The ABC's of Business Ethics: Definitions, Philosophies And

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What is ethics? Ethics is concerned with moral obligation, responsibility, and social justice. The word ethics comes from the Greek words "ethikos" and "ethos," meaning custom or usage. As employed by Aristotle, the term included the idea of character and disposition. Thus, ethics reflects the character of the individual and more contemporarily perhaps, the character of the business firm, which is a collection of individuals.

There are several ways to define ethics. John Rawls, author of A Theory of Justice, said that ethics is justice. In other words, ethics includes principles that all rational persons would select to govern social behavior if they knew the rules could apply to themselves. In their Philosophical Dictionary, Brugger and Baker define ethics as the philosophical investigation and explanation of moral facts such as moral evaluations, commandments, norms, virtuous acts and manifestations of conscience. Lacey's Dictionary of Philosophy describes ethics as an inquiry into how people "ought" to act. The bottom line is that through the study of ethics, people understand and are guided by what is morally right and wrong. Yet, controversy persists due to differences in values and perspectives.

What may be ethically right to one person, may be wrong to another. Because of this, society tends to define ethics in behavioral terms. For instance, an ethical person is considered as one who behaves in accordance with sound moral principles based on ideals such as fairness, justice and trust. These principles of conduct govern behavior at the individual and organizational levels; and may be based on values, culture, religion, and even legislation. Ethical standards, then, may change, or at least be influenced by legislative changes or changes in social values.

Since it is possible for ethical standards to change, some may ask why society operates with ethics. The answer is not so simple. Ethics is an essential element of success at individual and organizational levels.

In society, we value personal freedom. However, if, in exercising our freedom, we compromise our ethics, we hurt society. That is, we end up curtailing our individual freedom and others' enjoyment of their freedom, as well as eroding our ethical foundation. So, ethics forms the foundation for what kind of persons we are, and what kind of organizations we represent. The reputation of a firm is a primary factor in all its business relationships, whether they are formal or informal, and whether they involve advertising, product development or personnel matters. In today's domestic and global economies, the business practices of American managers will affect their company's image. Thus, it is important to maintain a reputation for sound ethical behavior if companies are to successfully compete in domestic and world markets.

In essence, good ethics is good business. Sound business practices are a result of moral or ethical business decisions. Corporate ethics reflects not only the content of moral decisions--What should I do?--but also the process of decision making, or the "hows." In such a decision-making process, a firm must be committed to the extent that ethics and profits are not mutually exclusive in principle and practice. Take for example the Johnson & Johnson-Tylenol incident. Johnson & Johnson immediately took its pain reliever, Tylenol, off the market when faced with claims of product tampering. It did what it thought was right, even though it might lose money. Moreover, it refused to put a price tag on its integrity. While some thought its sales could never recover, J&J ended up reinforcing its strong market leadership due, in part, to how it handled the Tylenol incident.

Ethical business practices stem from ethical corporate cultures. The most systematic approach to fostering ethical behavior is to build corporate cultures that link ethical standards and business practices. Such an institutionalization of ethical standards begins with an understanding of ethics philosophies, and is sustained by mechanisms such as corporate structuring, credos, codes, training programs, committees and social audits. …