It is easy to come up with a definition for business ethics based on your company’s goals and priorities, and independent of how books and resources would define it. The most widely accepted definition for business ethics says that it is a set of corporate values and codes of principles, which may be written or unwritten, by which a company evaluates its actions and business-related decisions. As the definition goes, business ethics can be written or unwritten. This is because most of the time, ethics business and the criteria for what is good and what is bad is shaped by a company’s best practices and long-standing culture.
In simplest terms, ethics business refers to the propensity to differentiate right from wrong, and the resiliency to choose to do what’s right in terms of actions and decisions. It applies to the employees both rank-and-file and managers as well as the company as a whole.
There are two ways that companies can approach and implement the concept business ethics. These two approaches are based on two schools of thought, each providing a different definition for ethics business.
The first school of thought is shareholder-focused. It maintains that ethical business decisions can be made when individuals within the organization and the company as a whole always keep the best interest of the owners in mind. For those who see business ethics from the shareholders’ perspective, actions and decisions should be geared towards generating more profit.
On the other hand, the stakeholder-focused approach puts premium on corporate social responsibility. Under this concept, ethical companies are those that act and decide with the interest of all stakeholders not just the owners in mind. ethics business means striking a balance to service all groups that have an impact on, or are impacted by the company’s decisions and actions. These stakeholder groups can include the employees, the supply chain, the end consumers, relevant government and non-government organizations, and the community where the company operates, among others. Given this, the stakeholder perspective emphasizes the need to make business decisions that will work well for all the stakeholder groups.
The definition for business ethics varies in every company. The challenge in defining the term lies in the fact that there is no clear definition of right and wrong. It is true that we have laws to punish offenses that are necessarily wrong. Unfortunately, these laws do not define and punish what is morally right and what is morally wrong. As a result, it is left to individuals and corporate persons to make their own classifications, and act and decide by these classifications.
Companies arrive at these right-wrong classifications based on many different factors. These factors include: the culture within the company, the presence of a formal professional code of business ethics, the internal system of rewards and recognition, recruitment and human resources practices, the values system, the way management treats its employees, and the flow of the decision-making process.
In terms of business ethics, the trend now rapidly favors companies that operate from a stakeholder perspective. The theory is that communicating a socially responsible image compels end-consumers to support the company and its product because of the moral benefit that it gives them. To be sustainable, it is thus important for decision makers that set the standards for business ethics to expand their horizons beyond the quest for profit.
Companies and businesspeople who wish to thrive long-term must adopt sound ethical decision-making practices. Companies and people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits. Knowing the difference between right and wrong and choosing what is right is the foundation for ethical decision making. In many cases, doing the right thing often leads to the greatest financial, social, and personal rewards in the long run.