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Who should manage them? What do firms owe their workers, and what do workers owe their firms? Should firms try to solve social problems? What responsibility do they have for the behavior of their suppliers? What role should firms play in the political process? Given the vastness of the field, of necessity certain questions in business ethics are not addressed here. Many people engaged in business activity, including accountants and lawyers, are professionals. As such, they are bound by codes of conduct promulgated by professional societies. Many firms also have detailed codes of conduct, developed and enforced by teams of ethics and compliance personnel.

Business ethics can thus be understood as the study of professional practices, i. This entry will not consider this form of business ethics. Instead, it considers business ethics as an academic discipline. Business ethics as an academic discipline is populated by both social scientists and normative theorists. This is reflected in the attendees of academic conferences in business ethics and the types of articles that are published in business ethics journals.

Social scientists—who at this point comprise the largest group within the field—approach the study of business ethics descriptively. They try to answer questions like: Does corporate social performance improve corporate financial performance, i. I will not consider such questions here. This entry focuses on questions in normative business ethics, most of which are variants on the question: What is ethical and unethical in business?

Considered only as a normative enterprise, business ethics—like many areas of applied ethics—draws from a variety of disciplines, including ethics, political philosophy, economics, psychology, law, and public policy. This is because remedies for unethical behavior in business can take various forms, from exhortations directed at private individuals to change their behavior to new laws, policies, and regulations.

One is that the means of production can be privately owned. A second is that markets—featuring voluntary exchanges between buyers and sellers at mutually determined prices—should play an important role in the allocation of resources. Those who deny these assumptions will see some debates in business ethics e. Merck and Wal-Mart are examples of the first type organization; Princeton University and the Metropolitan Museum of Art are examples of the second.

Business ethicists sometimes concern themselves with the activities of non-profit organizations, but more commonly focus on for-profit organizations. Indeed, most people probably understand businesses as for-profit organizations.

Jennings' Seven Signs of Ethical Collapse

One way to think about business ethics is in terms of the moral obligations of agents engaged in business activity. Who is a moral agent? To be precise, the question is whether firms are moral agents and morally responsible considered as qua firms, not considered as aggregates of individual members of firms. In the business ethics literature, French is a seminal thinker on this topic. He bases this conclusion on his claim that firms have internal decision-making structures, through which they 1 cause events to happen, and 2 act intentionally.

Donaldson claims that firms cannot be persons because they lack important human capacities, such as the ability to pursue their own happiness see also Werhane Other responses denied that firms are moral agents also. Velasquez argues that firms lack a necessary condition of agency, viz.

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In later work, French recanted his claim that firms are moral persons, though not his claim that they are moral agents. Discussions of corporate moral agency and moral responsibility have largely faded from the business ethics literature as of But they continue to receive attention in the mainstream philosophical literature, where they are treated with a high degree of sophistication. Here the focus is on collectives more generally, with the business firm playing a role as an example of a collective. As in the business ethics literature, in the mainstream philosophical literature a key question is: What are the conditions for moral agency and responsibility, such that collectives qua collectives, including firms, do or do not satisfy them?

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This view has strong intuitive appeal. We routinely say things like: On the other side are writers who deny that firms can be moral agents, such as Gilbert , S. A claim advanced on this side is that agency requires intention, and firms are not the kinds of things that can have intentions S. The common way of speaking about the agency and responsibility of firms may be metaphorical, or a shorthand way of referring to the agency and responsibility of individuals within firms.

For discussions of these issues, see the entries on collective responsibility , collective intentionality , and shared agency. While the question of whether firms themselves are moral agents is of theoretical interest, its practical import is uncertain. Perhaps BP itself was morally responsible for polluting the Gulf of Mexico.

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Perhaps certain individuals who work at BP were. What hangs on this? According to Hasnas , very little. Firms such as BP can be legally required to pay restitution for harms they cause even if they are not morally responsible for them. What ascribing agency and responsibility to firms enables us to do, according to Hasnas, is blame and punish them.

But, he argues, we should not engage in this practice. Phillips , by contrast, argues that in some cases no individual employee in a firm is responsible for the harm a firm causes. To the extent that it makes sense—and it often does, he believes—to assign responsibility for the harm, it must be assigned to the firm itself.

There is significant debate about the ends and means of corporate governance, i. Much of this debate is carried on with the large publicly-traded corporation in view. There are two main views about the proper ends of corporate governance. According to one view, firms should be managed in the best interests of shareholders.

Shareholder primacy is the dominant view about the ends of corporate governance among financial professionals and in business schools. A few writers argue for shareholder primacy on deontological grounds. On this argument, shareholders own the firm, and hire managers to run it for them on the condition that the firm is managed in their interests. Shareholder primacy is thus based on a promise that managers make to shareholders Friedman ; Hasnas In response, some argue that shareholders do not own the firm.

They own stock, a type of corporate security Bainbridge ; Stout ; the firm itself may be unowned Strudler Others argue that managers do not make, explicitly or implicitly, any promises to shareholders to manage the firm in a certain way Boatright More writers argue for shareholder primacy on consequentialist grounds.

In support of this, some argue that, if managers are not given a single objective that is clear and measurable—viz. Consequentialist arguments for shareholder primacy run into problems that afflict many versions of consequentialism: Most think that people should be able to pursue projects, including economic projects, that matter to them, even if those projects do not maximize welfare.

The second main view about the proper ends of corporate governance is given by stakeholder theory. To its critics, stakeholder theory has seemed both insufficiently articulated and weakly defended. With respect to articulation, one question that has been pressed is: The groups most commonly identified are shareholders, employees, the community, suppliers, and customers. But other groups have stakes in the firm, including creditors, the government, and competitors. It makes a great deal of difference where the line is drawn, but stakeholder theorists have not provided a clear rationale for drawing a line in one place rather than another.

With respect to defense, critics have wondered what the rationale for managing firms in the interests of all stakeholders is. This is precisely what defenders of shareholder primacy say about that view. It is important to realize that a resolution of the debate between shareholder and stakeholder theorists however we conceive of the latter will not resolve all or even most of the ethical questions in business. This is because this is a debate about the ends of corporate governance; it cannot answer all of the questions about the moral constraints that must be observed in pursuit of those ends Goodpaster ; Norman Rather, these views should be interpreted as views that managers should do whatever is morally permissible to achieve these ends.

A large part of business ethics is trying to determine what morality permits in this domain. Answers to questions about the means of corporate governance often mirror answers to question about the ends of corporate governance. Often the best way to ensure that a firm is managed in the interests of a certain party P is to give P control over it. We might see control rights for shareholders as following analytically from the concept of ownership. To own a thing is to have a bundle of rights with respect to that thing. As noted, in recent years the idea that the firm is something that can be owned has been challenged Bainbridge ; Strudler But contractarian arguments for shareholder control of firms have been constructed which do not rely on the assumption of firm ownership.

All that is assumed in these arguments is that some people own capital, and others own labor. It just so happens that, in most cases, capital hires labor. Many writers find this result troubling. Even if the governance structure in most firms is in some sense agreed to, they say that it is unjust in other ways.

Anderson characterizes standard corporate governance regimes as oppressive and unaccountable private dictatorships. Arguments for these governance structures take various forms. According to it, if states should be governed democratically, then so should firms, because firms are like states in the relevant respects Dahl ; Walzer A fourth argument for worker participation in firm decision-making sees it as valuable or even necessary training for participation in political processes in the broader society Cohen Space considerations prevent a detailed examination of these arguments.

But criticisms generally fall into two categories. The first insists on the normative priority of agreements, of the sort described above. There are few legal restrictions on the types of governance structures that firms can have. And some firms are in fact controlled by workers Dow ; Hansmann To insist that other firms should be governed this way is to say, according to this argument, that people should not be allowed to arrange their economic lives as they see fit.

Another criticism of worker participation appeals to efficiency.

Allowing workers to participate in managerial decision-making may decrease the pace of decision-making, since it requires giving many workers a chance to make their voices heard Hansmann It may also raise the cost of capital for firms, as investors may demand more favorable terms if they are not given control of the enterprise in return McMahon Both sources of inefficiency may put the firm at a significant disadvantage in a competitive market.

And it may not be just a matter of competitive disadvantage. If it were, the problem could be solved by making all firms worker-controlled. The problem may be one of diminished productivity more generally. Business ethicists seek to understand the ethical contours of, and devise principles of right action for, business activity. One way of advancing this project is by choosing a normative framework and teasing out its implications for a range of issues in business.

One influential approach to business ethics draws on virtue ethics see, e. For MacIntyre, there are certain goods internal to practices, and certain virtues are necessary to achieve those goods.

Building on MacIntyre, Moore develops the idea that business is a practice, and thus has certain goods internal to it, the attainment of which requires the cultivation of business virtues. Scholars have also been inspired by the Aristotelian idea that the good life is achieved in a community. They have considered how business communities must be structured to help their members flourish Hartman ; Solomon Another important approach to the study of business ethics comes from Kantian moral theory D.

In a competitive market, people may be tempted to deceive, cheat, or manipulate others to gain an edge. Ethical theory, including virtue theory and Kantian deontology, is useful for thinking about how individuals should relate to each other in the context of business cf. But business ethics also comprehends the laws and regulations that structure markets and organizations. And here political theory seems more relevant see and cf. This is not an easy task, since while Rawls makes some suggestive remarks about markets and organizations, he does not articulate specific conclusions or develop detailed arguments for them.

But scholars have argued that justice as fairness: Arnold ; 2 requires people to have an opportunity to perform meaningful work Moriarty ; cf. Hasan ; and requires alternative forms of 3 corporate governance Norman ; cf. Singer and 4 corporate ownership M. A version of this view can be found in McMahon , but it has been developed in most detail and is now most closely associated with Heath According to Heath, the reason we have a market-based economy, as opposed to a command economy, is because markets are more efficient. But markets fail, due to imperfect information, externalities, transaction costs, and more.

The state corrects for many market failures through regulation. We set limits on pollution and require truth in advertising, among other things. But we would not want, and we cannot write, regulations to address every market failure. This is where business ethics comes in, according to the MFA. Businesspeople have a moral obligation not to exploit the market failures that the law allows them to exploit. Put another way, the moral obligations of businesspeople are identified by the ideal regulatory regime—the one we would have if regulations were costless and written and administered by a godlike figure.

Selecting a normative framework and applying it to a range of issues is an important way of doing business ethics. But it is not the only way. Indeed, the more common approach is to identify a business activity and then analyze it using intuitions and principles common to many moral and political theories. The main way that firms interact with consumers is by selling, or attempting to sell, products and services to them. Many ethical issues attend this interaction. Among the things commonly said to be inappropriate for sale are sexual services, surrogacy services, and human organs. Some writers object to markets in these items for consequentialist reasons.

They argue that markets in commodities like sex and kidneys will lead to the exploitation of vulnerable people Satz Others object to the attitudes or values expressed in such markets. They claim that markets in surrogacy services express the attitude that women are mere vessels for the incubation of children Anderson ; markets in kidneys suggest that human life can be bought and sold Sandel ; and so on.

Whether selling a particular thing for money expresses disrespect, they note, is culturally contingent. They and others also argue that the bad effects of markets in contested commodities can be eliminated or at least ameliorated through appropriate regulation, and that anyway, the good effects of such markets e. Some things that firms may wish to sell, and that people may wish to buy, pose a significant risk of harm, to the user and others. When is a product too unsafe to be sold? This question is often answered by government agencies.

In some cases these standards are mandatory e. The state identifies minimum standards and individual businesses can choose to adopt higher ones. Questions about product safety are a matter of significant debate among economists, legal scholars, and public policy experts.

1. Varieties of business ethics

Legal scholars have also devoted considerable attention to tort law, the area of law that deals with cases of non-contractual, non-criminal harm. But business ethicists have paid scant attention to these questions.

Existing treatments often combine discussions of safety with discussions of liability—the question of who should pay for harms that products cause—and tend to be found in business ethics textbooks. He distinguishes three compatible views: There is much room for exploration of these issues. Drop side cribs pose risks to consumers; so do chainsaws.

On what basis should the former be prohibited but the latter not be Hasnas ? On the question of liability, an important issue is whether it is fair to hold manufacturers responsible for harms that their products cause, when the manufacturers are not morally at fault for those harms Piker Most advertising contains both an informational component and a persuasive component. Advertisements tell us something about a product, and try to persuade us to buy it. Both of these components can be subject to ethical evaluation. Emphasizing its informational component, some writers stress the positive value of advertising.

Markets function efficiently only when certain conditions are met. One of these conditions is perfect information: While this condition will never be fully met in reality, advertising can help to ensure that it is met to a greater degree Heath Another value that can be promoted through advertising is autonomy. People have certain needs and desires—e. Their choices are more likely to satisfy their needs and desires if they have information about what is for sale, which advertising can provide Goldman These good effects depend, of course, on advertisements producing true beliefs, or at least not producing false beliefs, in consumers.

The issue here is not whether deceptive advertising is wrong—most believe it is cf. Child —but what counts as deceptive advertising, and what makes it wrong. Its advertisements were deceptive, and therefore wrong, because they appeared to make a true claim, but in fact made a false claim.

Request removal from index. Google Books no proxy Setup an account with your affiliations in order to access resources via your University's proxy server Configure custom proxy use this if your affiliation does not provide a proxy. Spirituality In of the Classroom: Pava - - Journal of Business Ethics 73 3: Responsibility, Ethics, and Legitimacy of Corporations. Ethics in the Economy: Lynch - - Cassell.

Toward a Theology of the Corporation. Encourage your team to report anything that they're concerned about, from violations of the company's core values, to ethics, or to illegal actions. Where channels aren't anonymous, you should aim to respond to all reports. If you make a change in response to an anonymous suggestion, be open and explain what you're doing, so that people know that you're taking action. When a team is silent, it could mean that people are afraid of conflict.

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Just because an organization has ambitious, young executives, it certainly doesn't mean that an ethical collapse is inevitable. However, it is possible that inexperienced managers might have trouble challenging the decisions of a larger-than-life CEO, whether out of fear, or out of a lack of confidence in their own analysis. CEOs can also get away with immoral decisions because the management team doesn't want to challenge them, or may presume that the CEO knows more than they do about a situation. It can be challenging to change a workplace culture where people are under the spell of a powerful CEO.

Jennings advises that this sign will likely be the most difficult to address. If you're in a position to affect the hiring of executives, think twice before hiring a "big name. Thoroughly question candidates with a record of hitting goals that seem too good to be true.

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Make sure that bonuses and other benefits aren't being awarded unfairly in your organization. An organization's board can be weak for several reasons: The board's structure might also contribute to weakness. For instance, the board might discuss major proposals over the phone or online, without giving key members the chance to review issues thoroughly. Weak boards can often indicate an organization's ethical collapse, simply because they don't have the strength or cohesiveness needed to challenge an unethical CEO or senior management team.

One way to strengthen your organization's board is to keep communication lines open, and ensure that board members can talk with employees, and vice versa. This will prevent managers from filtering information, omitting bad news, or exaggerating good news. In order to create a two-way communication channel, you could set up a hotline, or simply compile a directory of phone numbers and email addresses, so that people can get in touch with one another.

Next, look at the perks that your board receives. Many companies that have collapsed because of poor ethical decisions offered extravagant packages to board members and some employees — perks that similar organizations couldn't afford. Look at the compensation that the people in your organization are receiving. Is it similar to that of your competition? If not, this could be a warning sign that your organization might not be able to afford its compensation policies.

Last, pay careful attention to who's on the board, as you need people who are strong enough to stand up for what's ethically right. Some organizations are at risk from conflicts of interest. For example, one high-ranking executive might contract work out to a family member or friend; directors might be voted onto the board because the CEO wants their business; or someone in finance might inflate earnings because he, and several of his friends, are major stockholders.

When decision-makers have conflicts of interest, they play two roles: It's quite possible for these roles to conflict, and this can lead to unethical decision-making. First, think about whether key decision-makers may have conflicts of interest. Pay close attention to auditors, analysts, board members and executives. If you're in a position to do so, set up policies to deal with these conflicts. These policies should address a wide range of conflicts, from working with relatives to accepting workplace gifts.

Often, accepting workplace gifts can create a conflict of interest in itself. When team members become comfortable with accepting gifts, it can be tempting to allow gifts to influence a work relationship, which can start to lead an organization towards ethical problems.