Business Ethics – Introduction
Morality
Morality can be defined as the standards that an individual or a group has about what is right and wrong or good and evil.How to distinguish moral standards from standards that are not moral?
Ethicists suggested five characteristics to identify moral standards.
1. Moral standards deal with matters which people think can seriously injure or seriously benefit human beings.
Business Ethics – Introduction
Morality
Morality can be defined as the standards that an individual or a group has about what is right and wrong or good and evil.How to distinguish moral standards from standards that are not moral?
Ethicists suggested five characteristics to identify moral standards.
1. Moral standards deal with matters which people think can seriously injure or seriously benefit human beings.
2. Moral standards are not established or changed by political or legal authoritative bodies. The validity of moral standards rests on the adequacy of the reasons.
3. Moral standards are preferred to other standards including even self-interest when choice is there.
4. Moral standards are impartial. They are based on impartial reasons that an impartial observer would accept.
5. Moral standards are associated with special emotions. When people act in violation of a moral standard, they feel guilty, ashamed and remorseful.
Ethics
Ethics is the activity of examining the moral standards of a society or of an individual. Whether the standards are reasonable or not and how to apply the standard in particular situations are examined by ethicists. The aim of ethics is develop a body of moral standards that a person feels reasonable to hold based on careful thought.Business Ethics
Business ethics is an enquiry of ethics in the field of business. It concentrates on moral standards that the system of business, business organizations, and individuals with in the business organizations and individuals who deal with business organizations have to evaluate and follow in their day to day dealings and decisions.Business ethics can be studied at three levels: systemic, corporate and individual. Systemic issues deal with economic, political, legal and other related systems within which production and distribution activities are carried out. Questions related to the morality of capitalism, regulation of business etc. fall into this level. Corporate level issues deal with actions of corporate concerns or corporate citizens.
Individual levels issues deal with every individual working in a business firm and it can include customers/consumers.
Do Moral Standards Apply to Corporations?
While some people do argue that corporations have no moral standards to adhere to and only people have. Velasquez concludes that as corporate citizens they have moral standards to live up to but at the same time they are mainly acted upon by people. People are behind corporate decisions.Moral Development
Lawrence Kohlberg proposed that a person’s ability to deal with moral issues develops in six identifiable stages.Stage 1: For child, the physical consequences determine the goodness or badness of an act.
Stage 2: Right activities are those that satisfy the needs of the child or the needs of persons he cares about.
Stage 3: Good behavior is living up to the expectations of the group of people one loves or trusts such as family or friends.
Stage 4: At more mature stage law is followed for determining right or wrong acts.
Stage 5: Conflicting personal views are recognized.
Stage 6: Moral principles are chosen because of their logical comprehensiveness in ethics enquiry.
Moral Reasoning
Moral reasoning is the process by which actions are judged with reference to moral standards. It involves knowledge of moral standard and whether a situation has arisen wherein moral standard needs to be applied.Moral reasoning has to be logical. The factual evidence regarding the situation must be accurate, relevant and complete. The set of moral standards invoked has to be consistent.
Arguments For and Against Business Ethics
Arguments against Business Ethics
1. The pursuit of profit will by itself ensure social responsible behavior in perfectly competitive markets.2. Managers are loyal agents and they should pursue the interests of their firms and should ignore ethical considerations.
3. It is sufficient if business firms obey law.
Arguments for Expecting Ethical Behavior from Business Concerns
1. Businesses cannot survive unless moral standards exist in business concerns and outside.
2. Ethical concerns are consistent with profits of businesses.
3. Analogy to Prisoners’ dilemma problem reveals that in repeated interactions, cooperation is the best solution and ethical behavior is the best solution.
4. Most people value ethical behavior and punish business men and organizations that are not ethical. In organizations, where people feel there is no fair play, there is more absenteeism, avoidance of work and lack of respect. In organizations where people feel there is fair play, there is enthusiasm, cooperation and trust.
2. Ethical concerns are consistent with profits of businesses.
3. Analogy to Prisoners’ dilemma problem reveals that in repeated interactions, cooperation is the best solution and ethical behavior is the best solution.
4. Most people value ethical behavior and punish business men and organizations that are not ethical. In organizations, where people feel there is no fair play, there is more absenteeism, avoidance of work and lack of respect. In organizations where people feel there is fair play, there is enthusiasm, cooperation and trust.
Main source:
Manuel
G. Velasquez, Business Ethics: Concepts and Cases, Fourth Edition,
Prentice Hall Inc., Upper Saddle River, N.J., 1998, Business Ethis by
Manuel G. Velasquez - Book Information and ReviewReferences2. Moral standards are not established or changed by political or legal authoritative bodies. The validity of moral standards rests on the adequacy of the reasons.
3. Moral standards are preferred to other standards including even self-interest when choice is there.
4. Moral standards are impartial. They are based on impartial reasons that an impartial observer would accept.
5. Moral standards are associated with special emotions. When people act in violation of a moral standard, they feel guilty, ashamed and remorseful.
Ethics
Ethics is the activity of examining the moral standards of a society or of an individual. Whether the standards are reasonable or not and how to apply the standard in particular situations are examined by ethicists. The aim of ethics is develop a body of moral standards that a person feels reasonable to hold based on careful thought.Business Ethics
Business ethics is an enquiry of ethics in the field of business. It concentrates on moral standards that the system of business, business organizations, and individuals with in the business organizations and individuals who deal with business organizations have to evaluate and follow in their day to day dealings and decisions.Business ethics can be studied at three levels: systemic, corporate and individual. Systemic issues deal with economic, political, legal and other related systems within which production and distribution activities are carried out. Questions related to the morality of capitalism, regulation of business etc. fall into this level. Corporate level issues deal with actions of corporate concerns or corporate citizens.
Individual levels issues deal with every individual working in a business firm and it can include customers/consumers.
Do Moral Standards Apply to Corporations?
While some people do argue that corporations have no moral standards to adhere to and only people have. Velasquez concludes that as corporate citizens they have moral standards to live up to but at the same time they are mainly acted upon by people. People are behind corporate decisions.Moral Development
Lawrence Kohlberg proposed that a person’s ability to deal with moral issues develops in six identifiable stages.Stage 1: For child, the physical consequences determine the goodness or badness of an act.
Stage 2: Right activities are those that satisfy the needs of the child or the needs of persons he cares about.
Stage 3: Good behavior is living up to the expectations of the group of people one loves or trusts such as family or friends.
Stage 4: At more mature stage law is followed for determining right or wrong acts.
Stage 5: Conflicting personal views are recognized.
Stage 6: Moral principles are chosen because of their logical comprehensiveness in ethics enquiry.
Moral Reasoning
Moral reasoning is the process by which actions are judged with reference to moral standards. It involves knowledge of moral standard and whether a situation has arisen wherein moral standard needs to be applied.Moral reasoning has to be logical. The factual evidence regarding the situation must be accurate, relevant and complete. The set of moral standards invoked has to be consistent.
Arguments For and Against Business Ethics
Arguments against Business Ethics
1. The pursuit of profit will by itself ensure social responsible behavior in perfectly competitive markets.2. Managers are loyal agents and they should pursue the interests of their firms and should ignore ethical considerations.
3. It is sufficient if business firms obey law.
Arguments for Expecting Ethical Behavior from Business Concerns
1. Businesses cannot survive unless moral standards exist in business concerns and outside.
2. Ethical concerns are consistent with profits of businesses.
3. Analogy to Prisoners’ dilemma problem reveals that in repeated interactions, cooperation is the best solution and ethical behavior is the best solution.
4. Most people value ethical behavior and punish business men and organizations that are not ethical. In organizations, where people feel there is no fair play, there is more absenteeism, avoidance of work and lack of respect. In organizations where people feel there is fair play, there is enthusiasm, cooperation and trust.
2. Ethical concerns are consistent with profits of businesses.
3. Analogy to Prisoners’ dilemma problem reveals that in repeated interactions, cooperation is the best solution and ethical behavior is the best solution.
4. Most people value ethical behavior and punish business men and organizations that are not ethical. In organizations, where people feel there is no fair play, there is more absenteeism, avoidance of work and lack of respect. In organizations where people feel there is fair play, there is enthusiasm, cooperation and trust.
Main source:
Manuel
G. Velasquez, Business Ethics: Concepts and Cases, Fourth Edition,
Prentice Hall Inc., Upper Saddle River, N.J., 1998, Business Ethis by
Manuel G. Velasquez - Book Information and ReviewMoral Standards and Moral Judgments – Approaches
Approach of Utilitarianism
The action that has highest net social benefit is to be undertaken when we do not have the resources for attaining everyone’s objectives. Jeremy Bentham is its proponent.Principle of Rights
Any behavior by an individual or a group should respect the basic rights of the individual affected by the action. Special agreements also create rights.Principle of Justice
Standards of justice indicate how benefits and burdens should be distributed among the members of a group. These standards are to be utilized when activities and benefits different substantially among members in important ways. Capitalism and Socialism differ in the principle of justice regarding duties and rewards of members of a society.Principle of Care
Every person has some special concrete relationships with others. He has to take care of them in preference to others or some of his own objectives. A parent has a responsibility to take care of his children even at the expense of his future or career.Business System - Free Markets - Ethics
Perfect competition
In a perfectly competitiive market, there are numerous buyers and sellers and none of them will have sizeable market share. Entry and exit of buyers and sellers is free. In a perfectly competitive market, prices and quantities always move toward the equilibrium point.
Velasquez wrote, perfectly competitive free market achieves or satisfies three moral criteria: Justice, Utility and Rights.
Capitalist criterion of justice: Benefits and burdens are distributed justly when a person receives in return at least the value of the contribution he or she made to an enterprise. Fairness is getting paid fully, in return for what one contributes. It is this form of justice (capitalist criterion of justice) that is achieved in perfectly free competitive markets.
Monopoly
Unregulated monopoly markets can fall short of the three values - capitalist justice, economic efficiency, and respect for negative rights that perfect competitive markets achieve.
Oligopoly
Oligopoly also can result in shortfall of the three values: capitalist justice, economic efficiency, and respect for negative rights that perfect competitive markets achieve. In oligopoly markets price-fixing, manipulation of supply, exclusive dealing arrangements, tying arrangements, retail price maintenance arrangements, price discrimination are identified as unethical practices.
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