As a field of study, business ethics has been in play since the days of Aristotle. The fourth-century BC Greek philosopher wrote of fair play, justice, equality of trades, greed and other themes that continue to resonate within the business world, even thousands of years later.
Naturally, business ethics as practiced in the 21st century have evolved since Aristotle’s time. Yet, the concept of a moral and ethical approach to business remains relevant within virtually every aspect of today’s society.
Many of the most-pressing political issues today are inextricably linked to differing philosophies about what is, and what is not, considered “ethical” in the business world. Sometimes this is governed by common sense; sometimes it is governed by the government through legislation and enforcement of labor laws and other legally binding codes of behavior.
Corporate moral agency, also referred to as corporate moral responsibility, is considered by some to be a counter-balance for the entrepreneurial drive toward profitability. Others in positions of authority might prioritize profits and the competitive drive ahead of an adherence to a moral or ethical code beyond the letter of the law.
Still others might devise a set of ethical guidelines that seek to strike a balance between “doing good” in the world and meeting the financial demands of shareholders and/or board members.
American Law and Business Ethics
While all businesses are regulated by laws, not all laws concern an ethical approach to doing business. Yet, many laws, such as the Fair Labor Standards Act of 1938, arose out of a societal commitment to fairness and ethical behavior.
Over the years, the concept of business ethics has led to the introduction of landmark laws to cover many moral and ethical issues in business, including:
- The ability of corporations to sue or be sued (Bank of the United States v. Deveaux, 1809)
- The criminalization of monopolistic cartels that acted to restrain trade (Sherman Antitrust Act, 1890)
- The establishment of rules to ensure fair trades of stocks, bonds and other securities (Securities Exchange Act, 1934)
Recent history provides plenty of examples of ethical quandaries and legal trouble in business. Here are just a few cases of abuse of business ethics that made headlines:
- In early 2017, Volkswagen pleaded guilty to criminal charges when it was found that the automaker had rigged its diesel-powered vehicles to cheat on government emissions tests. The company was fined $2.8 billion and CEO Martin Winterkorn was forced to resign.
- In 2016, Wells Fargo was fined $185 million by the U.S. government when it was discovered that more than 2 million unauthorized financial products had been charged to customers. More than 5,300 Wells Fargo employees were fired and CEO John Stumpf was forced to resign.
- In 2009, financier Bernie Madoff pleaded guilty to 11 felony charges related to a Ponzi scheme he operated under the guise of a wealth management business. Madoff’s fraud cost clients $64.8 billion and he was sentenced to 150 years in prison.
- In 2008, investment firms Bear Stearns and Lehman Brothers collapsed, in part, because they carried massive toxic debt related to subprime lending practices in the mortgage market. Neither company could overcome the failure to mitigate exposure to high-risk securities, and neither company was open and honest about its exposure and imminent collapse.
- In 2001, energy and communications company Enron declared bankruptcy after it was discovered that its accounting practices were fraudulent. CEO Jeffrey Skilling was sentenced to 24 years in prison, and the venerable accounting firm, Arthur Andersen, was dissolved.
As of mid-2017, news stories about disgraced CEOs were all too common. Business strategy consultant Price Waterhouse Coopers published a study that asked the question, “Are CEOs less ethical than in the past?”
Based on a 36% global increase in number of CEOs dismissed because of ethical lapses during the years 2012-2016, the answer appeared to be “yes.”
How Have Business Ethics Evolved?
In the wake of the Price Waterhouse Coopers report, the Harvard Business Review identified five reasons ethical lapses have been unearthed at a higher rate in recent years:
- Increased public scrutiny and diminished willingness for the public to forgive corporate ethical lapses
- More proactive and punitive business regulation in many nations
- Expanded business pursuits in emerging markets, where corruption has been unchecked and governance structures are not mature
- Digitalization of data and communications enabled whistleblowers and hackers to more easily expose wrongdoing
- Real-time, world-wide publicization of wrongdoing and negative information in a 24/7 news cycle
In the 21st century, not only must business leaders adhere to time-honored principles of business ethics such as fair treatment of employees, observance of fair trade laws and more, they must also be prepared for faster, more severe consequences of unethical behavior made public.
Those with a deep familiarity with the tenets of business ethics have a built-in advantage in the business world. An online MBA from Jacksonville University’s Davis College of Business can provide the necessary training you need to navigate the world of business with an unambiguously ethical philosophy.