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Definitions and Value of Business Ethics – Framework for Decision-Making

The economy has slowed to the point that the conglomerate Jackson works for has asked him to choose which of its four plants to shut down. Jackson needs a framework to decide how to make that decision. Which one should he use?

A manager has instructed Ellen to falsify entries in the corporate books. She doesn’t feel comfortable doing it, but isn’t sure she can risk her job by saying no. What should she do?

These situations arise in the business environment and force individuals to make difficult decisions. Ethics is the system of moral precepts that can help employers and employees decide which course of action to take.

Defining Business Ethics

business ethicsEthics is the system of moral principles that govern our actions. Put another way, ethics is the search for right and wrong. Ethics provides a framework for making decisions in all contexts, but recent events have highlighted the importance of this area in the business world. As a result of ethical breaches in large companies that led to their collapse and billions of dollars in losses, the government has turned its attention to enforcing ethical standards in the workplace.

Ethical dilemmas are constantly evolving as technology develops. The Ethical Resource Center defines the ethical dilemmas of the twenty-first century as privacy issues, financial mismanagement, intellectual property theft, cyber crime, and international corruption. In a world that is vastly different than the Leave-it-to-Beaver world of the 1950s, what should business ethics look like?

Definition

Ethics is a branch of philosophy designed to provide people with a framework for making decisions. Business ethics focuses on the goal of balancing profits with the values of society and individuals.

Ethics from the Law

One ethical framework draws moral standards from codified law. Under this approach, the test of whether an action is justified is whether it is legal. This approach is frequently used in the business context. It’s a relatively flexible approach because the law can be altered as the perceived need for ethical standards changes. For example, under codified law, businesses extend warranties to purchasers and failing to meet those warranty standards is unethical behavior.

When the law is the standard, ethics will evolve as judges apply it to new areas. As a result, what was ethical before may become unethical behavior. For example, prior to the Emancipation Proclamation it was perfectly legal to own slaves. Accordingly, from a positive law approach, it was also ethical. But since the Emancipation Proclamation and laws passed after the Civil War, slavery is illegal. The law changed and moved the ethical boundaries with it.

Under this approach, Jackson asks himself if it’s legal to close a plant. If the company isn’t doing anything illegal, it has the right to close any plant that it chooses. However, Jackson still feels unsettled and unsure what to do. Ellen has concerns that the bookkeeping magic she’s supposed to work isn’t legal, but her boss has given her an explanation that seems right. After all, she’ll only have to do it once.

Universal Standards for Ethics

Universal standards for ethics arise from several fronts. Fundamentally, this approach holds that ethics are set and cannot be changed by the shifting winds of the law. Instead, there is a natural law that sets the standards we should live by. This framework allows civil disobedience because sometimes the laws do not comply with a higher ethical standard.

Individuals such as theologian and philosopher Thomas Aquinas (1225-1274) believed that natural law derived from the nature of the world and the nature of humans. That is, there are clear moral constraints—actions that are always right or always wrong regardless of what the culture or law state.

Continuing the slavery example, it was morally and ethically right for the individuals in the north who had stops on the Underground Railroad to help the slaves escape to Canada. Even though there was a law on the books that made those actions illegal, a higher moral standard compelled them to act contrary to the law.

Ellen knows that it’s wrong to lie, and that’s what doctoring the books feels like. She drafts a resignation letter but hopes she doesn’t need to turn it in since she’s the primary breadwinner for her family and caregiver to her husband, who is terminally ill. Jackson evaluates his instructions to choose a plant to close and can find nothing about the situation that violates natural law. It’s simply a decision that has to be made for the good of the company. Feeling somewhat better, he conducts his analysis and makes a recommendation.

Situational Business Ethics

Situational business ethics, or moral relativism, calls for individuals to look at the underlying situation and make decisions based on those facts. While there may be large absolutes, those can only be understood and applied in the context of the current situation. For example, natural law states that stealing is wrong. Situational ethics might agree in general that stealing is wrong, but someone who is starving might find stealing justified. Do the motivations and circumstances excuse and justify the actions? If the answer is yes, the action is ethical.

Jackson evaluates the facts about each plant, and ultimately decides to keep three of them because he has friends employed at each. Situationally, that seems like the best approach. Sure, some people will lose jobs, but at least it won’t be people he knows. And he can justify the decision with a cost analysis. Ellen decides that she can doctor the books this once, because she needs her job. With her husband’s terminal illness, they can’t afford to lose her insurance.

Citation

Businesses may choose to rely on situational ethics in an international context because what is illegal (think bribery) in the United States is ethical and expected in other corners of the world.

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