Entry #4 The Role of Ethics in Business

            In this blog, the role of ethics in business is reviewed, and the concept of ethics as it relates to business operations will be evaluated.  The blog will discuss the stance that Drucker (1974) took on ethics, and it will discuss Carr’s (1968) perspective regarding the role of ethics in business.  The blog will conclude with this writer’s perspective on personal ethics and business ethics.

     The study of business ethics is not the study of what is legal but of the application of ethics to business decisions (Jennings, 2011).  A simple definition of business operation ethics refers to the code of conduct by a business in reference to the business’s goals and objectives. Therefore, the business operations ethics are defined by the firm’s values, and codes of principles that direct a firm to achieve its own goals.  The business ethics determines what is bad or good for a business depending on the business culture.  Therefore, ethics differentiate between what is good and bad for an organization (Fernando, 2009).

            On the other hand, there are two perspectives from which an organization can look at ethics.  That means there are two schools of thought from which the definition of ethics can be looked.  The first school of thought employs the definition of business ethics in reference to the shareholder focus approach.  In this approach, business operations ethics aims at ensuring that the business operations are made in such a way that they adhere to the interests of the shareholders.  That means the business ethics are mainly aimed at generating profits for the shareholders (Jennings, 2011).

On the other hand, the second school of thought defines business operations using a premium approach, whereby it mainly focuses on the business corporate responsibility.  In respect to this concept, the business ethics are not limited to the interests of the shareholders, but to the interests of all the stakeholders. The business ethics in this case try to strike a balance to the interests of all the stakeholders who include the workers, owners, clients, and suppliers among others.  That means the definition of business ethics depends on individual business; hence, the definition of what is wrong or right depends on the organizational culture of an individual business. According to Gruble (2011), the definition by a business of what is right or wrong depends on “the culture within the company, the presence of a formal professional code of business ethics, the internal system of rewards and recognition, recruitment and human resources practices, the values system, the way management treats its employees, and the flow of the decision-making process.”

Drucker (1974), argues that the management of every organization has two key roles to play, first, remaining focused and accountable for the operations of the businesses, and secondly, being accountable to the whole institution.  The leaders have to ensure smooth running of a business while at the same time guaranteeing that the firm is a responsible corporate entity. Thus, Drucker (1974) tried to make the businesses to view that they have a responsibility to the community. Through the spirit of performance, he required the businesses to display a high degree of integrity through their ethical and moral conduct.  That could be instituted through establishment of strengths, focusing on the results, and working efficiently to ensure that while serving the common good, the needs of the stakeholders are satisfied.

The Drucker (1974) concept of ethics required the managers to view the community to be the responsibility of a business, in so doing; he required the businesses to have a high performance that exhibits a high degree of integrity in their ethics and morality conduct.  That was through paying attention to conduct, results, evaluation of strengths, and working all around to ensure the needs of the stakeholders are satisfied.

Drucker (1974) believed that the management has a key role in ensuring that the ethical concerns of a business operation are achieved.  These are achieved by evaluation of what the managers do, which is judged by what others see.  The leaders have to ensure that their actions are linked to the values of a business.  The values of the businesses include the procedures, assumptions, practices, and policies that must be followed by all the employees of an organization.  It is the leadership that plays a key role in guiding other employees in doing what is right, therefore, resulting in the high performance of an organization.

Presently, through globalization, the world has become more connected and actions of organizations can be analyzed across the globe due to interconnectivity.  Therefore, the ability of an organization to effectively appreciate the concept of social responsibility through ethically appropriate programs is a great tool that can be appreciated across the globe.  It is the role of the leaders to ensure that as firms make profits, a balance of fair trade should be established to guarantee sustainability through ethical principles.

That attitude of leaders to ignore the externalities adversely affects the leadership excellence, and the relationship of an organization with stakeholders; nonetheless, efforts to address the externalities caused by an organization during its operation transforms the challenges into business opportunities.  Thus, Drucker (1974) proposes the importance of focusing on the common good through services to the society that gives the society some privileges.  Presently, leaders are faced with many challenges that require the Wisdom of Solomon for the most applicable solution to be established.  However, despite the diversity of the problems, leaders/ business managers have the responsibility of ensuring that their businesses take care of the community through giving back to the society.  That eventually results to a healthier community that has great benefits to the business operations. Among the benefits to the business operations include healthy, energetic, and productive workforces that enhances the productivity of a business.  Thus, Drucker (1974) proposes an ethical organization is one that is socially responsible and thus guarantees sustainability.

According to Carr (1968), many managers are forced by circumstances while acting in the interest of the shareholders or themselves to deceive in the process of negotiating with government officials, customer, and labor unions or even between departments of the same company.  That is done through misstatement, hiding some facts, by bluffing, or exaggerating, and hence ends up convincing others to follow their proposals.  Denying the business leaders the chance to bluff ends up denying them great business opportunities, and this can result in business losses.  In cases where a leader is constrained, maybe by religious reasons, not to bluff, the organization must come up with strategies to ensure that special ethics are employed to ensure that the leader does not have a guilty conscious.  That eventually justifies the bluff through a game of game strategy. The game of justifying the bluff is played at all levels of the corporate ladder.

The justification for bluffing is that one plays the game only when making the decision that will be most favorable to the business at that particular time.  Therefore, one adheres to Carr’s (1968) business ethics concepts.  The concept of Carr’s (1968) ethical approach can be claimed to be similar to the one employed in the poker analogy where special ethics differ from ethics employed in ideal civilized human relationship because “the game” calls for distrust of the other fellow.  It ignores the claim friendship (Carr, 1968).

There exist many dramatic incidences in the business world, while others refer to them as being unethical, the business world refers to them as the game.  This is most evident in the insurance business where business game players are very common.  Hence, violation of business ethics does not entail violation of business principles.  Another game entails casting illusions aside and playing to win.

The business ethics determines what is bad or good for a business depending on the business culture.  However, there is one school of thought where business operations ethics aims at ensuring that the business operations are made in such a way that they adhere to the interests of the shareholders and whereby business operations ethics mainly focuses on the business corporate responsibility.  Drucker (1974) argues that the leaders have to ensure smooth running of a business while at the same time guaranteeing that the firm is a responsible corporate entity.  Thus, he tried to make the businesses view that they have a responsibility to the community, and that the attitude of leaders to ignore the externalities adversely affects the leadership excellence.  The relationship of an organization with stakeholders drives efforts to address the externalities caused by an organization during its operations and transforms challenges into business opportunities.

While, again, Carr (1968) argues that many managers are forced by circumstances while acting in the interest of the shareholders or themselves to deceive in the process of negotiating with government officials, customers, labor unions, or even between departments of the same company.  Regardless of the argument brought about by either scholar, business operations should be guided by the urgency of being socially responsible in efforts to enhance sustainability.  Goodpaster (2007) refers to corporate “conscience” as a “mindset” that serves as an antidote to the tendency to fixate on narrowly defined operational goals.  Individuals and organizations that exercise principled moral judgment will exhibit traits that can encourage the development of conscience (Smith & Dubbink, 2011).

This blog has provided a look at different perspectives regarding ethics within business operations, but one thing not discussed was personal ethics within business operations.  Is there really a difference between personal ethics and business ethics?  No.  Ethics is not something that one can toggle around based on circumstance.  Either an action or stance is ethical or not.  If one has a personal belief that an action being taken in a business operation is unethical, then that individual cannot place their personal ethical beliefs aside and step into a different room of ethics for business purposes.  One either believes an action or position is ethical or not.  As Jennings (2011) alludes to, ethics in business is not based just on what is legal but also on whether a decision or act is ethical overall.  There is no separation between personal beliefs on ethics and ethical business actions.  An action or inaction is either ethical or not ethical.

References

Carr, A. Z. (1968). Is business bluffing ethical? Harvard Business Review, 46(1), 143-153.

Drucker, P. F. (1974). Management: tasks, responsibilities, practices. New York, NY: Harper & Row.

Fernando, A. C. (2009). Business ethics: An Indian perspective. Panchsheel Park, New Delhi: Pearson Education.

Goodpaster, K. E. 2002. Teaching and learning ethics by the case method. In Bowie, N. (Ed.), The Blackwell guide to business ethics. London: Blackwell.

Gruble, C. (2011). Defining business ethics. Business Ethics Review. Retrieved from http://businessethicsreview.wordpress.com/2011/06/21/defining-business-ethics/

Jennings, M. M. (2011). Business ethics: Case studies and selected readings. (Seventh Edition). Mason, OH: South-Western Cengage Learning.

Smith, J., & Dubbink, W. (2011). Understanding the role of moral principles in business ethics: A Kantian perspective. Business Ethics Quarterly, 21(2), 205-231.

James E. Burroughs, Jr., MBA, Northcentral University, (480) 748-9534.

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