Understanding The Meaning Of Business Ethics Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Discussion on ethics in business is necessary because business can become unethical, and there are plenty of evidences as in today on unethical corporate practices. Even Adam Smith opined that 'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices' Business does not operate in a vacuum. Firms and corporations operate in the social and natural environment. By virtue of existing in the social and natural environment, business is duty bound to be accountable to the natural and social environment in which it survives Irrespective of the demands and pressures upon it, business by virtue of its existence is bound to be ethical for at least two reasons: one, because whatever the business does affects its stakeholders and two, because every juncture of action has trajectories of ethical as well as unethical paths wherein the existence of the business is justified by ethical alternatives it responsibly chooses One of the conditions that brought business ethics to the forefront is the demise of small scale, high trust and face-to-face enterprises and emergence of huge multinational corporate structures capable of drastically affecting everyday lives of the masses.

There is law, and there are ethics.

The law must, of course, be complied with, but ethics go beyond it.

Ethics, the "very basics" :

1. The product must be precisely as advertised or specified.

2. Environmental damage must be avoided or minimized.

3. Employees and neighbors must be protected from any dangers in the processes used.

4. The user must be warned of any hazards posed by the product.

5. Employees should be compensated on the basis of 'value added`, not on the basis of how cheaply labor can be purchased in the prevailing market.


In the corporate world, business ethics have a major role to play in the manufacturing sector too. It is the duty of the manufacturer to produce the products and goods according to the customer's requirements and satisfaction. He / She has to produce goods which is of good quality, reasonable price and to top it all it should be safe to use by the customer.

In case if the products produced by a particular company are not up to the customer's expectations or requirements then the customer has a right to question the manufacturer and be compensated for the damage caused to him on using the product. Thus, all companies are taking great care and paying attention to produce proper and good quality products adhering to the standards, lest their company's reputation does not get affected.

Despite all these consumer rights assuming great importance in the society, do all

manufacturing industries follow ethical values and principles in their day to day lives?

Whether it is for the sake of beating competition or simply because it makes good business sense, companies now have started to internalize business ethics and values. Ethics have become a part and parcel of the entire manufacturing process. Sometime back the bottom line of an enterprise used to be monetary profits but this bottom line today comprises a whole gamut of subjects like quality assurance, environmental friendly practices, Corporate Social Responsibility (CSR) and many more.

Gone are the days when companies could act philanthropic and charitable by parting with a miniscule portion of their profits. There is no recognition for an organization that fails to recognize ethics and values in its domain area.

Role of ethics in decision making -

   From the description above, the types of decision-making used in the hospitality industry are clearly two different approaches. Technical matters in tourism businesses are handled through the hard system whereas those involving human factors are managed through the soft approach. If ethical consideration will be integrated into these two approaches, the effect will perhaps be different as well. In order to evaluate this, the different factors that require decision-making in the hospitality sector were taken into account. How ethics will affect the soft and hard decisions will be considered.

 Business Operations

Hard- The business operation sector of the manufacturing industry basically involves the different aspects that bring development, progress and profitability to the companies. If the hard system approach will be applied, information systems or technologies that would help increase sales, manage customer records, improve resource management practices or enhance marketing efforts are the main focus. Applying ethics or moral principles in this case, are not necessary. Deciding on which system or technology will help develop the operations of the tourism businesses does not really prioritize human factors. In most cases, the type, efficiency and cost of the system are the ones highlighted.

 Soft-   On the contrary, ethics has an important role in soft decision-making for the business operation sector. In particular, how the companies will operate in such a way that they will benefit and meet the needs of the people are hospitality issues that require ethical considerations. A relevant ethical concept for this is corporate responsibility. According to  (1996), corporate responsibility is supported by the concepts of multidimensional definitions and social marketing. In the multidimensional definitions concept, the focus is on the major responsibilities expected from companies. These major responsibilities include economic, legal, ethical and philanthropic dimensions (1991). These responsibilities must be performed in order to benefit not only the company operators but also their employees, customers, the community and the general public. (1991) notes that the social marketing concept of corporate responsibility stresses that companies should operate in a way that maintains or enhances the well-being of its customers as well as its society.

 (1992) supported this concept further by stating that CSR is the avoidance of harm and the provision of good services. The definition given by the authors on corporate social responsibility may vary to a certain degree. However, the meanings of these definitions emphasize on one matter, and that is, a socially responsible organization must have priorities other that short-term profitability ( 1996). Operating for the benefit and safety of people surrounding hospitality-based businesses require the soft decision-making approach as it is centered on differing human factors and issues; in order to direct businesses towards corporate responsibility, ethical considerations should be considered. For example, businesses could take on the utilitarian perspective, an ethical principle where the act is considered morally correct if the effect will be for the good of most people.


In general, there are three types of influences on ethical decision-making in business: (1) individual difference factors, (2) situational (organizational) factors, and (3) issue-related factors.


Individual difference factors are personal factors about an individual that may influence their sensitivity to ethical issues, their judgment about such issues, and their related behavior. Research has identified many personal characteristics that impact ethical decision-making. The individual difference factor that has received the most research support is "cognitive moral development."

This framework, developed by Lawrence Kohlberg in the 1960s and extended by Kohlberg and other researchers in the subsequent years, helps to explain why different people make different evaluations when confronted with the same ethical issue. It posits that an individual's level of "moral development" affects their ethical issue recognition, judgment, behavioral intentions, and behavior.

According to the theory, individuals' level of moral development passes through stages as they mature. Theoretically, there are three major levels of development. The lowest level of moral development is termed the "pre-conventional" level. At the two stages of this level, the individual typically will evaluate ethical issues in light of a desire to avoid punishment and/or seek personal reward. The pre-conventional level of moral development is usually associated with small children or adolescents.

The middle level of development is called the "conventional" level. At the stages of the conventional level, the individual assesses ethical issues on the basis of the fairness to others and a desire to conform to societal rules and expectations. Thus, the individual looks outside him or herself to determine right and wrong. According to Kohlberg, most adults operate at the conventional level of moral reasoning.

The highest stage of moral development is the "principled" level. The principled level, the individual is likely to apply principles (which may be utilitarian, deontological, or justice) to ethical issues in an attempt to resolve them. According to Kohlberg, a principled person looks inside him or herself and is less likely to be influenced by situational (organizational) expectations.

The cognitive moral development framework is relevant to business ethics because it offers a powerful explanation of individual differences in ethical reasoning. Individuals at different levels of moral development are likely to think differently about ethical issues and resolve them differently.


Individuals' ethical issue recognition, judgment, and behavior are affected by contextual factors. In the business ethics context, the organizational factors that affect ethical decision-making include the work group, the supervisor, organizational policies and procedures, organizational codes of conduct, and the overall organizational culture. Each of these factors, individually and collectively, can cause individuals to reach different conclusions about ethical issues than they would have on their own. This section looks at one of these organizational factors, codes of conduct, in more detail.

Codes of conduct are formal policies, procedures, and enforcement mechanisms that spell out the moral and ethical expectations of the organization. A key part of organizational codes of conduct are written ethics codes. Ethics codes are statements of the norms and beliefs of an organization. These norms and beliefs are generally proposed, discussed, and defined by the senior executives in the firm. Whatever process is used for their determination, the norms and beliefs are then disseminated throughout the firm.

An example of a code item would be, "Employees of this company will not accept personal gifts with a monetary value over $25 in total from any business friend or associate, and they are expected to pay their full share of the costs for meals or other entertainment (concerts, the theater, sporting events, etc.) that have a value above $25 per person." Hosmer points out that the norms in an ethical code are generally expressed as a series of negative statements, for it is easier to list the things a person should not do than to be precise about the things a person should.

Almost all large companies and many small companies have ethics codes. However, in and of themselves ethics codes are unlikely to influence individuals to be more ethical in the conduct of business. To be effective, ethics codes must be part of a value system that permeates the culture of the organization. Executives must display genuine commitment to the ideals expressed in the written code-if their behavior is inconsistent with the formal code, the code's effectiveness will be reduced considerably.

At a minimum, the code of conduct must be specific to the ethical issues confronted in the particular industry or company. It should be the subject of ethics training that focuses on actual dilemmas likely to be faced by employees in the organization. The conduct code must contain communication mechanisms for the dissemination of the organizational ethical standards and for the reporting of perceived wrongdoing within the organization by employees.

Organizations must also ensure that perceived ethical violations are adequately investigated and that wrongdoing is punished. Research suggests that unless ethical behavior is rewarded and unethical behavior punished, that written codes of conduct are unlikely to be effective.


Conceptual research by Thomas Jones in the 1990s and subsequent empirical studies suggest that ethical issues in business must have a certain level of "moral intensity" before they will trigger ethical decision-making processes. Thus, individual and situational factors are unlikely to influence decision-making for issues considered by the individual to be minor.

The Influence Of Ethics On Decision Making

The Influence of Ethics on Decision Making

Ethics can have a big influence on decision-making in the workplace. Ethical behavior in the workplace is behavior that is accepted as morally "right," rather than "wrong." (Organizational Behavior). Unethical behavior can be considered illegal, or merely against the norms of society. Employees encounter ethical decisions every day in the workplace, whether they realize it or not. The stock boy must make a decision on whether it is right to steal merchandise. The auto mechanic must make a decision on what is a fair price to charge a gullible customer. The CEO must decide how to use all the power he or she possesses. There are many different thinking about ethical behavior, and different people will judge the same situation differently depending on their ethical thought process.

The utilitarian view of ethical thinking states that ethical behavior is when the greatest good is done for the greatest number of people. This usually means, in a business sense, that one department, program, or factory must be shut down to help the company function more efficiently or be more financially stable.

The individualism view is just that, decisions must be based on what is best for the individual's interests in the long run. The moral rights view suggests that the basic rights of citizens should be respected. The rights of fair treatment, privacy, and freedom of speech are thought of as such moral rights. The justice view emphasizes fair and impartial treatment for all involved, whether it is upper management, employees or customers (Organizational Behavior).

In the workplace, people base one or all of their decisions on these different views. Some helpful questions to ask when deciding what to do in a situation are: Is it right? Is it legal? Is it beneficial? (Organizational Behavior). Enrolling students in online degree programs presents many ethical decisions. The prospective student often knows nothing about degree programs,...


How An Effective Decision Making Process Could Have An Impact On An Organization's Success

While Managers do not control many factors affecting the success of their decisions, they do have substantial control over the process they use to make decisions. Discuss how an effective decision making process could have an impact on an organization's success. You need to evaluate the process and show how it relates to the success of an organization.

Everyone goes through similar decision-making processes umpteen times every day, regardless of their position in the organization. From the ground up - the security guard who needs to decide whether a person is authorized to enter the premise, to the top management, who at times must decide whether it is the time for the company to expand its market.

A good decision can reap in handsome profit for the company while a poor decision can do the exact opposite - throw the company into the reds. Decisions can make or break an organization, especially so, when the survival of an organization is solely based upon steering clear of the red zone.

As the old saying goes, prevention is better than cure. The importance of a good decision is obvious here thus it is important to have an effective decision-making process so as to prevent poor decisions from being made.

There are five steps to an effective decision-making process. The first step is to identify the problem, the recognition that one even exists. Once the problem had been identified, alternative solutions are to be generated, usually through a technique known as brainstorming. Brainstorming encourages group members to generate as many ideas as possible, without prior evaluation, this means that even far-fetched ideas are accepted so as to generate a high volume of ideas. Once there is a ready pool of alternative solutions, the evaluation and selection of alternatives can then proceed. The advantages and disadvantages of each alternative should be carefully considered before one is chosen. Every alternative should be..