Ethics

ETHICS IS A WORD used to refer to a range of personal decisions relating to issues of morals or principles. It includes issues of morality: what is right and wrong and, hence, how should we live and how should we behave? These questions are clearly contingent upon culture and dependent upon time and situation. This is because different groups of people profess to believe in the correct way to behave, and promulgate various codes of behavior and values that are claimed to cover all eventualities. These codes often conflict with each other and, from an analytical-ethical perspective, most have some useful content which can help people live together peacefully, but none is sufficient to deal with all the complexities of the modern world.

The range of possible circumstances in which people may find themselves and the decisions they might have to make are so wide that simple definitions are inadequate. Instead, an eclectic approach is required and this helps to explain the tremendous growth of schools of business ethics, with professorial chairs and peer-reviewed journals devoted to the concept.

In the business world, ethics is used in a general sense to refer to the obligations and responsibilities of firms to their stakeholders. Stakeholders are all those individuals and organizations to whom the behavior and existence of the firm is in some ways significant. This can include employees (who rely upon the firm for regular wages), shareholders (who anticipate return on their investments), suppliers of intermediate goods and raw materials (who rely on the firm for their own business survival), and neighbors (who may be affected if the firm causes some form of environmental degradation), as well as many others.

As large firms continue to become internationalized, undertaking different sorts of business activities in different countries, it is clear that they may develop a complex network of stakeholders who, in some cases, will have competing and even contradictory calls on the firm's attention and resources. The need for firms to ensure highest returns for shareholders and investors may, for example, conflict with the interests of employees, when the firm decides to export jobs overseas to countries where labor costs are lower, as in the case of Aviva, which decided that more than 2,000 administrative and telecommunications answer-centre calls were to be relocated to India.

A particular issue of contention has arisen with the growth of importance of the American business model, which argues that the only legitimate purpose of business is the constant pursuit of short-term profit maximization and which is closely associated with conservative thinkers in the United[Page 295] States and elsewhere. The American business model ruthlessly pits the firm's responsibilities to its shareholders against its responsibility to any other stakeholder, and dictates that the latter must be subservient, no matter what the cost to society and individuals. The interest in business ethics has been further stimulated by these developments.