Real Leaders

Business Ethics: What Everyone Needs to Know

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Most people follow at least some ethical rules in their daily lives. (The small percentage of individuals who do not are called psychopaths) The world of business, however, presents some unique issues, which is why they have evolved as a specialized field of ethics.

One of those unique issues is the sheer size and frequency of the ethical challenges that businesspeople must face. It is not unusual for those in business to be presented, almost daily, with opportunities to personally profit by violating the law or by harming or misleading others. The stakes can be enormous, especially when a big transaction or career-making decision is involved. This means people in business often face much larger temptations in the office than on the street. (Although it is usually not very tempting to shoplift a small item, the opportunity to make millions of dollars by insider trading or cheating on a large contract is far more enticing.)

As a result, businesspeople must always remain aware of and sensitive to their ethical obligations. If they do not, they risk joining the long and sad parade of once-virtuous—but now notorious—white-collar criminals like Enron Chair Kenneth Lay, Goldman Sachs director Rajat Gupta, and business maven Martha Stewart.

A second unique aspect of business ethics is that they operate in a social environment—business dealings—in which people, to some extent, often tolerate, expect, or even praise the selfish pursuit of personal gain. This makes the business environment quite different from many other social environments in which we interact with other people. Few of us want to be perceived as selfish at a wedding reception or a bar mitzvah. But when we are negotiating a contract or trying to sell a product, a certain degree of material self-interest is expected.

The key phrase here is the qualifier, “a certain degree of.” Business ethics help to keep us from crossing the line from legitimately self-interested behavior, over to unethical and/or illegal behavior.

Third, business ethics emphasize the obligations we owe not only to our friends and family, but also the obligations we owe to people with whom we have only an “arms-length” business relationship, and even obligations owed to total strangers. Indeed, sometimes business ethics go further still, and teach that we have obligations to intangible legal entities like corporations. This aspect of business ethics can raise some practical difficulties. It is relatively easy and natural for a person to remember the interests of friends and family whom she likes, and with whom she interacts on a daily basis.

However, it is often more difficult for us to stay aware of, and respect, duties owed to people whom we don’t know well or even may have never met — much less duties owed to intangible legal entities. Business ethics help us find our way through this minefield.

Finally, a fourth distinguishing characteristic of business ethics is that ethical problems in this context tend to involve unique concepts and rules specific to the business world. Many of these concepts and rules are based on or draw upon, legal rules that apply primarily to business institutions and business dealings. Business ethics and the law are deeply intertwined. 

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