Overview
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.
Core Idea
The core idea is that businesses are not just profit machines operating in a moral vacuum; they are social entities with responsibilities to various stakeholders (employees, customers, community), not just shareholders.
Formal Definition
Business ethics applies ethical theories (like utilitarianism, deontology, virtue ethics) to business practices, policies, and institutions.
Intuition
- The Lemon Car: A dealer knows a car has a hidden defect. Selling it might be profitable (good for business?), but it is dishonest and dangerous (bad ethics). Business ethics argues that good business must also be ethical.
- Fair Pay: Paying workers a living wage might cost more, but it respects their dignity and rights.
Examples
- Corporate Social Responsibility (CSR): Companies voluntarily taking steps to improve society (e.g., reducing carbon footprint, charitable giving).
- Whistleblowing: An employee exposing illegal or unethical behavior within their company (often at great personal risk).
- Insider Trading: Trading stock based on non-public information is unethical because it rigs the market.
Common Misconceptions
- Misconception: Business ethics is an oxymoron.
- Correction: While profit is a goal, long-term success usually requires trust and reputation, which depend on ethics.
- Misconception: It’s just about following the law.
- Correction: Ethics often requires more than the law (e.g., not exploiting a legal loophole to harm people).
Related Concepts
- Stakeholder Theory: The view that a company should create value for all stakeholders, not just shareholders.
- Shareholder Primacy: The opposing view (Friedman) that the only social responsibility of business is to increase its profits.
- Triple Bottom Line: Measuring success by People, Planet, and Profit.
Applications
- Marketing: Truth in advertising vs. manipulation.
- Supply Chain: Ensuring products are not made with child labor or slave labor.
Criticism and Limitations
- Greenwashing: Companies pretending to be ethical/green just for PR, without real change.
- Profit Conflict: When ethics and profit genuinely conflict, profit often wins, leading critics to say voluntary ethics is insufficient (regulation is needed).
Further Reading
- Business Ethics: A Kantian Perspective by Norman Bowie
- Strategic Management: A Stakeholder Approach by R. Edward Freeman