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Defining Business ethics

Crane and Matten (2010) define business ethics as “the study of business situation, activities, and decisions where issues of right and wrong are addressed”.
The concept of ethics includes two related ideas:

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  The conduct of behavior according to moral principles,
  
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  The evaluation of behavior according to moral principles.
  

In many societies the ethical code is based on the predominant religious system. Elsewhere there may be no obvious religious influence, and instead it is derived from a sense of how people ought to behave which may closely correspond to values in the culture.
Gruble (2011) states that 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.
In common usage, the terms “ethics” and “morality” are often used interchangeably. In fact, morality is concerned with the norms, values, and beliefs embedded in social processes which define right and wrong for an individual or a community. Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for a given situation. These rules and principles are called ethical theories. (Crane, Matten, 2010)
To understand what ethics really means Mead and Andrews (2010) show this example: Supposing that you are doing business with a business partner who offers you a gift on condition that you sign a contract. In other words, the gift is a bribe. This faces you with a range of practical and abstract questions. The

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practical questions include:

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  Will anyone else – superiors, colleagues, subordinates, other authorities – find out the truth if you take the bribe?
  
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  If the truth is discovered, what punishment might you incur?
  
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  Is the bribe large enough to justify the risk of discovery and punishment?
  

One more abstract level, you are faced ethical issues:

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  Is it right to take this bribe?
  
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  What is the right action that should I take?
  
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  The situation could be more complicated:
  
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  if the bribe takes the form of a restaurant meal;
  
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  if the person offering the bribe is a member of your family;
  

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  if the bribe is offered during a religious festival, when gifts are normally exchanged;
  
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  if non-acceptance will be construed as a serious insult, and mean that your firm will lose the contract. This loss of work will mean that your colleagues lose their jobs;
  
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  your agent offers to accept the bribe on your behalf, and to deduce the proceeds from his expense account. (Mead, Andrews, 2010)
  

The United States reported that between 1994 and 2001, it learned of instances ⁴⁵
in which foreign firms from over 50 countries offered bribes to buyers in over 100 countries, and these cases involved over 400 competitions for contracts valued at
$200 billion. (Daniels, Radebaugh, Sullivan, 2007) The 2011 Corruption Perceptions Index shows that public frustration is well founded. No region or country in the world is immune to the damages of corruption. The vast majority of the 183 countries and territories assessed score below five on a scale of 0 (highly corrupt) to 10 (very clean.) New Zealand, Denmark and Finland top the list, while North Korea and Somalia are at the bottom. The Czech Republic is on the 57^th place with the score 4.4, Slovakia is on the 66^th place with the score 4. Figure 3.1 shows the situation in the world. It goes from the yellow color (score 10) to the dark red color (score 0), the gray areas mean the data weren’t found. (Transparency International, 2012)

Figure 3.1 Corruption Perceptions Index 2011 (Source: Transparency International, 2012)

The Corruption Perceptions Index ranks countries and territories according to their perceived levels of public sector corruption. It is an aggregate indicator that combines different sources of information about corruption, making it possible to compare countries.

The organization protects its members against such ambiguities by an ethical code to which all members are expected to subscribe. In more collectivist cultures where members can be expected to share the same beliefs, this code may be implicit, and perhaps not even articulated. (Mead, Andrews, 2010)