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What are Business Ethics?

After Enron was at the center of a scandal involving its irregular accounting practices in 2001, it seemed like a high profile business executive was in the news almost every day being accused of greed, deceit, and corruption.
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  • Written By: Dana Hinders
  • Edited By: Bronwyn Harris
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  • Last Modified Date: 12 December 2014
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While most people have taken the time to define their personal morals, the concept of business ethics has only recently begun to come under intense scrutiny. After Enron was at the center of a scandal involving its irregular accounting practices in 2001, it seemed like a high profile business executive was in the news almost every day being accused of greed, deceit, and corruption. In response to public outrage, the business community at large began to focus more on encouraging ethical behavior. Now, it is common for both large and small businesses to have a formalized listing of ethical guidelines for employees to follow.

Naturally, any successful corporation must remain focused on earning a profit. With no profit, the company loses value and the employees eventually lose their jobs. However, business ethics do not allow a company to do whatever is necessary to make money. Corporate social responsibility dictates that businesses must provide safe working conditions and use manufacturing practices that do not unnecessarily harm the environment. Ethics also require that companies provide accurate financial data to stockholders and avoid advertising their products and services to consumers under false pretenses.

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The study of business ethics is sometimes referred to as applied ethics because it attempts to translate utilitarianism, social contract theory, deontology, and other theoretical principles into acceptable rules for conduct in various real world situations. At the college level, many schools now have programs to encourage students to develop an awareness of ethics. These classes typically use case studies as the basis for discussions on what constitutes ethical behavior. Lower level classes are sometimes required for an undergraduate business degree, while students working towards an MBA may be able to specialize in leadership and business ethics. While many people do feel classes discussing ethics are beneficial, others say it’s hard to predict how students will behave once they are out of school and into the working world.

To some extent, the government can regulate ethical behavior by passing laws that require businesses to take certain actions. In many ways, however, professional organizations may be the best equipped to impart a sense of business ethics onto a particular industry. Organizations such as the Public Relations Society of America, the National Independent Automobile Dealers Association, the Chartered Property Casualty Underwriters Society, and the National Association of Realtors have codes of ethical behavior that members are required to follow and provide regular training events that help encourage open discussions of business ethics.

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Sunny27
Post 3

Icecream17- I did not know that about Zappos.

I think that many firms suffer from ethical dilemmas.

For example, the airlines industry is looking to cut costs, but at what point does the cost cutting endanger the public as well as its employees? There has to be a delicate balance between profitability and safety.

icecream17
Post 2

Crispety- Great point, I just want to add that honesty is an important business ethic when dealing with the employees as well as the customers.

With employees, they should always know where they stand in a corporation. If their performance is substandard they should be told, so that they could have a chance to succeed. A company simply firing an employee without being honest is not following proper business ethics.

Likewise with a customer, it is important to be honest about product availability, even if it means that a customer will seek to buy the item somewhere else.

There is an online company that does just that. Zappos refers customers to competitors when they are out of stock of an item.

Customers are finding the fact that the company is putting the welfare of the customer ahead of their own, often makes them return in droves to shop at Zappos because of this.

Following proper business ethics is a win-win situation for all involved.

Crispety
Post 1

I just want to add that business ethics are important for all companies to follow because it establishes a universal code of conduct.

This code of conduct provides a positive working environment as well as profitable business success. For example, honesty and hard work are important business ethics, but it takes many forms.

An employee that comes to work on time and works productively and does not cheat the company of potential productivity is following the business ethic model perfectly.

However, another employee breaks the company rules in order to personally gain from a potential sale by offering a lower than authorized discount to a client is not following proper business ethics, because the employee had to cheat in order to make a personal sale.

In the long run this behavior hurts the company because the lower margins are not profitable for the company.

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