Business ethics aims to help companies navigate difficult ethical choices. It helps them decide whether they should prioritize profits over customers or employees, for example. It also tries to set clear standards for corporate responsibility. If a company practices good ethics, it can build trust with consumers and employees, which increases revenue. It can also reduce losses. For instance, one study found that honorees of the World’s Most Ethical Companies outperformed their large-cap index by 10.5 percent over three years.
The field of business ethics was born in the 1960s, as corporations became more aware of a consumer-based society that showed concern regarding environmental issues and social causes. Many philosophers turned their attention to business ethics, and several academic journals and societies were started. These included the Society for Business Ethics, which was founded in 1980. The first meeting of the group was held in conjunction with the American Philosophical Association in Boston. The society helped spur the creation of other groups, such as the Social Issues in Management Division of the Academy of Management and the European Business Ethics Network. Normative business ethicists, or moral philosophers, typically assume that the private ownership of means of production is ethically acceptable and that markets — featuring voluntary exchanges between buyers and sellers at mutually agreeable prices — should play an important role in the allocation of resources. Those who reject capitalism will view some debates in business ethics as misguided. Other business ethicists look at the social and cultural context of businesses in which they operate.
They try to determine whether a business should be seen as morally equivalent to its employees, consumers and suppliers. In this context, they consider such questions as the appropriateness of discrimination in hiring and promotion, and the importance of providing equal opportunities to all citizens in the areas of housing, education, health and transportation. Some business ethicists also seek to understand the ethical contours of a firm’s activities by choosing a normative framework and teasing out its implications for business issues. They may use such theories as utilitarianism (which holds that an action is right if it produces the greatest amount of good for the most people) or deontology (which states that an activity is morally wrong if it violates a person’s rights).
A major area of focus in contemporary business ethics concerns environmental issues. It aims to help companies develop products and production processes that do not needlessly cause harm to others. It can also involve determining the appropriate level of caution to take when introducing new technology whose impact is not well understood. For example, the development of genetically modified foods and mobile phones raises ethical concerns about the risks they pose. Some companies are not for profit and, thus, do not need to follow business ethics guidelines. Still, many have developed an internal code of conduct and have established a hotline to report unethical behavior. These measures can help improve profitability by fostering trust with consumers, employees and suppliers. In addition, they can reduce risk, which is a major source of financial loss for a corporation.