LECTURE 4Business Ethics

BUSINESS ETHICS

Business can be defined as a primary economic institution through which people in modern societies carry on the task of producing and distributing goods and services

Business ethics refers to the application of ethical judgments to business activities

BUSINESS ETHICS

The concept of Business Ethics has come to mean various things to various people, but generally it's coming to know what it right or wrong in the workplace and doing what's right

RELATIONSHIP BETWEEN BUSINESS AND ETHICS

Different economists like Milton Friedman and Talcott Parsons expressed different views about the relationship between ethics and business. The result was:

Unitarian view of ethics Separatist view of ethics Integration view of ethics

DIFFERENT VIEWS OF ETHICS

The Unitarian View-Business is a part of moral structure and moral ethics . If business wants to exist flourish and survive in the long run, morality and ethics cannot be separated from the operation of the business. Business has to concentrate in the society and usher in society welfare.

DIFFERENT VIEWS OF ETHICS

The Separatist View of Ethics Classical Economists like Adam Smith and Milton Friedman held the separatist view.

These economists were of the opinion that business should concentrate on profit maximization. Business is a distinct entity and does not contain ethics and morality.

Milton maintained that business should concentrate on production and distribution of goods and services.

This view lays emphasis on business concerns like reducing production costs, optimizing labor etc

DIFFERENT VIEWS OF ETHICS

The Integration view of Ethics- Talcott Parsons (1902-1979) professor of sociology at

Harvard proposed a view called the Integration view. He was of the opinion that ethical behavior and

business should be integrated or combined in a new area called ‘Business Ethics’.

He argued that Business being economic entity has the right to make profits, but at the same time it should discharge the social obligations.

According to this view , business and morality are interrelated and are guided by external factors like government, market system, law and society

BENEFITS OF BUSINESS ETHICS TO BUSINESSES

Customer confidence and loyalty Employee satisfaction and low turnover Increased investor trust and confidence No trouble with the law Competitive edge – attracting talent,

winning new business, entering global markets

Reputation

BENEFITS TO CONSUMERS

Good product – no compromises with quality

Fair price Address consumer concerns Protect consumer rights

BENEFITS TO EMPLOYEES

Equal opportunity Growth Pride Work-life balance Employee benefits

BENEFITS TO INVESTORS

Safeguard investor rights Avoid unfair practices such as insider

trading Transparency Accountability

BENEFITS TO SUPPLIERS

Motivates them to be ethical (for example avoiding child labor/sweatshops etc.

Fuels innovation Market for innovative/sustainable

technologies Reputation

BENEFITS TO SOCIETY AT LARGE

Putting pressure on other companies to act ethically

Avoid unfair trade practices such as monopoly

Corporate Social Responsibility

BENEFITS TO GOVERNMENT

Transparency Taxes Foster a culture of good business

practices Less regulation Curb corruption in the government

itself

BENEFITS TO ENVIRONMENT

Green businesses Innovation to find more eco friendly

practices Sustainability

DISADVANTAGES OF BUSINESS ETHICS TO BUSINESSES

Higher costs/lower profits Losing to competition Possible Investor displeasure Trouble getting goods/services from

supplier