Business Ethics

Ethical issues have attracted great attention over the past decade. Such issues are faced almost everyday in various organizations across the world. “Ethics may be defined as the set of moral principles that distinguish what is right from what is wrong. It is a normative field because it prescribes what one should do or abstain from doing.”[1] At another place, it has been defined as: “… the branch of philosophy that explores the nature of moral virtue and evaluates human actions.”[2]

In today’s world, we increasingly observe people anxious to gain success. Such endeavors are highly noble but it sometimes leads to a compromise on matters of ethical conduct. Although ethical behavior is mainly dependant on an individual’s learning from the environment in which he/she has grown and developed, organizational policies can also enforce ethical conduct to a great degree. A study of ethical considerations and its implementation and continuity is of prime importance for an organizations success. In fact, ethical conduct amongst an organization’s members determines its survival!

Firms may face a number of ethical problems. According to a review published in the Wall Street Journal in 1991, it was revealed that employees face an array of issues such as stealing, lying, fraud and deceit etc. Surveys both in the USA and internationally reveal rampant unethical behavior in businesses. For instance, a recent survey of 2,000 major US corporations revealed that they faced ethical problems such as drug and alcohol abuse; employee theft; conflicts of interest; quality control issues; discrimination in hiring and promotion; misuse of proprietary information; abuse of company expense accounts; misuse of company assets; and environmental pollution.[3]Not surprisingly, ethical dilemmas gain a global importance due to the interconnected nature of the business world.

Professional Ethics and Organizational Development

Professional Ethics may be described as a person’s behavior and performance when conducting professional work. Apart from codes of ethics, professional ethics also concerns issues such as “professional indemnity”.[4]

It is worth mentioning that no two codes of ethics are identical. Codes of ethics can be different depending on the nature of organizations. They usually vary by cultural group, profession and by discipline. An interesting fact is that there is great cultural diversity in the world; therefore, what may be acceptable in one part of the world may be totally unacceptable in other parts. For example, software piracy in many parts of the world is thought of as normal and there is strong support for it among people who have no idea of what it entails and its negative repercussions. On the other hand, in many developed countries such as the United States there is greater awareness and often it is opposed. Such difference in attitudes causes a difference in ethical perceptions and norms. Therefore, for an effective and successful organization development many similar factors need due consideration.

Training for ethics should not be ignored even in an economy passing through downturn. For example, in 2004, the famous aircraft manufacturer Boeing lost more than $1 billion in Air Force contracts to rival Lockheed Martin after accusations that former employees has stolen Lockheed documents. Due to this problem, all employees of the Boeing unit involved in this activity underwent a mandatory, four-hour ethics training session.[5]

Research by the Ethics Resource Center (ERC), which is a Washington-based ethics research and consulting organization, shows that the overall corporate ethics seem to be improving.  A survey was conducted of 1,500 U.S. workers, which showed that 22% had observed workplace misconduct in 2003. This figure has actually gone down from 31 percent in 2000.

It is advisable for companies to have a reasonable code of conduct, appropriate ethics training, and employee counseling and advice. For example, any newly hired worker can receive an orientation about ethics. In addition, the company’s sales trainee program can cover  legal areas besides and internal issues like sexual harassment and diversity.

A well chalked out plan to train employees about various ethical issues can go a long way in ensuring overall business success. Various methods such as role plays, case studies examination, scenario analysis through video tapes and live acting, provide valuable insights to employees regarding such issues. Ethics training is a wise investment and is exactly the thing a company should do.

Ethical Dilemmas

Today’s OD practitioners are faced with a variety of dilemmas. “An ethical dilemma is a situation involving choice, encountered by a change agent or client system, which has the potential to result in a breach of acceptable behavior.”[6] Ethical dilemmas may occur due to role conflict or ambiguity between the change agent and the client system. As a result of role ambiguity and role conflict, misinterpretation of data may occur. On the other hand, data may be misused, manipulated or coerced. Forced participation in a change effort can prove harmful. Such measures produce undesired attitudes in the employees. In addition, goal conflict can occur when there is ambiguity about whose values will be maximized by the change effort. [7]

Philosophers suggest two main ways to manage ethical dilemmas. The first approach focuses on “the practical consequences of what we do”. The second approach “concentrates on the actions themselves”. According to the first approach, taking an approach in which there is no harm and little negative effects. On the other hand, according to the second approach, some actions are “simply wrong”. These approaches may be thought of as strategies for analyzing and resolving problems. The following three step strategy would greatly solve the problems.[8]

    • Analyze the Consequences
    • Analyze the Actions
    • Make a Decision

Code of Ethics

Codes of ethics are important in maintaining and ensuring an organization’s ethical behavior. Ethical codes are necessary to define acceptable behaviors. Besides promoting high standards of practice, they also provide a benchmark for members to use for self evaluation. In addition, ethical codes help in establishing a framework for professional behavior and responsibilities.[9]

It is prudent to examine the purpose of new codes before designing them. Different organizations have different needs and therefore they must consider the importance of code of ethics in meeting its desired objectives. Will these codes be regulating behavior or inspiring employees to work efficiently? A code of ethics should be personalized to the needs and values of an organization.[10]

Before a new code is created, it is highly important that its process is carefully thought. Employee’s involvement is necessary to make such a process successful. Equally important is the implementation of a code of conduct. It has been observed that employees often resist change. The introduction of a new set of practices and do’s and don’ts might create problems if the rules are not effectively publicized and implemented.

In every process of improvement there is some degree of errors as nothing is perfect. Therefore, following an implementation of a code of conduct, constant review and updating is needed. This further enhances the performance of the company. Such measures are achieved through encouraging feedback from employees. However, a code of ethics will not solve all ethical problems as Aristotle said:

“…. we must remember that good laws, if they are not obeyed, do not constitute good government. Hence there are two parts of good government; one is the actual obedience of citizens to the laws, the other part is the goodness of the laws which they obey…” (Aristotle, Politics 1294a 3-6).

The effectiveness of code of ethic spreads far into many different types of organizations. “…A code of professional ethics is central to advising individual engineers how to conduct themselves, to judging their conduct, and ultimately to understanding engineering as a profession.”[11]

Factors affecting Individual Ethics

Individual ethics may be affected in a number of ways. Most importantly, ethics may be greatly influenced by legal considerations. The law of the land may generally or in detail, determine what is ethically right or wrong. A law and its implementation can be a guiding force in ethical behavior.

The culture of an organization can also affect the individual ethics. If the top management is strictly following ethical guidelines, it is more than likely that the employees at the lower level would follow the general ethical environment of the company.

Individual factors also affect individual ethics. These factors are dependant on individual values. As shown in the figure, individual factors may include: stage of moral development, personal values and personality, family and peer influences, life experiences and situational factors. A person’s values and morals do have a profound effect on his/her ethical standards.[12]

Ethics & Business Survival

The importance of ethics as a pillar of business survival cannot be over-looked. Sound ethical practices can determine a company’s efficient functioning. An efficient organization would give positive results in terms of performance and if applicable – profits. The culture of an organization forms the core of its work practices and also its culture. “A company’s culture is defined by what the top executives actually do.”[13] It is important to note that employees often follow and imitate what senior mangers do. If the managers at an organization’s hierarchy set examples that are not morally sound and against sound ethics, the organization as a whole is bound to mimic that behavior and therefore it will have lose ethical conduct.  Thus the top leadership is ultimately responsible for the culture of the organization including the ethical culture.[14] Leaders must lead by example. It is not possible to have good ethical conduct without having uniform principles and guidelines for each person in an organization. Ethical conduct may need to be modeled and promoted. Ethical behavior has to be demonstrated and thoroughly conveyed to organizations.

Poor ethical performance can lead to financial losses. Such losses can occur due to a variety of reasons. Extra-ordinarily high company profits can be a cause of consumer exploitation. Economic rules show that in the medium and long-term, competitors will eventually drive down such profits an even lead to losses until the less efficient are forced to exit the market.  On the other hand, lack of good ethics within the company could lead to disgruntled employees. If the employees start feeling that they are being exploited, they may try to correct the situation through forming unions, protesting, and rioting, thus causing huge losses to the company.

Another important concern is the product quality of a company. A famous example is how the producers of Tylenol, using a good ethical process and turned a negative outcome to a positive. When tampering was discovered in one of their products, they recalled all products from everywhere, even from those regions where the poisoning had not occurred, and then invented the tamper-proof seal. As a result, the company greatly benefited and gained even greater market share and customer loyalty as a result.

Trust can be viewed as the foundation stone for the very existence of an organization. “Without trust in the leader, the instinct for survival takes over and the cost to the organization in chaos, and rebuilding is huge.” [15]

In future sound ethics will gain an even greater importance. Due to the availability of fast means of communications such as the internet and the internationalization of businesses, unethical behavior can be easily exposed and disseminated‹at little or no cost. It is rightly said that, “In this interconnected world, only ethical leaders and companies will survive.”[16]

Dealing with unethical behavior

The scandals of unethical behavior in corporate America have raised questions for the common man about the effectiveness of ethical guidelines. It is hard to make a decision when an unethical incident occurs. Should executives responsible for unethical actions be asked to leave their positions? It is equally hard to rebuild a lost reputation.[17]

Dealing with unethical behavior has to be done with utmost care and an analysis of the system. The first important rule is: “Condemn the sin, not the sinner”.[18] When an unethical incident occurs by an individual, it is important “to label the unethical behavior for what it is”. Clear lines must be drawn between acceptable and unacceptable behavior.

It is advisable to make the accused to simply step aside until all the charges are verified. A company’s name is at stake. By taking prompt action, the people outside and inside the organization are ensured that the company as a whole is cognizant of ethical concerns.

Ethics must also be constantly updated with the changing nature of your industry. For example, the ethical failures in fields such as telecommunications, accounting, and health care, can to some extent be attributed to the rapidly changing structure and of these industries. In addition, ethical behavior creates an industry wide fame and integrity. A business which strictly follows its ethical guidelines, earns respect and trust of suppliers and buyers. This can increase the opportunities for business partnerships and reduce the transaction costs of managing an ongoing relationship. On the other hand, ethical conduct has other benefits such as an ease in attracting employees and financing future business ventures.

E-Business Ethics

Keeping in view the staggering growth of IT services, I felt that there was a genuine need to discuss organizational development in light of electronic business. The internet has transformed the way business is conducted in today’s business environment. Countless opportunities have emerged. On the other hand, new dilemmas have also emerged such as conflicting legislation, contrasting societal models, and different business operations. New scenarios have emerged that need a clear definition according to the legal systems.[19]

New challenges being faced by businesses include dealing with various legal vulnerabilities that a company’s employees are exposed to. For example, the wide world of internet allows countless options of downloading unlicensed software on a company’s network, pornography and other related issues. These problems can cause a company financial losses due to legal challenges in the form of privacy, jurisdiction and copyright infringement.  The laws for such issues are still in their infancy. Thus many such cases are settled on previously established legal precedents. In addition, disputes across state boundaries also cause confusion. This can create problems in organization development.

In addition, other issues such as spam – unsolicited emails; profiling – issues of privacy and consumer protection; and publication rights etc. also create various problems that need a clear definition and solving. Many firms engage in such marketing techniques that are thought to be ethically bad. Amongst all these issues, efforts are underway to deal with such scenarios. However it is the enforcement of such laws across international borders that will be a problem.[20]

Technology has resulted in the creation of new ethical dilemmas. For example a New York-based Internet advertising company, DoubleClick Inc., made plans to share customer information with an off-line marketing firm. This created uproar from consumer advocates as it was thought to be a breach of “confidential” information. This controversy tarnished the company’s image and raised questions about the future of online marketing.[21]


Ethics form the foundation of any well functioning progressive system. In reality, human dealings are based on trust. Once the trust is compromised, disturbances are created which in turn create further problems for an organization.

Enhancing ethical behavior in any organization offers a myriad of benefits. For an entrepreneurial perspective, a reputation for ethical dealing can greatly amplify the opportunities for business partnerships. In addition to lowering transaction costs, the workforce satisfaction also increases thus ensuring smooth functioning of the organization.

In this age of ethical degradation, we as individuals and organizations need to rediscover the good practices that were based on honesty, integrity and trust. If every individual holds himself accountable for his/her actions and believes in moral conduct, many of our world problems would be solved. We must make genuine efforts to improve our performances, to modernize them where necessary, and apply them in totality. It is very rightly said that “the advantage of ethical principles is that they are general, they are guidelines, they can adapt to different cultures and situations without losing their essence”. [22] The dilemma is that besides having a morally sound behavior, the problem still remains: what constitutes ethical behavior? In other words, who defines what really is ethical!


  1. Dr. Rafik Issa Beekun, University of Nevada and Islamic Training Foundation, November 01, 1996, Copyright © 1996, International Institute of Islamic Thought,
  1. Life Skills Coaches Association of British Columbia
  1. Kevin C. Wooten and Loius P. White, Ethical Problems in the Practice of Organization Development, Training & Development Journal, 1983, EBSCO publishing
  1. Thomas I. White, Ph.D.,  Resolving an Ethical Dilemma
  1. Robert Davison and Ned Kock, Professional Ethics
  1. Guidance for Writing a Code of Ethics by Chris MacDonald, Ph.D.
  1. Michael Davis, THINKING LIKE AN ENGINEER: THE PLACE OF A CODE OF ETHICS, Copyright © 1991 by Princeton University Press
  1. Chang, Julia, Sales & Marketing Management; Nov2003, Vol. 155 Issue 11, Business Source Premier
  1. Michael Hackworth, Only the Ethical Survive, Leadership in fairness and honesty makes good business sense.
  1. Kirk O. Hanson,  Confronting Unethical Conduct, Jan 1, 2003
  1. KIRK O. HANSON , A Good Start, New ventures can make ethics part of their business plan.
  1. Sandy Sampson, Wild Wild Web: Legal exposure on the Internet, Software Magazine. Englewood: Nov 1997. Vol. 17
  1. Zachary Tobias, Ethics in E-Business, Computerworld,4814,53391,00.html

[1] Beekun, Islamic Business Ethics, International Institute of Islamic Thought

[2] White, Resolving an Ethical Dilemma

[3] Beekun, Islamic Business Ethics, International Institute of Islamic Thought

[4] Chang, Julia, Sales & Marketing Management; Nov2003

[5] Chang, Julia, Sales & Marketing Management; Nov2003

[6] Wooten and White, Ethical Problems in the Practice of Organization Development

[7] Wooten and White, Ethical Problems in the Practice of Organization Development

[8] White, Resolving an Ethical Dilemma

[9] Life Skills Coaches Association of British Columbia

[10] Guidance for Writing a Code of Ethics by Chris MacDonald, Ph.D.

[11] Michael Davis, Thinking like an engineer: The place of a code of ethics

[12] Beekun, Islamic Business Ethics, International Institute of Islamic Thought

[13] Michael Hackworth, Only the Ethical Survive

[14] Only the Ethical Survive

[15] Only the Ethical Survive

[16] Only the Ethical Survive

[17] Hanson,  Confronting Unethical Conduct

[18] Hanson,  A Good Start

[19] Sampson, Wild Wild Web: Legal exposure on the Internet

[20] Sampson, Wild Wild Web: Legal exposure on the Internet

[21] Tobias, Ethics in E-Business

[22] Jean-Pierre Allain, President of AIIC (

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