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Defining Basic Business Ethics Concepts

Updated on January 11, 2014
drmiddlebrook profile image

Dr. Middlebrook is a self-publishing expert, author (pen name Beax Rivers), online course developer, and former university professor.

Shredded paper is often associated with the hiding of corrupt business practices.
Shredded paper is often associated with the hiding of corrupt business practices. | Source

"Ethics" is a set of principles used to determine what is "right" when it comes to the conduct or behavior of an individual. This includes individuals who are acting on behalf of a business entity. In this Hub, as we consider the meaning of basic concepts in business ethics, it is important to also look at ethics from the standpoint of the individual. After all, business ethics, sometimes referred to as corporate ethics, is simply the application of the same types of ethical principles used to determine "right" conduct of individuals that is transferred to professional settings.

I have a doctorate in business specializing in marketing, and I once taught business ethics (as an adjunct professor) in the weekend MBA program of the highly regarded Cameron School of Business, at University of St. Thomas, in Houston, Texas. Ethics is concerned with the basic concepts and underlying principles of right human conduct, and it includes study of the moral values and standards of individuals and society. The study of ethics involves examining such things as the inherent equality and the natural rights of all human beings.

Examining ethical concepts related to business involves discussion of behavioral conduct that is linked to problems and conflicts that can arise in a business environment. Ethical issues often emerge during the conduct of business when there are clashes between profit-maximizing activities, and the underlying belief that social responsibility is (or should be) integral to the process of doing business.

1500 Louisiana Street building, in Houston, TX. Built for Enron Corporation, whose execs are renowned perpetrators of one of the biggest business conspiracies ever. Never occupied by Enron, the building was purchased by Chevron.
1500 Louisiana Street building, in Houston, TX. Built for Enron Corporation, whose execs are renowned perpetrators of one of the biggest business conspiracies ever. Never occupied by Enron, the building was purchased by Chevron. | Source

Business Ethics Concepts and "Issues"

Business ethics involves the application of moral standards to the systems and organizations through which we produce and distribute goods and services--and to the people who work within these systems and organizations.

Business ethics concepts are concerned with three different kinds of ethical/moral issues. Some concepts are related to issues involving the conduct of business within the systems where business operates, including economic, political, legal and other social systems. Other concepts are concerned with corporate issues--those involvingquestions related to the conduct of a particular company. And, still other concepts are concerned with examination of individual issues--those where questions are related to the behavior/conduct of one or more individuals within a company. In this Hub, I am taking a brief look at concepts including:

  • Businesses as "Corporate" Citizens
  • "Good" Business Ethics
  • Immoral" Business Practices
  • What Constitutes a Moral “Right?”
  • Ideas about Justice

Billionaire philanthropist Warren Buffett, and billionaire Bill Gates, recently persuaded 11 more of their billionaire peers to promise to give away half of their wealth.
Billionaire philanthropist Warren Buffett, and billionaire Bill Gates, recently persuaded 11 more of their billionaire peers to promise to give away half of their wealth. | Source

The Concept of Businesses as "Corporate" Citizens

Corporations, in the United States and most other nations, are legally considered as persons. That means they are legally entitled to the same rights and liabilities as persons who are citizens.

What is the foundation of an individual's moral standards? Where do they come from? The job of teaching morality or moral standards, many believe, has to begin in the home with parents as part of early childhood development. Those who study human moral development believe that by the time a child reaches adulthood, their basic moral predispositions are already in place. A person starts to practice ethics when he or she, after taking into consideration the moral values and standards absorbed from family, church, friends, institutions, or social organizations, begins to ask such questions as:

  • What are my moral values and standards? What do they actually mean, to me?
  • How are my moral standards important to me when it comes to making life choices, daily decisions, and how I conduct myself in situations as I live my life?
  • How should I use my moral standards in the conduct of activities in which I engage--at home, at work, and during leisure-time activities?

The ultimate goal of ethics, for the individual, is development of a set of moral standards that, after careful consideration, are believed to be reasonable to hold. The standards an individual holds are usually viewed by the individual as justified and logical, able to be accepted and applied to the many types of choices and decisions an individual must make in different circumstances on a daily basis--in business, personal, and social settings.

As consumers, most people believe that business should be held to standards of morality that apply to how they interact in their dealings with one customer, as well as with customers in general, within local, national, and world communities.

William H. Gates III, Chairman, Microsoft Corporation, USA, delivers a speech during the session 'A New Approach to Capitalism in the 21st Century' at the Annual Meeting 2008 of the World Economic Forum in Davos, Switzerland, January 24, 2008.
William H. Gates III, Chairman, Microsoft Corporation, USA, delivers a speech during the session 'A New Approach to Capitalism in the 21st Century' at the Annual Meeting 2008 of the World Economic Forum in Davos, Switzerland, January 24, 2008. | Source

The Concept of "Good Business Ethics"

"Good" business ethics involves having and adhering to a code of moral conduct that places the rights and expectations of people over and above the "profit motive" of business. Even though it is the goal of business to make money, the manner in which profit is sought can come under intense scrutiny if it is believed that the rights of human beings are being compromised in the process of making money. For this reason, it can result in good business for companies to practice good business ethics, because moral business practices, in the final analysis, can be seen as "profitable." Ethical conduct helps business in three primary ways by:

(1) Discouraging the breaking of laws in work-related activity. Since it is wrong or "criminal" to break the laws of society, then it is morally "right" to uphold (or not to break) them.

(2) Helping business entities avoid actions that may result in costly civil law suits against the company. Since individuals have rights, business has obligations to observe those rights.

(3) Motivating companies to avoid engaging in actions that can harm the company's image. Having a "moral code of conduct," or ethics, can help businesses improve their profitability, because adhering to moral standards can help to prevent loss of revenue and loss of company reputation.

Some of the moral obligations of business are determined by what the law requires. Moral standards are part of our legal system. There are laws, for example, against killing, stealing, engaging in fraudulent activities, sexual harassment, and public nudity, among other things. But moral standards go beyond what the law requires. For example, in the U. S. and most Western nations, adopting positions with regard to "social responsibility" are optional for companies. No company is required by law to help improve the quality of life on a local, national, or international level, yet that is exactly what the company called Ben & Jerry's has vowed to do.

A banner reading "Capitalism isn't working" (a pun on the Conservative election poster "Labour isn't working") at the G20 Meltdown protest in London on April 1, 2009.
A banner reading "Capitalism isn't working" (a pun on the Conservative election poster "Labour isn't working") at the G20 Meltdown protest in London on April 1, 2009. | Source
In his 2010 film, "Capitalism, a Love Story," filmmaker Michael Moore informed a broad audience about the unethical business practice called "dead peasants" insurance policies.
In his 2010 film, "Capitalism, a Love Story," filmmaker Michael Moore informed a broad audience about the unethical business practice called "dead peasants" insurance policies. | Source
Demonstrations against the G8 summit, Rostock, Germany, 2007: "Make capitalism history."
Demonstrations against the G8 summit, Rostock, Germany, 2007: "Make capitalism history." | Source

The Concept of "Immoral" Business Practices

Many major companies have become embroiled in trouble, and have been fined millions of dollars for violating laws that were set up based on ethical considerations. But unethical business practices extend well beyond activities that break the law. Hundreds of companies participate in "questionable" and clearly "unethical" practices--without breaking any established laws. They engage in practices developed only to improve their bottom-line profits, with no regard for anything or anyone else.

A good example of such practices is “dead peasant” insurance policies. These policies were widely exposed in the 2010 Michael Moore documentary movie, "Capitalism, a Love Story." "Dead peasant" policies are those companies take out on their employees, without the employee's consent, which not only give the companies tax breaks, the policies allow them to make money off of an employee's death. Some of the policies are worth millions of dollars, and the companies collect on them, not the deceased employees' families or loved ones. (You can learn more about "dead peasants" insurance policies and see a list of companies that have taken them out on employees at http://deadpeasantinsurance.com/which-employers-bought-policies-on-the-lives-of-employees/). (Please note: the term "dead peasants," which speaks volumes about the attitude of many top executives and business owners, toward rank and file employees, was coined by one of the companies that engaged in this deplorable practice.)

It is not wrong to make money, but it is important for businesses owners and executives to conduct themselves in ways that are moral and ethical, as they make money. Hundreds of examples of businesses engaging in bad, unethical, and immoral behavior in order to make money only serve to convince people that major companies are immoral, and that they don't think highly of ethical business practices. When companies engage in practices such as "dead peasants" insurance policies, consumers become convinced that business will stop at nothing to keep the rich getting richer and the poor poorer.

Organizations are “morally responsible” for their actions, and their actions/conduct are judged to be either “moral” or “immoral” in the same sense as those of individuals.

Academy-Award winning actress, Mo'Nique, at the 2010 Human Rights Campaign National Dinner in Washington, DC.
Academy-Award winning actress, Mo'Nique, at the 2010 Human Rights Campaign National Dinner in Washington, DC. | Source

The Concept of "Rights"

What Is a Moral “Right?”

In general, a moral "right" is an individual’s entitlement to something. It is a gift from God that extends from being a human being. When someone has a "right," it means he or she is able to choose freely whether or not to pursue certain interests or activities, without need of the permission of others. Rights impose prohibitions and requirements on others not to interfere, and it is these prohibitions and requirements then enable people, as individuals, to choose freely which interests and activities they will pursue.

The possession of moral rights necessarily implies that others have certain duties toward the bearer of that right. For example, the moral right to worship as one chooses comes the moral duty of other people not to interfere in one's chosen form of worship.

What Are "Negative" Rights and "Positive" Rights?

Negative rights are sometimes called the right to non-interference. Negative rights impose duties on other people to leave you alone; to not stop or block you from doing things that you feel are right for you, and that are important to you. For example, you have a right to make your own decisions and choices for your life, as well as a right to voice your opinion on a topic (freedom of speech).

American society places a great deal of importance on the rights of individuals, and most of us understand the importance of not violating the negative or "non-interference" rights of others. We understand that it is our duty not to interfere in certain activities of other human beings who are holders of a given right.

Positive rights do more than impose negative duties. They create duties on others to provide something for the holder of the right. They say that others must provide the holder of the right with benefits; whatever he or she needs to freely pursue his or her interests.

Let's use, for example, the notion of health care. If we look at health care as being a negative right, then, you and I possess the right of non-interference when it comes to getting health care. Even though we must pay for health care services, we have a right to obtain health care. The right we have to pursue health care, and the right to non-interference with this right, has to be protected by the state in order to ensure that no one interferes with or discriminates against us as we pursue our right to obtain health care.

But, if health care is a positive right, that means the state has an obligation to provide health care for us.

Justice et inégalité : les plateaux de la balance--Justice and inequality: the plateaus of the balance.
Justice et inégalité : les plateaux de la balance--Justice and inequality: the plateaus of the balance. | Source

Concepts of Justice

Before looking at concepts of justice, here is a scenario for you to consider.

Let's say that you are the owner of a corporation that has a manufacturing plant employing hundreds, yet the plant pollutes an environment that affects thousands.

You and your employees get to leave your company every day, and you drive home to communities that you have not polluted, where the air is fresh and safe to breathe. But, those people who live near the plant and the pollution you created are suffering serious adverse health effects caused by the pollution, and they are having to pay the health and medical costs of their illnesses.

As the business owner, are you sharing equally in society’s benefits and burdens? Or are you getting more than your share of benefits, as you're creating more, and shouldering less, than your share of the burdens?

Judgments about justice are based on moral principles that identify fair ways of distributing benefits and burdens to members of a society. Questions concerning how justice is "distributed" can arise when different people put forth conflicting claims on society’s benefits and burdens and all the claims cannot be satisfied.

A judge's tools.
A judge's tools. | Source

Egalitarianism is the belief in the equality of all people. Believers in human equality say that there are no relevant differences among people that can justify unequal treatment. According to them, all the benefits and burdens of society should be distributed according to this formula: “Every person should be given exactly equal shares of a society’s or a group’s benefits and burdens.”

The egalitarian view of how justice should be distributed is based on a seemingly simplistic view that all human beings are equal in some fundamental respect and that, in view of this equality, each person has an equal claim to society’s goods, and that goods, and burdens, should be allocated in equal portions.

Utilitarianism is the belief that a society is just to the extent that its laws and institutions exist to promote the greatest overall or average happiness of its members. Utilitarians believe in the best consequences for all, and that it is right to organize society in a way that distributes or redistributes wealth so that everyone's basic needs are met. Since "happiness" cannot be quantified or averaged, many Utilitarians consider a "basic-needs" minimum, to which they believe every person is entitled. Basic needs are viewed as being universal. All people have a basic need for things such as food, shelter, clothing, medical care, protection, companionship, and self-development. The basic-needs minimum, says Utilitarianism, is a prerequisite to any desirable kind of life, and is something every human being is entitled to just because they are human beings.

Source

Socialist justice, on the other hand, says “work burdens should be distributed according to people’s abilities, and benefits should be distributed according to people’s needs.” It is concerned with equal justice for all, in every aspect of society, arguing that there should be an "even" chance for everyone, and opportunities for all--from the poorest, to the middle class, to the rich.

Capitalist justice says that the benefits a person receives should be equal or proportional to the value of his or her contribution to society. It says, “benefits should be distributed according to the value of the contribution the individual makes to a society, a task, or an exchange. If this is true, we have to ask, “Do manufacturers contribute more value to society?” If so, does that mean their larger portion of benefits and lesser portion of burdens is legitimate?

Libertarian justice says the free market is inherently just, and that redistributive taxation violates people’s property rights. Libertarian distributive justice is based on two principles defining how individuals are responsible for their own future no matter what happens. Principle 1 (Principle of equal liberty) of distributive justice says that each person’s liberties must be protected from invasion by others and must be equal to those of others. Principle 2 (Difference principle) assumes that a productive society will incorporate inequalities, but it then asserts that steps must be taken to improve the position of the most needy members of society, such as the sick and the disabled--unless such improvements would so burden society that they make everyone, including the needy, worse off than before.

Source

The Ongoing Challenge of Business Ethics

Many different problems, concerns, and issues surround the idea of business ethics. There is little room for doubt that corporate wrongdoing, and wrong thinking, will continue to create a seemingly unending supply of case studies for society to examine. While it would be great to live in a world where business was always conducted "on the up and up," we all know from the examples we hear or read about every day, that it is not likely any such world of business will ever exist.

Ethical challenges and dilemmas, and how to solve or deal with them, will continue to be topics of study in business schools around the nation, and the world. Figuring out legal, moral, ethical, and socially responsible ways to keep profits rolling in, while delivering value to shareholders, will continue to be challenges for business.

The best businesses, however, will be those that recognize these challenges, and that seek to address them in ways that serve the interests of business--by creating sound and sustainable profit, and the interests of society--by engaging in ethical business practices that minimize harm to everyone, not just to a select few.

© 2012 Sallie B Middlebrook PhD

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    • Ericdierker profile image

      Eric Dierker 4 years ago from Spring Valley, CA. U.S.A.

      Your opening claim ruins your credibility, ""Ethics" is a set of principles used to determine what is "right" when it comes to the conduct or behavior of an individual, including those acting on behalf of a business entity" Wrong

      Ethics is the doing of right regardless of consequence.

      Business and greed and survival do not dictate ethics. Ethics are universal and absolute.

      Do not make a soldier massacre civilians because his ethics are caused by,,,""Ethics" is a set of principles used to determine what is "right" when it comes to the conduct or behavior of an individual, including those acting on behalf of a business entity"

      Get over your high school Pollyanna idealism.

    • drmiddlebrook profile image
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      Sallie B Middlebrook PhD 4 years ago from Texas, USA

      My opening claim, Ericdierker, is not a claim. It is a definition. Get over your anger before commenting on any Hub. This is a definition I chose, after looking at and considering many others. You don't get to pick my definitions that I use in my article. You can pick your own and put them in your articles.

      It is a good definition, as ethics is indeed a set of principles used to determine what is right in the conduct of behavior. People get to choose whether or not they will do right or wrong, and their ethics will help determine what they will do.

      Some people act in ways that are ethical, and some do not. No one said business and greed dictates ethics. That is not what I wrote, nor did I imply it in any way in this article.

      If I am guilty of "high school Pollyanna idealism," it is my right to be that way, if I choose. And since you started the "name calling," you have obviously chosen to be a curmudgeon, and that's your right.

    • Ericdierker profile image

      Eric Dierker 4 years ago from Spring Valley, CA. U.S.A.

      I like this definition but it is not your original definition: "It is a good definition, as ethics is indeed a set of principles used to determine what is right in the conduct of behavior. People get to choose whether or not they will do right or wrong, and their ethics will help determine what they will do." I hope you see the difference from your page one sentence one: ""Ethics" is a set of principles used to determine what is "right" when it comes to the conduct or behavior of an individual, including those acting on behalf of a business entity"

      Do you see the subtle difference you added with the concept of choice?

      I have no choice in ethical behavior. It is right or wrong. Ethically I must do right.

    • drmiddlebrook profile image
      Author

      Sallie B Middlebrook PhD 4 years ago from Texas, USA

      No, actually, I don't see even a subtle difference. The title of the article lets you know this discussion is going to be concerned with ethics as it pertains to the conduct of individuals in business settings. There is nothing in the definition about "choice." It is about conduct/behavior, and ethics is a set of principles used to determine what is right in terms of someone's conduct, their behavior. Behavior can be right or wrong, and people do get to choose how they will behave. I see no difference whatsoever, in the two versions of the same definition.

    • drmiddlebrook profile image
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      Sallie B Middlebrook PhD 4 years ago from Texas, USA

      Although I do not feel it was necessary for clarity, I broke my opening statement into two sentences. I would not want to contribute to anyone's misunderstanding of what is being said.

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