A definition for business ethics could be given in the most basic understanding of choosing between the right and wrong actions. Business ethics prescribes the actions of individuals in an organization. It also suggests the kind of behavior that the organization as a whole gives emphasis to. It is most clearly expressed in the written or unwritten values and codes of principles that a company adopts. An organization is a community which creates its own culture and is therefore, sociologically speaking, capable of determining its standards for what constitutes acceptable decisions and behavior.
A company can approach a definition for business ethics in two perspectives—that of the shareholders and those of the stakeholders. A shareholder’s perspective of business ethics focuses on making decisions for the best interest of the owner such as a company’s investors. Their main interest is solely on maximizing the company’s profit. Those who look at business ethics in this way may be able to make the most money but it is with tragic results.
On the other side of the spectrum, the stakeholder’s perspective holds the belief that companies have certain duties to groups outside its financial operations whose needs should be taken into consideration. A phrase that is mostly associated with this type of thinking is that of corporate social responsibility. Decisions are made with an evaluation of its impact to those of people and groups within the organization and those outside of it. Stakeholders are the company’s employees, customers, suppliers, community residents, government agencies and competitors of the same industry. Shareholders are also among the stakeholders.
The importance of ethical business decisions are seen in the company’s life and development. Companies who behave in socially acceptable manners are more likely to enjoy long-term success against those who do business for profit only. A positive corporate image is achieved when people learn to trust and have faith in the company which eventually translates into monetary figures by an increase of sales. Gaining the customers’ trust is an important aspect of a company’s financial stability. Ethical decision making is also connected to the discussion on morality in business. Formulated codes of conduct are expressions of the company’s commitment to responsible business practices like corporate accountability and fair corporate governance.
As a study and evaluation of the principles governing the decision making process of a company, a definition for business ethics also include the reality of the many overlapping issues and concepts that question what is good and true. A simple ethical question is a company’s obligation to be honest to their customers while a broader philosophical and social issue would tackle a company’s responsibilities on preserving the environment and the protection of the employees’ rights. Managers have the burden of establishing a balance between the ideal and practical dimensions of the business.
Ethical behavior is necessary in doing business especially when decision making is a moral responsibility. The four-way test has been a suggestion to evaluate the morality of certain business decisions. It asks about the truthfulness of the decision as well as its fairness to everyone concerned. This sense of fairness is actually the main factor in building the goodwill of the organization.