Business ethics is a relative term, and can be looked at from various angles, all equally rational and valid. There are many economists, sociologists and philosophizers who have defined these ethics in their own way and from different perspectives. One of the most simple ways to explain business ethics is that business ethics are a code of ethical conduct.
Adherence to which is expected out of organizations that function in a particular society, so as to not harm the members of that society or the society itself, in any manner. Earlier, the sole motive of all organizations was profit maximization. Today, profit maximization cannot be achieved if ethics or morals applied in that business are compromised on. Importance of business ethics in the workplace and in society is a crucial study for everyone who owns a business, or believes in being a thoughtful and informed customer.
In every business, there comes a time when profit maximization and social issues meet at a common junction. If at that time, the social issues are compromised on, there is a breaking of ethical code. To make this more simple, let us assume that organizations are people, which is the case in most countries including the United States where companies are legally considered as persons. If that person, for his personal benefit, decides not to abide by the norms of society or does not deliver as promised, he is guilty of his actions.
This is where business ethics come in to the picture, to avoid a conflict between personal gain and social benefit. Business ethics are a term of today, having been formed somewhere around the 1970s. The history of business ethics and its co-relation with other economic and business terms is discussed below with some examples, which will help give you a clear understanding of the term.
History of Business Ethics
Now, if we see emergence of the term business ethics, it's pretty much contemporary. But, the whole idea has evolved through ages and can be traced back to quite a few decades if not centuries. In the olden times, slavery was allowed and eventually it was banned. There was an entire era of colonialism, today we can't even think of something on those terms. There have been wars and those wars have always been out of one simple interest, more power which would only be achieved through a lot of profit.
The businesses in olden times were seldom sensitive to the communities where they flourished. There was monopoly on a large scale and sometimes, there were also no ends to meet the needs. Eventually, we had economic laws that formed better ways for efficient co-existence. From 1970 to somewhere around the mid 80's, there were more than 500 courses that were started to deal with academic study of the term business ethics.
In 1980, emerged the Society for Business Ethics and about seven years later, business schools in Europe started with the European Business Ethics Network. With so much hype around the term, somewhere around the 1990s or maybe a little before that, various companies and organizations started advertising how they are morally bound to their business ethics. This was in response to the various scandals arising out of not following the business ethics.
What are Business Ethics Today
According to economist Milton Friedman, corporate executives' responsibility... generally will be to make as much money as possible, while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom". Today business ethics are much more defined than they were before, and that too from different perspectives. Today, financial policies are made keeping in mind the ethics rather than only the law. The finances have to be maintained ethically and the usage of these, again, has to be made correctly.
Human resource is another sector that is directly related to business ethics. The business should in no manner hamper the interest of the workers, and policies have to be formed keeping in mind the say of the trade unions. Recruitment, selection and promotions have to be done keeping in mind only the work of the individual. Marketing of a particular product or service has to be done keeping in mind the society where these businesses function.
Business firms should not market or advertise or promise anything that they can't deliver. Every society has different set of rules and regulations which a business needs to understand to function efficiently and of course, ethically. A lot of companies and corporates were against the strict following of these business ethics earlier, but today there is The International Business Development Institute that offers a Charter in Business Development (CBD). This charter states what exactly are, and aren't, business standards and practices.
The Religious Element
Different religions maintain and believe in different business ethics that suit, and are basically in accordance with, their respective religions. Though mostly all operations are today maintained by general law for the country, it is important to study this perspective on business ethics too. In Christianity, the theology is entirely based on the Old and New Testament. A very famous example here is that of Jesus asking his disciples, "If you lend to those from whom you hope to receive, what credit is that to you?".
Christians believe that rewards from God should be given more importance than temporary monetary rewards. Here, interest on loans is discouraged. In Muslims, if you lend money to the needy with chargeable interest as a term, it's considered exploitation of people. Another example here is that if the promises made by the seller are not fulfilled or are not delivered wholly, the transaction can be canceled by the customers at any given point.
Buddhism mostly speaks of business ethics to benefit employees and ethics in the workplace, where the employees should be the main focus in running a business and that employees in turn should treat working as gaining enlightenment. In the Jews, the ethics in business are more valued than any other ethics in the Torah, to an extent that it is believed that the first question a person would be asked before entering another life after death would be were you honest in business?
Some Examples to Demonstrate What Business Ethics Are
Let's assume that there is a company called A that deals into manufacturing of fairness creams. This company starts advertising that after using this cream, the customer would be able to achieve fairness in just 7 days. Most of the time, this isn't true and the disclaimer is a proof of these. After the whole hype about code of ethics in business, these companies started advertising in terms of shades fairer than just fair.
Business ethics in pharmaceutical industries are the best to study. First, the medicines have to be effective and deliver results as per promised. Second, they should not have any short or long term effects. Third, they should not be very expensive as the common man is the customer that we have to answer in the end. Now, let's take an example of a service instead of a product.
From time to time, there are offers that companies come up with for the benefit of the customers. One such commonly seen offer is the free delivery of certain food items, if not delivered in time. Here, the size of the order and the area where the order needs to reach should be well explained so that the society is not mislead. If it doesn't reach on time, the order should be free in all terms.
Some academics argue that business ethics is nothing but the want of drawing equilibrium between relativism and idealism. Business ethics also gave rise to corporate social responsibility (CSR) that deals with the social responsibility of corporates towards communities and the welfare of society at large. I hope this information helped you understand what are business ethics, properly and clearly.