Business Ethics as Foundation of Corporate Social Responsibility

Why is ethical management important to business? In February 2005, I participated in a Global Conference organized by Markkula Center for Applied Ethics of the Jesuit-run Santa Clara University in the Silicon Valley, California. Debra Dunn, Executive Director of the CSR Department of Hewlett-Parkard Company (HP), world's largest information technology corporation, talked about her companys social responsibility programs. The following year, in September 2006, Patricia Cecile Dunn,HP chairman of the board, got involved in an ethico-legal management issue when she hired a team of independent electronic-security experts that spied on HP board members and several journalists to determine the source of leak of confidential details regarding HP's 2006 long-term strategy. They used a technique known as pretexting to obtain call records of HP board members and nine journalists, including reporters for CNET, the New York Times, and Wall Street Journal. She resigned her position after being criminally charged in California criminal court. That same year, HP appointed Jon Hoak as vice president and chief ethics and compliance officerafter learning the hard way that ethics is relevant to business. Ethical management is practically considered by all business leaders as relevant to business survival and corporate reputation. Is the term business ethics an oxymoron?

To better appreciate the nature of business ethics, we must realize the tensions inherent in the term. It seems the concepts of "business" and "ethics" are strange bedfellows.Business ethics is one of the phrases listed at www.oxymoronlist.com.

Like silent scream, or that wonderful military expression friendly fire, or Virtual Reality in information technology, or Working Vacation, Peace Force, Living Dead, just war, American English, advanced BASIC, educated guess, graduate student, head butt, business ethics is an oxymoron, a phraseology that produces an effect by seeming self-contradiction.

In the traditional sense, people get into business to maximize profit (huge profit, that is), while ethics deals with anything other than profit. Ethics, in the field of philosophy, is a specialized study of what is right or wrong. However, there is the dilemma about doing the right thing. it seems the one who abides to moral principles is usually poorer and the crook

is richer. The dilemma arises because ethical behavior is not always rewarded and unethical behavior is rarely punished.

What is business ethics?

Business ethics is a form of applied ethics that examines ethical rules, theories, and principles in a business context. It includes the correct understanding of any moral duties or obligations (orthodoxy) that apply to persons who are engaged in commerce (orthopraxis). Generally speaking, business ethics is a normative discipline, whereby particular ethical standards are advocated and then applied. It makes specific judgments about what is right or wrong, which is to say, it teaches what ought to be done and what ought not to be done (De George, 1999). Business ethics in this book is also known as ethical management.

Business ethics pushes the practitioner to study and evaluate how he makes business decisions in accordance with moral concepts and judgments. He or she asks the questions: Is it true? Or is it deceitful? Is it fair? Or is it unjust? Does it cause bodily or emotional harm to others? Is it the right thing to do? Ethical questions range from practical, narrowly defined issues, such as a companys obligation to be honest with its customers, to broader social and philosophical questions, such as a companys responsibility to preserve the environment and protect employee rights.

Managers are caught in a balancing act between the ideal and the practical, such as the need to produce a reasonable profit for the shareholders and at the same time to maintain integrity by paying correct taxes to the government. Although there are some exceptions, it appears that those who choose to conduct business in an ethical manner will, in the long run, perform better than those who do not (Valor, 2005; Rothman & Scott, 2004; Maximiano, 2003; De George, 1999; Carroll, 1999).

What is the role of ethics in the management?

Business ethics covers a myriad of both practical and moral problems that arise out of specific functional areas of management.

Ethical management in the workplace. This ethics is the foundation of CSR in the workplace, which covers those ethical issues arising around the employer-employee relationship, such as the rights and obligations justly owed between them. Preventing discrimination issues in the workplace include the practice of affirmative action and fighting sexual harassment, child labor, and other discriminatory practices on the bases of age, gender, race, religion, and physical attractiveness. In this area, moral challenges affecting the privacy of the employer, the practice of whistle blowing, and working conditions and occupational safety may take placeand the moral leader and practitioners should be in a position to face those challenges squarely.

Ethical management regarding intellectual property rights. This may take into account the issues regarding bioprospecting (considered ethical) and biopiracy (considered unethical), copyright, patent, and trademark infringement, business intelligence, employee trading, and industrial espionage. Ethical management in sales, advertising, and marketing. Business ethics and social responsibility deal with the issues on pricing and price fixing, moral dimension of the antitrust or anti-cartel law, bait and switch, viral marketing, pyramid scandal, and sex in advertising. Cases may include Benetton. Ethical management in production. This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. The stakeholders involved are the consumers, the general public, and almost always the environment. Discussions may include moral relations between business and the environment and ethics problems arising out of new technologies such as mobile phone radiation and genetically modified food. Well-known cases on this area include Ford Pinto, Bhopal disaster, and the use of asbestos. Ethical management in finance, accounting, and auditing. The best cases are Enron and Worldcom, where the issues comprise executive compensation, (criminal) manipulation of the financial markets, bribery, facilitation payments, fraud, and false reporting. Its practical CSR application is corporate governance, accountability, and valuebased management.