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Dated back to Code of Hammurabi some 4,000 years ago, business ethics is a social science, whose main aim is to define and examine the responsibilities of businesses and their agents as a part of the general moral environment of a given society. The products of this field of research are sets of rules and codes of conducts, which serve as a means of protection from the possible infringements of moral codes as a result from the general activities and responsibilities of a firm to its stakeholders (e.g. generating profits for shareholders and taxes to the government). This paper will briefly explain the foundations and the growing importance of business ethics in today’s economy. Finally, it will describe several contemporary issues of research and practice.
In its simplest sense, the field of business ethics represents the meeting point between ethics and business, where business decisions and their implementation are evaluated in terms of the “right” (moral) and “wrong” (immoral). However, ethical decision-making is far from being simple, as is involves much greater complexity and debate (Trevino & Brown, 2004) than other ethical fields, even complicated ones such as bioethics. The main reason for this confusion is not only the themes of business ethics, but the difficulty to recognize the relevance of ethics to the business decision in question. For example, corporate governance standards are closely related to ethics, but the weight of the latter in the spectrum of this field (which also involves financial, legal and other issues) is not always clear, especially when ethical standards collide with other customs.
Thus, it is better to define business ethics through the types of responsibilities it does and does not deal with. That is, instead of suggesting “the best one way” of e.g. corporate governance, the business ethics school will emphasize the moral underpinnings of the matter and will support the decisions and actions only from those perspectives. Finally, ethics differ from law by the sense that not everything that is legal is also moral. For instance, although it is legal for a company to pollute to environment to some extent, many would argue that pollution is inherently immoral and hence unethical.
As mentioned earlier, issues of business ethics have a long history, and are thoroughly referred to in civilian and religious writings. Throughout the various forms of commerce, matters such as competition, accurate reporting and pricing (to name a few) are part of all major transcripts, including Aristotle, the Old Testament, the Koran and even appear in Buddhist writings. However, this interest in business ethics has grown significantly during the 20th century, reaching a peak today due to several main reasons:
First and foremost is the unique role of corporations in the modern society. This form of business, whose economic and social power may be immense and involves numerous stakeholders, motivated further thinking regarding the means in which possible negative influence of corporations can be restricted.
Second, a wave of corporate scandals, involving cases of fraud, negligence and immoral marketing methods has increased the attention to companies’ internal affairs, in particular their agents. This was due to the explosions of scandals such as Enron and WorldCom as well as a growing interest in corporate affairs in Hollywood, leading to blockbusters such as Wall Street, Quiz Show, The Insider and Jerry Maguire.
Third, a new wing of economic and legislative thinking in all fields of ethics (e.g. in medicine and environmental issues) has also transformed the line of thought towards businesses, from perceiving them as mechanisms for creating value to active members of the society with individual sets of responsibilities.
As the theoretical and practical efforts in the field of business ethics surround virtually all aspects of business conduct, there is also a great variety within this science. Some of the main issues that occupy business ethics scholars are:
Moral behavior in the face of immoral environment: a significant test for the firm’s ethical behavior is the nature of business transactions when the environment does not enforce high standards, thus enables ethically questionable (and maybe more profitable) conduct. Examples may include environmental issues (e.g. CO emissions), human rights (e.g. child labor), safety in the workplace, discrimination and sexual harassment.