ABCs of Business Ethics

One easy way to examine the major thrust of business ethics is to think of a series of words or phrases that begin with A, B, and C.

This is a shorthand and relatively straightforward approach to simplifying business ethics. However, we must caution you that behind each of these relatively basic ideas is a complex set of issues.

The three As are “applied,” “above the law” and “aspirational”.

The three Bs are “beneficial,” “beyond the bottom line” and “breaking new ground.”

The three Cs are “compliance,” “consequences” and “contributions.”

Applied Business ethics is an applied morality, like legal, engineering and medical ethics. Each of these professional fields draw rules from moral philosophy or religious traditions andapplies them to the problems specific to the relevant area. Each philosophical theory results in a different approach to applying these standards to dilemmas faced by business people.

Above the Law Ethical questions are those that exist somewhere above the legal minimum. Unfortunately, some companies view ethics as synonymous with legal requirements.We view the law as the floor. As a response to the scandals that occurred several years ago, the floor was raised by the passage of the Sarbanes Oxley Act in the United States during 2002. As an illustration, one might think of a famous dance of the baby boom generation, the limbo. The purpose of this dance was to continue to dance under a stick and get progressively closer to the floor. The challenge was “how low can you go?” This, unfortunately, also describes business people who try to do the moral minimum. In reality, those who suggest BUSINESS ETHICS BEGINS WHERE THE LAW ENDS convey the essence that the law is a minimum standard.

Aspirational Business ethics at its best should be aspirational. Both senior and junior executives should aspire to do better from an ethical standpoint. This approach is covered within the virtue ethics and moral development models. For a number of years, one of Levi Strauss & Company’s ethics publications was called its “Aspiration Statement,” which signalled to the world thatLevi aspired to a high level of ethics, even though they did not always attain it.

Beneficial This point means that good ethics is beneficial to the firm. The one caveat is that it is beneficial in the “long run.” There are good theoretical reasons for believing that practicing good ethical behaviour is beneficial to the firm. We admit, however,that the empirical evidence is mixed with respect to whether good behavior usually results in increased profitability. We do know that a systematic lack of transparency with customers, shareholders and the public is financially disastrous. Immoral behaviour can ruin a company (eg Arthur Andersen and Enron).

Beyond the Bottom Line Business managers must think beyond just the financial impact of their decisions. They should understand the environmental and safety implications of their products, whether toys or automobiles. In fact, firms such Royal Dutch Shell now regularly provide information on what they call a “triple bottom line”, including economic, environmental and social performance. The latest report can be found online.

Breaking New Ground The most ethical firms think “outside the box” and employ ‘moral imagination’ in dealing with intractable ethical concerns.  In particular, problems for which the most obvious alternative solutions all involve harm to multiple stakeholders call for creative thinking to devise a solution that either minimizes such harm or, ideally, produces results that permit the parties in conflict to gain. For example, pollution control efforts sometimes generate cost reductions (eg less waste) with economic value.

Compliance At minimum, managers must comply with the policies and rules of their companies as well as those of their nation’s legal system. In fact, most corporate codes of ethics are written as compliance documents by spelling out prohibitions and approved responses to ethical situations known from company experience. Research with large organisations suggest about half report taking a compliance approach to ethical issues facing their firm. Many though view the law as the minimum standard, and in so doing are less likely to run into reputational disrepute and consequently maintain their success over the medium to long-term.

Consequences Most managers worry about the consequences of their actions. In fact, one set of ethical theories uses the yardstick of whether good or bad consequences will result in deciding whether a decision is ethical or unethical. For instance, a decision to move a manufacturing plant to a lower-cost-of-labour country will likely mean good consequences for the company in terms of lower costs of production. But not all the consequences arising from such a decision will be positive.

Contributions Most managers of companies do not look at their position or corporation as just being in the business of making money. They often speak in much more enlightened terms, such as improving convenience for consumers or offering more product choice. Thus, business contributes to a more productive economy and a happier society. Whether this vision is always fulfilled is debatable, but businessmen and women often see themselves as contributing to society and not just in a narrow microeconomic sense.


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