Ethics are not necessarily synonymous with the law. There will be instances in which ethical
behavior and the law are the same (e.g., in the cases of murder, discrimination, whistleblower protection,
and fraud). Such instances are illustrative of a good legal system. There will, however, be times when the
law takes a different path than ethics—the result being ethical corruption that serves only the interests of
small groups.
• Ethics are not about following cultural norms. Following cultural norms works only for ethical
cultures. Although most cultures probably like to see themselves as ethical, all societies have been and will
be plagued with norms that are unethical (e.g., slavery in the United States prior to the Civil War and
sweatshops in developing countries).
• Ethics are not synonymous with science. Science cannot tell us what to do. The sciences can
provide us with insights into human behavior, but ethics provides the reasons and the guidance for what
we should do.
• Ethics are not the same as values. Although values are essential to ethics, the two are not
synonymous. Values are enduring beliefs that a given behavior or outcome is desirable or good. [4] They
create internal judgments that will determine how a person actually behaves. Ethics determine which
values should be pursued and which should not. [5]
Why Ethics Are Important
Ethics are important because they provide structure and stabilization for society. They help us to
understand what is good and bad, and this helps us to choose between right and wrong actions.
Without ethics, our actions would be “random and aimless, with no way to work toward a goal
because there would be no way to pick between a limitless number of goals.” [6]Ethics do not
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provide easy answers to hard questions, but they do provide a framework within which to seek
the answers.
Business Ethics
Business ethics is applying the virtues and discipline of ethics to business behavior. They set the
standard for how your business is conducted and define the value system of how you operate in
the marketplace and within your business. [7] They are relevant to any and all aspects of business
conduct: workplace issues, product and brand, corporate wrongdoing, professional ethics, and
global business ethics. They apply equally to the individual who works for the company and to
the company itself because all ethical and unethical business behavior eventually finds its way to
the bottom line. It is almost a certainty that someone will encounter an ethical dilemma at some
point in his or her professional life. Video Link 1.1
Business Ethics in the Twenty-First Century
A PBS documentary about business ethics and social responsibility.
http://watch.wliw.org/video/1316867588
Do Business Ethics Pay?
Asking whether business ethics pay may be the wrong question to ask. Behaving ethically should
happen because it is the right thing to do. However, companies large and small are in the
business of making money, so the question is not an unreasonable one. Good ethics carry many
benefits, not the least of which is financial good health. Companies that “outbehave” the
competition ethically will also tend to outperform them financially. [8]According to an Institute
of Business Ethics report, companies with a code of conduct generated significantly more
economic value added and market value added than those companies without a code,
experienced less price to earnings volatility, and showed a 50 percent increase in average return
on capital employed. [9]
Business ethics also pay in other ways that will improve the workplace climate and, ultimately,
positively impact the bottom line. They can “reduce incidents of corruption, fraud, and other
malpractices; enhance the trust of customers, suppliers and contractors; enhance the credibility
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of buyers and salespersons; and enhance the loyalty and goodwill of employees, shareholders
and customers.” [10]
The Costs of Unethical Business Conduct
By contrast, the costs of unethical business behavior can be staggering. Some of the costs
include the loss of physical assets, increased security, the loss of customers, the loss of
employees, the loss of reputation, legal costs, the loss of investor confidence, regulatory
intrusion, and the costs of bankruptcy. According to a report by the Josephson
Institute, [11] unethical business behavior has an adverse impact on sales, stock prices,
productivity, the performance of the highly skilled employees, efficiency, communication, and
employee retention and recruiting plus the risks from scandal and employee fraud.
The costs of employee theft are particularly daunting. An estimated 75 percent of employees
steal from the workplace, and most do so repeatedly. One third of all US corporate bankruptcies
are caused directly by employee theft; US companies lose nearly $400 billion per year in lost
productivity due to “time theft” or loafing; and an estimated 20 percent of every dollar earned by
a US company is lost to employee theft. [12] Office supplies, money, and merchandise are the
most frequently stolen items. [13]Employee theft may be even more of a concern to small
businesses because many small businesses operate so close to the margin. It has been estimated
that theft by small business employees totals nearly $40 billion each year.[14]
Small Business Ethics
In business, it is common for there to be conflicts between business success and ethical
behavior. When faced with an ethical dilemma, the decision may be unduly influenced by profits
and legality. This challenge is particularly acute for small business owners because they are so
much closer to the employees and the customers. The results of ethical decisions will be felt
more immediately by the entire company. [15]
Small-business owners will find themselves confronted more often with ethical choices because
of the decision-making autonomy that they have; there is no need to answer to a large number of
employees, corporate management, or a corporate board. The ethical choices that are made will
likely impact a far greater number of people than will the ethical decisions of individual
employees. Many business decisions will pose ethical challenges—examples being whether to
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use inferior materials to produce products because of competition with larger businesses,
employee and workplace problems, product quality and pricing, legal problems, and
government regulatory concerns. [16] The pressure to make an unethical choice on behalf of the
small business can be very powerful, especially when the health and vitality of the business may
be at stake. [17] Fortunately, the chances of an unethical decision being made in a small business
are lower because the individual or individuals who are harmed will always be more visible. It is
more difficult for the small business owner to be unethical. Ultimately, small business owners
will behave in accordance with “their own moral compass, sense of fair play and inclination to
deal in good faith.” [18]
According to one study, [19] small businesses see norms and pressures from the community and
peers as having more influence on their ethics than moral or religious principles, the
anticipation of rewards, upholding the law, or the fear of punishment. This leads to the
conclusion that small business is influenced significantly by the communities in which their
businesses are located. Socially responsive behavior is visible and it is “rewarded or sanctioned
by local residents through changes in employee morale, performance, and turnover; customer
loyalty; and positive interactions with business service professionals, suppliers, local
government officials, and business colleagues. These local sanctioning mechanisms [in turn
affected] the success of the business.” [20]
Because of this community influence, customer relationships are and must be based on trust
and the relatively immediate visibility of ethical behavior. It is perhaps not surprising that
people in small business are ranked number one on ethical standards ahead of physicians,
people in big business, and government officials. [21]
