The importance of business ethics
Business ethics deals with the choices exercised by people in organizations in terms of decisions and actions. Some options are considered good and some are not. But there are no standard definitions. Much of the choice depends on the perspective of what is good for the business and from whose point of view.
A common earlier view is that what is good for the owners or shareholders is good for the business. All economically profitable actions and decisions are considered good in this perspective. All organizational behavior of individuals and groups is oriented in such a perspective towards profit generation with a single minded approach.
The danger with such a view or behavior is that it can sometimes be detrimental to others who are not shareholders, but who are affected by such behavior and decisions. The laws governing such business behaviors and choices deal with what is legally right and wrong; they do not deal with and cannot deal with choices that are morally right or wrong, as long as they are not legally wrong.
And this can lead to ‘smart’ choices that are legally defensible, but bad for business, bad for customers, bad for society, bad for government and bad for stakeholders other than shareholders. An emerging point of view that is slowly gaining more acceptance is that the highest good of all stakeholders must be considered and organizational decisions must be made in accordance with such considerations, if the company is to be considered to operate with business ethics. .
Corporate social responsibility, not just responsibility to shareholders, is the foundation of this school of thought. This is necessary not only from a ‘good guy’ point of view as a business; it is also necessary to build an acceptable image of the business in the eyes of society and consumers, so that its products sell well. It also makes business sense to make the right decisions from this perspective and spend on them.
The promotion of such business ethics goes through various actions and cultural aspects: the type of people a company recruits, the formal and informal principles and practices promoted by managers, the prize and reward systems for different types of behavior, the treatment of the employees. by the company and by the owners, the practices of human resource management, and in general by what is considered organizational behavior, and in turn also shapes and reinforces organizational behavior.