Business Ethics
Introduction to Business Ethics
What is a business? Is Christian Aid a business? Is McDonalds? What about a university? This is a difficult and complicated question to answer but let us start from the claim that a business is an organization that buys and sells goods or services for profit.
If I buy some books from a shop, they are goods and the business makes a profit. If I pay the taxi driver to take me to the airport then that is a service and I increase the taxi company's profit.
Maybe then Christian Aid is not a business? Arguably there is no "customer" purchasing a good or a service, whereas McDonalds clearly is a business. But what about a university? Well that is a much harder and more controversial question, and one that we have posed below for you to consider. For any business, whatever its size, the key feature will be that it sells goods or services for profit.
Ethics arises because relationships exist. That is, if there is a relationship then there is a legitimate question of how ought we to behave in that relationship? In a business there are many different relationships and hence we can ask ethical questions regarding each of these relationships. Here are a few examples.
(a) A business has a relationship with its shareholders - the people who own a share of the company. However, if the shareholders want to reduce the wages of the workers so they can get a larger dividend, would they be doing something morally wrong? After all, they might arguably be said in some sense to "own" the business and can do what they want with it.
(b) A business has a relationship with its customers - the people who are buying the goods and services. For instance, if a business knowingly reduces the amount of health advice it provides on its labels in order to increase profits, has it done something morally wrong?(c) A business has a relationship with its employees. If a business realises that it can increase productivity by scrapping paternity leave would it be morally wrong to do so? Conversely, if an employee is privy to some questionable practices and becomes a "whistle-blower" then has she done anything morally wrong?
(d) There are also ethical questions that arise regarding the business's relationship with the environment. If a business opens a new factory, giving a much needed boost to the local economy, but can only do so by building on a nature reserve, has it done something morally wrong?
(e) Also there are others who are affected by the business's activity. For example, if a mobile phone company constructs a new phone mast which causes a low hum to be heard by the local community, has the company done something morally wrong?
Of course, businesses have always made ethical decisions. The working conditions in factories before the 1847 Factory Act were certainly morally wrong, even if this was not recognised at the time.
This is in stark contrast to nowadays, when you find "value and ethic" statements in full view on the promotional material of any business. Not to be talking in terms of "values and ethics" is very bad business practice. The phrase that is often used in this context is a business's "Corporate Social Responsibility" (CSR). We can take CSR to mean: "[…] a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders". A great example of a company with a clear CSR is The Body Shop, who in 1988 became the founding member of the Ethical Trading Initiative.
There is now a plethora of ethical rankings that tell the customer which businesses are best in terms of CSR, and which is the most ethical (e.g. Forbes, 'The World's Most Ethical Companies').
Although it is now the norm for a business to have "ethics" statements, it is arguably irrational for companies to be ethical. Why might this be? Consider this basic argument.
- A business's aim is to make a profit.
- A business will make a profit if it can attract customers.
- In the present context (at least in the West) a business will attract most customers if it appears to be ethical.
- It will make more profit if it appears ethical rather than actually being ethical because it actually costs more to be ethical rather than simply appearing ethical.
Therefore, given (1)–(4) it seems more reasonable for a business simply to appear to be ethical, rather than actually being ethical.
Of course, there are many questions that arise from the above argument. For instance, we might think that the potential costs of being found out (i.e. appearing but not being ethical) far outweigh the costs of actually being ethical in the first place - hence (4) might be rejected. However, there remains a great attraction only to appear ethical and not go through a long, often expensive process to become ethical. It is of course then an open empirical question whether businesses are ethical or whether it is window dressing and simply a cynical marketing device.
In this chapter we are going to look at a few areas of business ethics and do so through the lens of the normative theories of Utilitarianism and Kantian deontology.
Source: Mark Dimmock and Andrew Fisher, https://www.openbookpublishers.com/htmlreader/978-1-78374-388-9/main.html
This work is licensed under a Creative Commons Attribution 4.0 License.