in two ways:

1. When competition is eliminated through a monopoly.
2. When there are only few sellers in the market (oligopoly), which puts the competition under their control.

Doing Business in a Global Economy

• Ethical issues can arise from the way multinational companies (MNC) does business in a host country (especially if it is underdeveloped).
  • They may take advantage of cheap labor and/or lower legal restrictions.
  • They may sell products/services which are illegal in their native country but not on the host country.
  • They may follow discriminatory laws/practices in the host country.
  • They may sell harmful products in the host country.

Corporate Issues

Corporate Moral Responsibilities

The primary moral obligations of a corporation from two points of view:

1. Shareholder View: To promote the interests of the shareholder.
2. Stakeholder View: To promote the best balance among the interests of various stakeholders.

Advertising

Business ads are usually persuasive rather than informative. They are unethical when they are being deceptive because they are undermining human autonomy/rationality.

Kinds of business advertising:

• associative advertising;
• puffery;
• mass advertising; and
• subliminal advertising.

Discrimination (in the workplace)

Discrimination in the workplace occurs when job-irrelevant traits are used as basis for making decisions against employees or prospective employees. This can be done on an isolated case—done by an individual—or on an institutionalized case—done by an institutionalized group. Examples of the types of discrimination:

• age;
• gender;
• religious; and
• disability discrimination.

Employee Privacy

The right to privacy concerns the right of employees to determine the type and extent of information they share to a company. There are three factors we can consider if these rights were violated:

1. Job relevance of the information collected.
2. Employee’s consent.
3. Appropriateness of data collection method.

Anti-competitive Practices of Corporations

Anti-competitive practices involves companies agreeing to control the prices through monopolies/oligopolies. Examples of anti-competitive practices in oligopoly markets:

• price-fixing
• supply manipulation
• market allocation
• exclusive dealing arrangements
• tying arrangements
• pricing discrimination

Individual Issues

Conflict of Interest

Conflict of interest happens when an employee makes decisions motivated by their self-interest—this may not serve the interests of the whole company. This can occur because of special situations (e.g., special relations) or activities (e.g., bribery).

Employee Theft

Employee thefts pertains to employees stealing resources from the company. It usually involves trade secrets and inside information.

Whistleblowing

Whistleblowing is the act of exposing the wrongdoings of a company to the authorities or the public. There are two extreme views concerning this act:

1. It is immoral because it violates commitments to loyalty.
2. It is moral because it exercises the right to freedom of speech.

The issue with this is that, firstly, loyalty may be misplaced, and secondly, the right to freedom of speech may be misused/abused. According to De George (1993), the moral conditions can be morally permissible and morally obligatory:

1. Morally permissible:
   1. The wrongdoing may result in serious injuries;
   2. the wrongdoing has been reported to one’s immediate superiors; and
   3. no appropriate action was done.
2. Morally obligatory (in addition to the conditions mentioned earlier):
   1. There is sufficient evidence for the wrongdoing.
   2. There are good reasons to believe that exposing the wrongdoing will prevent the negative consequences.

Sexual Harassment

Harassment is considered sexual when in comes in the form of unwelcome sexual advances, requests for sexual favors, and other verbal or physical contact of a sexual nature. It is a degrading coercion exerted on employees who are vulnerable and defenseless. There are two types of sexual harassment:

1. Quid Pro Quo Harassment:
   • Occurs when unwelcome sexual conduct is explicitly a condition in the individual’s employment
2. Hostile Environment Harassment:
   • Occurs when sexual conduct is unreasonably interfering with the employee’s job performance or creates an hostile working environment.

Political Tactics

Political tactics are ways in which individuals or groups, within an organization, use informally-sanctioned power to advance their self-interest. This includes the following actions:

1. blaming others;
2. controlling information;
3. developing a base support for one’s ideas;
4. image building;
5. ingratiation;
6. forming power coalitions and developing strong allies;
7. getting control over scarce resources; and
8. establishing favorable relationships.

Sources

1. Module 6 Presentation (Lecture Slides)