04-07-2013, 02:35 PM
Business ethics
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INTRODUCTION
Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical
principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business
conduct and is relevant to the conduct of individuals and entire organizations.
Business ethics has both normative and descriptive dimensions. As a corporate practice and a career specialization,
the field is primarily normative. Academics attempting to understand business behavior employ descriptive methods.
The range and quantity of business ethical issues reflects the interaction of profit-maximizing behavior with noneconomic
concerns. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within
major corporations and within academia. For example, today most major corporations promote their commitment
to non-economic values under headings such as ethics codes and social responsibility charters. Adam Smith said,
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a
conspiracy against the public, or in some contrivance to raise prices."[1] Governments use laws and regulations to
point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details
of behavior that lie beyond governmental control.[2] The emergence of large corporations with limited relationships
and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes.[
History
Business ethical norms reflect the norms of each historical period. As time passes norms evolve, causing accepted
behaviors to become objectionable. Business ethics and the resulting behavior evolved as well. Business was
involved in slavery,[4][5][6] colonialism,[7][8] and the cold war.[9][10]
The term 'business ethics' came into common use in the United States in the early 1970s. By the mid-1980s at least
500 courses in business ethics reached 40,000 students, using some twenty textbooks and at least ten casebooks
along supported by professional societies, centers and journals of business ethics. The Society for Business Ethics
was started in 1980. European business schools adopted business ethics after 1987 commencing with the European
Business Ethics Network (EBEN).[11][12][13][14] In 1982 the first single-authored books in the field
appeared.[15][16]
Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance
themselves from the business scandals of the day, such as the savings and loan crisis. The idea of business ethics
caught the attention of academics, media and business firms by the end of the Cold War.[12][17][18] However,
legitimate criticism of business practices was attacked for infringing the "freedom" of entrepreneurs and critics were
accused of supporting communists.[19][20] This scuttled the discourse of business ethics both in media and
academia.[21]
Overview
Business ethics reflects the philosophy of business, one of whose aims is to determine the fundamental purposes of
a company. If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a
violation of its fiduciary responsibility. Corporate entities are legally considered as persons in USA and in most
nations. The 'corporate persons' are legally entitled to the rights and liabilities due to citizens as persons.
Functional business areas
Finance
Fundamentally, finance is a social science discipline.[35] The discipline borders behavioral economics, sociology,[36]
economics, accounting and management. It concerns technical issues such as the mix of debt and equity, dividend
policy, the evaluation of alternative investment projects, options, futures, swaps, and other derivatives, portfolio
diversification and many others. It is often mistaken to be a discipline free from ethical burdens.[35] The 2008
financial crisis caused critics to challenge the ethics of the executives in charge of U.S. and European financial
institutions and financial regulatory bodies.[37] Finance ethics is overlooked for another reason—issues in finance
are often addressed as matters of law rather than ethics.[38]
Finance paradigm
Aristotle said, "the end and purpose of the polis is the good life".[39] Adam Smith characterized the good life in
terms of material goods and intellectual and moral excellences of character.[40] Smith in his The Wealth of Nations
commented, "All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile
maxim of the masters of mankind."[41]
However, a section of economists influenced by the ideology of neoliberalism, interpreted the objective of
economics to be maximization of economic growth through accelerated consumption and production of goods and
services.[42] Neoliberal ideology promoted finance from its position as a component of economics to its
core.[citation needed] Proponents of the ideology hold that unrestricted financial flows, if redeemed from the
shackles of "financial repressions",[43] best help impoverished nations to grow.[citation needed] The theory holds that
open financial systems accelerate economic growth by encouraging foreign capital inflows, thereby enabling higher
levels of savings, investment, employment, productivity and "welfare",[44][45][46][47] along with containing
corruption.[48] Neoliberals recommended that governments open their financial systems to the global market with
minimal regulation over capital flows.[49][50][51][52][53] The recommendations however, met with criticisms from
various schools of ethical philosophy. Some pragmatic ethicists, found these claims to unfalsifiable and a priori,
although neither of these makes the recommendations false or unethical per se.[54][55][56] Raising economic growth
to the highest value necessarily means that welfare is subordinate, although advocates dispute this saying that
economic growth provides more welfare than known alternatives.[57] Since history shows that neither regulated nor
unregulated firms always behave ethically, neither regime offers an ethical panacea.[
Other issues
Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax
payments, internal audit, external audit and executive compensation also fall under the umbrella of finance and
accounting.[38][73] Particular corporate ethical/legal abuses include: creative accounting, earnings management,
misleading financial analysis insider trading, securities fraud, bribery/kickbacks and facilitation payments. Outside of
corporations, bucket shops and forex scams are criminal manipulations of financial markets. Cases include
accounting scandals, Enron, WorldCom and Satyam.[citation needed]
Human resource management
Human resource management occupies the sphere of activity of recruitment selection, orientation, performance
appraisal, training and development, industrial relations and health and safety issues.[74] Business Ethicists differ in
their orientation towards labour ethics. Some assess human resource policies according to whether they support an
egalitarian workplace and the dignity of labor.[75][76][77]
Issues including employment itself, privacy, compensation in accord with comparable worth, collective bargaining
(and/or its opposite) can be seen either as inalienable rights[78][79] or as negotiable.[80][81][82][83][84] Discrimination
by age (preferring the young or the old), gender/sexual harassment, race, religion, disability, weight and
attractiveness. A common approach to remedying discrimination is affirmative action.