The What and Who of Business Ethics

According to the Merriam-Webster Dictionary, ethics is defined as “1. the discipline dealing with what is good and bad and with moral duty and obligation; 2a. a set of moral principles : a theory or system of moral values (emphasis added) and ‘moral principles’ are defined as “the principles of right and wrong that are accepted by an individual or a social group (; emphasis added). Hence ethics can be paraphrased as a set of rules for good and bad (or right and wrong) behaviour valued by a person or a group of people.

When extending this to businesses, the following questions need to be answered. Firstly, who are the individuals or is the group of people that decide on the rules and that are ‘governed’ by them? The Institute of Business Ethics states that “Business ethics is relevant both to the conduct of individuals and to the conduct of the organisation as a whole. It applies to any and all aspects of business conduct, from boardroom strategies and how companies treat their employees and suppliers to sales techniques and accounting practices.” Although customers are not explicitly mentioned in this statement, their involvement is implied with the reference to “sales techniques”. The inclusion of customers is supported with another definition for business ethics, “Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses.” (Investopedia). So the people who participate in defining the ‘rules of the game’ include the business’s employees, its customers and its suppliers.

The second, and perhaps the more tricky question to answer is what is defined as ‘good’ and ‘bad’ or ‘right’ and ‘wrong’? It is generally accepted the business ethics go beyond the legal requirements to which businesses must comply. Business ethics is about the discretionary decisions and actions. Referring back to one of the definitions for ethics, “a theory or system of moral values”, the right and wrong is defined by a set of values. Businesses need to define their corporate values, which clarify for all employees, and even external parties like customers and suppliers, what is ‘good’. It is important that when defining corporate values that businesses understand their customer’s values and even the values held by any participant in their market, even the competitors. If there is misalignment between the business’s corporate values and their actions, or if there is misalignment between their corporate values/actions and the values of external parties, then the business will probably be seen as ‘bad’ by those external parties.

So why is this concept of business ethics so important? Ethical businesses are trusted businesses. Unethical businesses are not trusted. A breach in business ethics means a breach in trust. Building trust takes intentional, sustained effort over a long time. Loosing that trust can happen very quickly and regaining it can be very difficult or even sometimes impossible. And ultimately, people don’t do business with others who they don’t trust.