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Chapter 3: Ethics and corporate governance
LO1: Appreciate the role of ethics in business.
Ethics
The business world has control of the worlds resources, and
makes decisions everydaythat affect those resources and the lives
of millions of people. It is imperative thatthose who operate
within the business world have an understanding of
variousphilosophies to help guide their decision making. Ethics is
the study of standards of conduct and moral judgement; the code of
morals of a particular person, religion,group, profession, etc. It
is accepted in business that there should be a certain
ethicalstandard.Due to the business world becoming more globally
focused and the communitybecoming more educated and aware, the
subject of ethics, and, in particular, businessethics, is gaining
increasing attention. The changes in peoples value systems over
thelast few hundred years have meant that old rules and
expectations (e.g. how we dealwith corporate governance) cannot be
relied upon to seek solutions; instead,thoughtful, reasoned
consideration needs to be given to the facts at hand in
eachcircumstance.
LO2: Outline ethical philosophies and approaches relevant
tobusiness decision making.
Ethical philosophies
Key principles of ethics such as virtues, duty, morals, prudence
and justice have beenproposed and debated throughout history.Major
influences on ethical thinking include the following:
The comparison of morality and prudence a distinction between
acting in onesself interest ( prudence ) or acting as one out to by
taking into account theinterests of other people is central to the
theory of ethics. In fact, most people inbusiness are unconcerned
about the motivations of the decision maker as longas the action is
the right thing to do. Generally, acting morally is
prudent.However, the distinction is important, because, in
business, there are numerouscases where decisions have been made to
act morally but the actions arent
prudent. Religion religions influence duty and morals. Religions
mandate that ones
virtues and choices should be aligned with the relevant book of
religion. Law ethics and law are related, but they are not the same
thing. Law is about
which actions are legal, not particularly which are ethical.
Justice may or may notbe seen to be done in the court of law.
Conscience Let your conscience be your guide is a well used
phrase fordecision makers that may or may not lead to good decision
making. Despite theirgood motives, it would be doubtful that their
actions were morally correct.
Relativism contends that what is right or wrong depends on the
particularenvironment and situation. That is, there is no
universally accepted ethic
conduct. A narrower form of relativism is the belief that
ethical issues are linked
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to your personal view and therefore the notion of what is right
and wrong comesfrom within: you are not answerable to anyone but
yourself.
Rights the issue of rights is prominent in business. Generally,
rights areattached to a freedom to choose and the obligations of
others not to interferewith that freedom. So, employers tend to
invoke rights to run their business as
they see fit and employees have the right to fair working
conditions and pay.Despite the influences above, three major
approaches to studying ethics have beenevident and are described as
follows:
The descriptive approach describes facts and explains moral
behaviour andbeliefs. Codes of conduct and company policies on
expected behaviour are goodexamples of the descriptive
approach.
The conceptual approach centres on the conceptual study of
meaning and termsused in ethics such as justice, right,
responsibility and duty.
The normative (prescriptive) approach concentrates on what ought
to be done. This approach is about developing a whole system of
guiding moral principles. Two theories that are typical of this
approach are teleological and deontologicaltheories.
