Business Ethics

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With the never ending high-profile scandals in business and government, the interest in the nature of ethical leadership continues to grow. Various scandals all around the world concerning undesirable business activities, such as the despoiling of rivers with industrial pollutants, the exploitation of sweatshop workers, the payment of bribes to government officials, and the deception of unwary consumers have highlighted the unethical way in which some firms have gone about their business.

Consciously or unconsciously, today’s contemporary leaders and employees make dozens of decisions on ethical matters in efforts to complete their work. Ethical situations and dilemmas are around every corner and given that reality, leaders must understand the subject of ethics—what it is and why it is important.

What Is Business Ethics?

Ethics is often associated with the words right and good, along with their opposites wrong and bad. For instance, we might speak of a particular action as being “right” or “wrong,” meaning that it is an ethically correct or an ethically incorrect thing to do.

Or we might refer to a particular state of affairs as “good” or “bad,” meaning that it has some form of intrinsic ethical desirability or undesirability.

As well as referring to certain actions as being ethically right, we also use the word “right” in a different sense when talking about ethics. That is, we talk of right as being something that people have rather than as a quality of an action.

If somebody has an ethical claim to a certain thing, we tend to believe that others have an ethical responsibility to let them have that thing, or perhaps even to enable them to have it. And just as we speak of ethical responsibilities, we also assume that words like obligations and duties mean more or less the same thing.

We also talk a lot about fairness when we discuss ethics. We tend to think that if a situation is “fair” then it is ethical, and if it is “unfair” then there is something unethical about it.

Furthermore, ethics-related talk often includes references to virtue: we sometimes refer to a person who behaves ethically as “a virtuous person,” or we refer to an ethical act as “a virtuous act.”

But perhaps the word that crops up most often in association with ethics is morality. Indeed, ethics and morality are often used interchangeably in everyday speech, as are the words ethical and moral.

Philosophers frequently make a distinction between morality and ethics though.

Meanwhile, ethics is often taken by philosophers to refer to the study of morality.

Several scholars generally agree that the terms ethics and morality, and ethical and moral are synonymous. The English terms “ethics” and “morality” are translations of the same word in Greek and Latin respectively; and as such, each word is translated into English slightly differently.

The word ethics derives from the Greek word “ethikos,” and from the root word “ethos,” referring to character or custom. This definition is germane to effective leadershipOpens in new window in organizations in that it connotes an organization code conveying moral integrity and consistent values in service to the public.

The word morality derives from the Latin word, “moralitas,” based upon the root word, “mores,” referring to character, custom, or habit. Therefore, these interchangeable terms refer to the character or disposition of beliefs, values, and behaviors that shape perceptions of what is right and wrong based upon one’s personal, social, cultural, and religious values and the standards by which behavior is deemed acceptable or unacceptable regarding responsibilities, rules, codes of conduct, and/or laws.

One’s morals certainly are part of the discussion regarding ethical behavior, but the term morals, generally connotes something different from ethics.

According to this definition, business ethics covers the whole spectrum of interactions between organizations, individuals, society, and the state. In other words, business ethics is as complex as business itself.

It is not an optional accessory to business life or a mere enthusiasm of the philosophers and moralists; business ethics is how the people conduct their business affairs, from the basest fraud to the highest levels of excellence.

For the most part, many view ethics and morality as being so similar to one another that they use the term interchangeably to refer to the study of fairness, justice, and moral behavior in business.

• Is it ethical, for example, to pay a bribe to obtain a business contract in a foreign country?
• Is it ethical to allow your organization to withhold information that might discourage a job candidate from joining your organization?
• Is it ethical to ask someone to take a job you know will not be good for their career progress?
• Is it ethical to do personal business on company time?

The list of questions could go on and on. Despite one’s initial inclinations in response to these questions, the major point of it all is to remind leaders and other organizational members, that the public-at-large is demanding that government officials, business leaders, workers in general, and the organizations they represent all act according to high ethical and moral standards.

There is every indication that the future will see a continued concern with maintaining high standards of ethical behavior in organizational transactions and in the workplace. All leaders have a general idea of what business ethics means, but it is helpful to see some of the agreement on what ethics is not.