CAN BUSINESS ETHICS BE LEARNED?<br />“Business social responsibility should not be coerced; it is a voluntary decision tha...
Can business ethics be learned
Can business ethics be learned
Can business ethics be learned
Can business ethics be learned
Can business ethics be learned
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Can business ethics be learned

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Can business ethics be learned

  1. 1. CAN BUSINESS ETHICS BE LEARNED?<br />“Business social responsibility should not be coerced; it is a voluntary decision that the entrepreneurial leadership of every company must make on its own.” John Mackey<br />Summary<br />Business ethics reflects the philosophy 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 its fiduciary 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.<br />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". Friedman also said, "the only entities who can have responsibilities are individuals ... A business cannot have responsibilities. So the question 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." A multi-country 2011 survey found support for this view among the "informed public" ranging from 30-80%.Duska views Friedman's argument as consequentialist rather than pragmatic, implying that unrestrained corporate freedom would benefit the most in long term. Similarly author business consultant Peter Drucker observed, "There is neither a separate ethics of business nor is one needed", implying that standards of personal ethics cover all business situations. However, Peter Drucker in another instance observed that the ultimate responsibility of company directors is not to harm—primum non nocere.Another view of business is that it must exhibit corporate social responsibility (CSR): an umbrella term indicating that an ethical business must act as a responsible citizen of the communities in which it operates even at the cost of profits or other goals. 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 their free speech rights are limited. This can be interpreted to imply that they have independent ethical responsibilities.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.<br />Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. Issues concerning relations between different companies include hostile take-overs and industrial espionage. Related issues include governance; corporate; political contributions; legal issues such as the ethical debate over introducing a crime of corporate manslaughter; and the marketing of corporations' ethics policies.<br />“Earnings can be pliable as putty when a charlatan heads the company reporting them”<br />Warren Buffett 1930-, American Investment Entrepreneur<br />Some businesspeople argue that there is a symbiotic relation between ethics and business in which ethics naturally emerges from a profit-oriented business. There are both weak and strong versions of this approach. The weak version is often expressed in the dictum that good ethics results in good business, which simply means that moral businesses practices are profitable. For example, it is profitable to make safe products since this will reduce product liability lawsuits. Similarly, it may be in the best financial interests of businesses to respect employee privacy, since this will improve morale and thus improve work efficiency. Robert F. Hartley's book, Business Ethics, takes this approach. Using 20 case studies as illustrations, Hartley argues that the long-term best interests of businesses are served by seeking a trusting relation with the public (Hartley, 1993). This weak version, however, has problems. First, many moral business practices will have an economic advantage only in the long run. This provides little incentive for businesses that are designed to exclusively to seek short-term profits. As more and more businesses compete for the same market, short-term profits will dictate the decisions of many companies simply as a matter of survival. Second, some moral business practices may not be economically viable even in the long run. For example, this might be the case with retaining older workers who are inefficient, as opposed to replacing them with younger and more efficient workers. Third, and most importantly, those moral business practices that are good for business depend upon what at that time will produce a profit. In a different market, the same practices might not be economically viable. Thus, any overlap that exists between morality and profit is both limited and incidental.<br />The strong version of this profit approach takes a reverse strategy and maintains that, in a competitive and free market, the profit motive will in fact bring about a morally proper environment. That is, if customers demand safe products, or workers demand privacy, then they will buy from or work for only those businesses that meet their demands. Businesses that do not heed these demands will not survive. Since this view maintains that the drive for profit will create morality, the strong version can be expressed in the dictum that good business results in good ethics, which is the converse of the above dictum. Proponents of this view, such as Milton Friedman, argue that this would happen in the United States if the government would allow a truly competitive and free market. But this strong view also has problems, since it assumes that consumers or workers will demand the morally proper thing. In fact, consumers may opt for less safe products if they know they will be saving money. For example, consumers might prefer a cheaper car without air bags, even though doing so places their own lives and the lives of their passengers at greater risk, which is morally irresponsible. Similarly, workers may forego demands of privacy at work if they are compensated with high enough wages. In short, not every moral business practice will simply emerge from the profit principle as suggested by either the weak or strong views.<br />MAJOR ISSUES IN BUSINESS ETHICS<br />Ethical issues and examples<br />You’ll find lots of examples of business ethical decisions and dilemmas in areas such as:<br />Let’s take one of the above – suppliers.<br />A business cannot claim to be ethical firm if it ignores unethical practices by its suppliers – e.g.<br />Use of child labour and forced labour<br />Production in sweatshops<br />Violation of the basic rights of workers<br />Ignoring health, safety and environmental standards<br />An ethical business has to be concerned with the behaviour of all businesses that operate in the supply chain – i.e.<br />Suppliers<br />Contractors<br />Distributors<br />Sales agents<br />The two articles below provide a good example of the ethical issues that arise in the supply chain: click on the images to read the stories:<br />Pressure for businesses to act ethically<br />Businesses and industries increasingly find themselves facing external pressure to improve their ethical track record.  An interesting feature of the rise of consumer activism online has been increased scrutiny of business activities.Pressure groups are a good example of this. Pressure groups are external stakeholders they<br />Tend to focus on activities & ethical practice of multinationals or industries with ethical issues<br />Combine direct and indirect action can damage the target business or industry<br />Some examples of business-related pressure groups can be found from the following links:<br />Direct consumer action is another way in which business ethics can be challenged. Consumers may take action against:<br />Businesses they consider to be unethical in some ways (e.g. animal furs)<br />Business acting irresponsibly<br />Businesses that use business practices they find unacceptable<br />Consumer action can also be positive – supporting businesses with a strong ethical stance & record.  A good example of this is Fairtrade.<br />Is ethical behaviour good or bad for business?<br />You might think the above question is an easy one for businesses to answer? Surely acting ethically makes good business sense? As with all issues in business studies, there are two sides to every argument:<br />The advantages of ethical behaviour include:<br />Higher revenues – demand from positive consumer support<br />Improved brand and business awareness and recognition<br />Better employee motivation and recruitment<br />New sources of finance – e.g. from ethical investors<br />The disadvantages claimed for ethical business include:<br />Higher costs – e.g. sourcing from Fairtrade suppliers rather than lowest price<br />Higher overheads – e.g. training & communication of ethical policy<br />A danger of building up false expectations<br />CONCLUSION<br />Business ethics involves being able to run a money-making enterprise while being considerate of the values and morals that your business represents. This might sometimes sound conflicting, because profit-making might sound like the opposite of being ethical. However, the important thing to remember here is to keep things in balance. Being ethical does not necessarily mean you give things out for free, as this is actually not beneficial to society. Doing business in an ethical manner means earning a fair profit, while providing useful and beneficial services, and at the same time giving people a chance to make a living.<br />Schools and higher learning institutions usually offer courses on business ethics, and this is particularly useful for those who are taking up degrees in management and entrepreneurship.<br />Formal schooling. Business ethics is usually a concept taught in business-related and management degrees.  Apart from making profit and managing a company, it's also important for future business leaders to know how to be socially responsible. However, other fields of study also include business ethics in their curriculum, such as Philosophy, International Studies, human resources, and even mass media. This is because ethics, in general, should be a concept applied in any profession or trade.<br />

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