What Is Business Ethics?

Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wage, insider trading restrictions, and environmental regulations. On the other hand, business ethics can be influenced by management behavior, with wide-ranging effects across the company.

Business ethics is the application of ethical values to business behaviour. Business ethics is relevant both to the conduct of individuals and to the conduct of the organisation as a whole. It applies to any and all aspects of business conduct, from boardroom strategies and how companies treat their employees and suppliers to sales techniques and accounting practices.

Ethics goes beyond the legal requirements for a company and is, therefore, about discretionary decisions and behaviour guided by values.

What Is an Example of Business Ethics?

Consider an employee who is told in a meeting that the company will face an earnings shortfall for the quarter. This employee also owns shares in the firm. It would be unethical for the employee to sell their shares since they would be subject to insider information. Alternatively, if two large competitors came together to gain an unfair advantage, such as controlling prices in a given market, this would raise serious ethical concerns.

Why Are Business Ethics Important?

Business ethics are important because they have lasting implications on several levels. With increased investor awareness on environmental, social, and governance issues, a company's reputation is at stake. For instance, if a company partakes in unethical practices, such as poor customer privacy procedures and protections, it could result in a data breach. This, in turn, may lead to a significant loss of customers, erosion of trust, less competitive hires, and share price declines. 

Please read the following passage and air your views.

                Business Ethics in China

If you want to talk about business ethics in China, don't set yourself up as the Western expert imposing foreign models on the Chinese. That was the message of Stephan Rothlin, general secretary of the Center forInternational Business Ethics (CIBE) in Beijing in remarks to the Business andOrganizational Ethics Partnership of the Markkula Center for Applied EthicsMarch 23.

The Chinese, Rothlin said, are very open to considering ethical issues: "They want to be global players, and they realize that in order to become a real global power, they have to eliminate corrupt practices." Many students at the Beijing University of International Business and Economics, where CIBE is based, are pursuing an MBA because they are frustrated by the corruption they witness, he noted. 

But the Chinese do not want paternalism from the West. Instead, Rothlin said, they want acknowledgement that "they can offer something, that they can actually become a driver in the field of ethics." Because the Chinese are emerging as an economic powerhouse, any ethical rules they integrate into their businesses practices will have an impact on the whole world.

Often, the Chinese see hypocrisy in criticism of their country by companies that tout their own ethical codes but then close their eyes to what their own Chinese subcontractors are doing, Rothlin said. To counteract this skepticism toward Western critiques, he counseled an approach that acknowledges unethical conduct in other cultures as well. Swiss by birth, Rothlin teaches about the failure of Swissair in 2001 "to avoid suggesting that only China has problems."

He gives the same advice to those who want to work with Chinese companies or bring their businesses to China. "The strategy should be to limit the output of Western experts to a minimum," he said. Setting up a code of ethics, for example, should be primarily the job of the Chinese. "It does not mean anything if you translate your existing code from English and distribute it," he cautioned. "The Chinese will say, 'Yes, thank you,' and then throw the code away." Of course, that indifferent kind of implementation would not work anywhere in the world, even, as one member of the partnership pointed out, "in San Diego."

Rather than imposing a code, Rothlin argued, "let the Chinese develop their own codes. Then the managers can identify themselves with these codes." 

Rothlin emphasizes China's own philosophical traditions when he talks about business ethics with the Chinese. He gave this example of how he discusses the problem of corruption, which often includes favoring family and cronies. Some students of China have argued that the Chinese are encouraged in such favoritism by their traditions. They point to Confucius' focus on responsibility to family, citing his admonition that a person who sees his father steal a sheep should not turn his father over to the authorities.

But Rothlin points out counter-arguments within the Chinese tradition itself. Mozi, a philosopher of the 5th century BCE, tried to replace the Confucian focus on the clan with a more universal caring. He saw favoring the family as the root of corruption and instead advocated laws that protect everyone equally.