A Societal View
From the vantage point of the society in which our economic system is nested and provisioned through business activities, the role of business ethics can be seen as critical to both social order and justice.
TRUST is an essential ingredient of a fair and efficient system.
Market participants – the buyers and sellers of goods and services – should have faith that transactions in which they take part are characterised by openness or transparency – that they are not being deceived by untruthful claims or unknowingly exposed to risks associated with unsafe products.
They also need to have faith that they are being treated fairly; they are not being discriminated against because of circumstances that are regarded as inappropriate bases for differential pricing, quality or service levels.
Absent these characteristics, market transactions lead to distortions in the level of welfare generated by the market. When such faith is not present, buyers or sellers are subject to exploitation and extra ‘costs’ of inspection are incurred.
When damages are experienced, injured parties undertake efforts to resolve disputes, adding additional ‘costs’.
In other words, lack of disclosure, unfair treatment and unexpected risks lead to inefficiencies in the form of injuries and dispute settlement that would be avoided if transactions occurred in a more open and fair manner.
Societies’ sustainability and prosperity also depend on the conservation of resources that are not directly involved in buying and selling.
Economic activity depends on the availability of natural resources -air, water and land. The depletion or pollution of these resources places the long-term survival of communities and nations at risk.
When people recognise the prospect of such risks, they seek ways to ensure survival through means that replace or intervene in markets – laws and administrative procedures that prohibit or limit pollution or depletion or that tax or penalise participants to compensate for the social costs associated with these events.
Economists refer to these effects of marketing as ‘externalities’, or unpriced outcomes that are not accounted for among the costs and benefits that constitute the conditions of market transactions.
A societal perspective on business ethics requires business people to avoid, wherever possible, actions that expose societies to disorder and the prospect of inadequate resources whilst at the same time respecting those laws and regulations formulated to ensure order and sustainability for all citizens and future generations.