Morality (from the Latin moralitas, meaning "manner, character, proper behavior") is the differentiation of intentions, decisions, and actions between those that are good (or right) and those that are bad (or wrong). Ethics, also known as moral philosophy, is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct.
Business Ethics
Business ethics (also corporate or professional ethics) is a form of applied ethics that examines the principles and moral beliefs that guide management decisions. Ethical issues include the obligations a company has to its employees, suppliers, customers and neighbors. In particular, business ethics is concerned with situations when those obligations are inconsistent with economic or strategic choices, or are in conflict with each other. Legal obligations are not the same as ethical ones; laws are enforced through the threat or imposition of punishment by a government or through civil litigation. All individuals and organizations must follow the law, but complying with ethical beliefs is voluntary, not coerced.
Business ethics applies to all aspects of business conduct by individuals and organizations as a whole. Ethical behavior is conduct that follows one's personal beliefs or shared organizational or institutional values. When individuals take action on behalf of an organization, they represent its ethics to society. Businesses are dependent on their reputations, so it is important for them to have clear and consistent expectations regarding ethical standards to guide employee behavior. Many employees prefer to work for organizations that share their own moral beliefs. A company's ethical practices can thus have an effect on the recruitment and retention of employees.
In recent decades there has been widespread attention to business ethics due to highly visible cases of corporate malfeasance, such as the WorldCom, Enron, and Tyco scandals. To protect their reputations, companies have begun to form more comprehensive corporate policies concerning ethics. These policies generally offer guidance to employees and state the expectations of the company. Some companies require that employees sign a contract stating that they will follow the procedures within the handbook.
To be viewed by the public as having high moral standards, many companies have created a position called the corporate ethics officer or the corporate compliance officer. This person ensures their organization has statements of ethical principals, clear guideline about acceptable and unacceptable practices, and means of reporting ethical breaches. These executives also have the specific responsibility of monitoring ethical behavior and addressing breaches.
Promoting an Ethical Business Climate
There are at least four elements that create an atmosphere conducive to ethical behavior within an organization:
- A written code of ethics and standards
- Ethics training for executives, managers, and employees
- Availability for advice on ethical situations (i.e., advice lines or offices)
- Systems for confidential reporting
It is the duty of all managers to see that their organization maintains ethical practices and behaviors. Good leaders strive to create a better and more ethical organization. Promoting an ethical climate in an organization is critical, since it is a key component in addressing many other issues facing the organization.