What Is Business Ethics

What is Business Ethics?
The Idea of Business Ethics

It’s in the best interest of a company to operate ethically. Trustworthy companies are better at
attracting and keeping customers, talented employees, and capital. Those tainted by questionable
ethics suffer from dwindling customer bases, employee turnover, and investor mistrust.
Let’s begin this section by addressing this question: What can individuals, organizations, and
government agencies do to foster an environment of ethical behaviour in business? First, of
course, we need to define the term.
What Is Ethics?
You probably already know what it means to be ethical: to know right from wrong and to know
when you’re practising one instead of the other. Business ethics is the application of ethical
behaviour in a business context. Acting ethically in business means more than simply obeying
applicable laws and regulations. It also means being honest, doing no harm to others, competing
fairly, and declining to put your own interests above those of your company, its owners, and its
workers. If you’re in business you obviously need a strong sense of what’s right and wrong. You
need the personal conviction to do what’s right, even if it means doing something that’s difficult
or personally disadvantageous.
Why Study Ethics?

Ideally, prison terms, heavy fines, and civil suits would discourage corporate misconduct, but,
unfortunately, many experts suspect that this assumption is a bit optimistic. Whatever the
condition of the ethical environment in the near future, one thing seems clear: the next
generation entering business—which includes most of you—will find a world much different
than the one that waited for the previous generation. Recent history tells us in no uncertain terms
that today’s business students, many of whom are tomorrow’s business leaders, need a much
sharper understanding of the difference between what is and isn’t ethically acceptable. As a
business student, one of your key tasks is learning how to recognize and deal with the ethical
challenges that will confront you. Asked what he looked for in a new hire, Warren Buffet, the
world’s most successful investor, replied: “I look for three things. The first is personal integrity,
the second is intelligence, and the third is a high energy level.” He paused and then added: “But
if you don’t have the first, the second two don’t matter”. [3]
Identifying Ethical Issues and Dilemmas

Ethical issues are the difficult social questions that involve some level of controversy over what
is the right thing to do. Environmental protection is an example of a commonly discussed ethical
issue, because there can be trade-offs between environmental and economic factors.
Make no mistake about it: when you enter the business world, you’ll find yourself in situations
in which you’ll have to choose the appropriate behaviour. How, for example, would you answer
questions like the following?
1. Is it OK to accept a pair of sports tickets from a supplier?

2. Can I buy office supplies from my brother-in-law?
3. Is it appropriate to donate company funds to a local charity?
4. If I find out that a friend is about to be fired, can I warn her?
Obviously, the types of situations are numerous and varied. Fortunately, we can break them
down into a few basic categories: issues of honesty and integrity, conflicts of interest and
loyalty, bribes versus gifts, and whistle-blowing. Let’s look a little more closely at each of these
categories.
Issues of Honesty and Integrity

Master investor Warren Buffet once told a group of business students the following: “I cannot
tell you that honesty is the best policy. I can’t tell you that if you behave with
perfect honesty and integrity somebody somewhere won’t behave the other way and make more
money. But honesty is a good policy. You’ll do fine, you’ll sleep well at night and you’ll feel
good about the example you are setting for your coworkers and the other people who care about
you”.[4]
If you work for a company that settles for its employees’ merely obeying the law and following
a few internal regulations, you might think about moving on. If you’re being asked to deceive
customers about the quality or value of your product, you’re in an ethically unhealthy
environment.
Think about this story:
“A chef put two frogs in a pot of warm soup water. The first frog smelled the onions, recognized
the danger, and immediately jumped out. The second frog hesitated: The water felt good, and he
decided to stay and relax for a minute. After all, he could always jump out when things got too
hot (so to speak). As the water got hotter, however, the frog adapted to it, hardly noticing the
change. Before long, of course, he was the main ingredient in frog-leg soup.” [5]
So, what’s the moral of the story? Don’t sit around in an ethically toxic environment and lose
your integrity a little at a time; get out before the water gets too hot and your options have
evaporated.
Conflicts of Interest
Conflicts of interest occur when individuals must choose between taking actions that promote
their personal interests over the interests of others or taking actions that don’t. A conflict can
exist, for example, when an employee’s own interests interfere with, or have the potential to
interfere with, the best interests of the company’s stakeholders (management, customers, and
owners). Let’s say that you work for a company with a contract to cater events at your college
and that your uncle owns a local bakery. Obviously, this situation could create a conflict of
interest (or at least give the appearance of one—which is a problem in itself). When you’re
called on to furnish desserts for a luncheon, you might be tempted to send some business your
uncle’s way even if it’s not in the best interest of your employer. What should you do? You
should disclose the connection to your boss, who can then arrange things so that your personal
interests don’t conflict with the company’s.
The same principle holds that an employee shouldn’t use private information about an employer
for personal financial benefit. Say that you learn from a coworker at your pharmaceutical
company that one of its most profitable drugs will be pulled off the market because of dangerous
side effects. The recall will severely hurt the company’s financial performance and cause its
stock price to plummet. Before the news becomes public, you sell all the stock you own in the
company. What you’ve done is called insider trading – acting on information that is not
available to the general public, either by trading on it or providing it to others who trade on it.
Insider trading is illegal, and you could go to jail for it.
Conflicts of Loyalty
You may one day find yourself in a bind between being loyal either to your employer or to a
friend or family member. Perhaps you just learned that a coworker, a friend of yours, is about to
be downsized out of his job. You also happen to know that he and his wife are getting ready to
make a deposit on a house near the company headquarters. From a work standpoint, you know
that you shouldn’t divulge the information. From a friendship standpoint, though, you feel it’s
your duty to tell your friend. Wouldn’t he tell you if the situation were reversed? So what do you
do? As tempting as it is to be loyal to your friend, you shouldn’t tell. As an employee, your
primary responsibility is to your employer. You might be able to soften your dilemma by
convincing a manager with the appropriate authority to tell your friend the bad news before he
puts down his deposit.
Bribes Versus Gifts

It’s not uncommon in business to give and receive small gifts of appreciation, but when is a gift
unacceptable? When is it really a bribe?
There’s often a fine line between a gift and a bribe. The following information may help in
drawing it, because it raises key issues in determining how a gesture should be interpreted: the
cost of the item, the timing of the gift, the type of gift, and the connection between the giver and
the receiver. If you’re on the receiving end, it’s a good idea to refuse any item that’s overly
generous or given for the purpose of influencing a decision. Because accepting even small gifts
may violate company rules, always check on company policy.
Read through Bell Canada’s Code of Business Conduct detailing its recommendations for gifts.
If you cannot access the image below, find it on page 10 of the document.

What Is Business Ethics

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What is Business Ethics?

The Idea of Business Ethics

Why Study Ethics?

Identifying Ethical Issues and Dilemmas

1. Is it OK to accept a pair of sports tickets from a supplier?

Issues of Honesty and Integrity

Think about this story:

Bribes Versus Gifts

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