ETHICS AND BUSINESS

CHAPTER 1

 Business is part of human society. Business without ethics threatens the survival of human society. The study of Business Ethics paves the way for our common understanding of the basic concepts of what is right and wrong in the conduct of business.

1. The Nature of Business

Business is as old as human civilization. For as long people have needs and wants, there will always be business. Business is part and parcel of human society. The latter cannot exist without business.

 Business is also a complex activity that involves major activities like: Production Manufacturing Marketing. Advertising Selling and the like.

 Businessmen deal with the following:

Suppliers Customers Workers Employees Competitors

Definitions:
BE is the study of right and wrong human behavior and conduct in business. BE is the study, evaluation, analysis, and questioning of ethical standards, policies, moral norms and ethical theories that managers and decision makers use in resolving moral issues and ethical dilemmas affecting business.

2. The Importance of Ethics in Business

To understand the fundamental idea of what is good and what is bad in our human conduct

Without ethics, businessmen will set their own moral standards, moral rules and moral principles.

resulting to SUBJECTIVE MORALITY

 Ethics as a science does not only evaluate the morality of our human conduct but also provides us with a common understanding of the UNIVERSAL OBJECTIVE and IRREVERSIBLE MORAL PRINCIPLES that govern our human conduct and guide our moral decisions.

Another important aspect in business that needs profound examination is the manner in which business leaders and managers confront ethical issues affecting the flow of business activities.

- Use of quantitative techniques - Nothing wrong with QT but there are issues which can only be resolved by Moral Reasoning.

Some ethical issues which cannot be solved by QT but MR are the ff:

SEXUAL HARASSMENT BRIBERY MISREPRESENTATION GRAFT INSIDER TRADING

3. THE BUSINESSMANS MYTHS ABOUT BUSINESS ETHICS

1. Myth no. 1 Ethics is a personal affair and not a public debatable matter.

Myth No. 2 Ethics and Business do not mix. Myth No. 3 Ethics in Business is Relative.

Myth No. 4 Good business means good ethics.

Myth No. 5 Business is a War.

4. The Relationship Between Ethics and Business

Without morality, business will be a chaotic business activity. Concern of ethics: to discover that there are unwritten laws that should govern human conduct where + laws may be absent.

Significant roles of BE in the world of business:

1. Business is an integral part of human society. Therefore all actions relating to business must be subjected to moral rules and moral evaluation.

2. In business, what is legal may not be necessarily be moral. E.g. lethal injection

Ethics provides us with a clear distinction between morality and legality.

3. Laws are insufficient; they are sometimes absent or unclear.

4. Peter Drucker argues that the Enterprise is an organ of society and its actions have decisive impact on the social scene.
He is just reminding us that business corporation is not just created to make profits but to consider its moral and social obligations to the stakeholders.

5. MORAL REASONING IN BUSINESS

Essence of Business Ethics: to provide managers and decision makers with a framework for the resolution of moral issues and problems affecting business activities and the organization.

 Moral reasoning is the process in which ethical issues and problems are benchmarked against a moral standard so that a moral judgment is made possible.

Framework for Moral reasoning

1. ETHICAL ISSUES REALITY CHECK MORAL NORM/MORAL STANDARD/COMPALNY POLICY/ ETHICAL PRINCIPLE MORAL JUDGMENT

Situation Analysis (sexual harassment) Problem Analysis (gravity of offense) Decision Analysis (Company rules/policies) Resolution (Moral/Immoral or Legal/Illegal)

CHARACTERISTICS OF A GOOD MORAL JUDGMENT:

1. LOGICAL 2. BASED ON FACTS and SOLID EVIDENCE 3. BASED ON SOUND AND DEFENSIBLE MORAL PRINCIPLES

6. THE MORALITY OF PROFIT- MOTIVE

Milton Friedman, a noted economist says: The only responsibility of business is to make profit so long as it stays within the rules of the games, which is to say engage in open and free competition without deception of fraud.

The Good side of Profitmotive: 1. It motivates people to do something meaningful. 2. It promotes ingenuity and cleverness in running a business. 3. Makes people productive. 4. Generates potential capital for the business.

The Bad Side of Profit-Motive: 1. It promotes rivalry among competitors. 2. It makes people focus only in making money, that is to sell as many goods as possible without considering the needs and wants of the customer. 3. It turns the businessman from being reflective because it focuses his attention in making money. 4. It promotes self-interest rather than the common good.

 Ethical Considerations of Profit-Motive in Business 1. Earning profit is good and a valid activity in business. However an ethical discernment is required. Is my profit fair enough for and my customers? Did I consider some factors in making profit?

2. Making excessive profit is totally wrong. It leads to greed, avarice and manipulation of customers. 3. Profit is not the be-all and the end-all of doing business.. 4. Profit is never total condemnable.