1. Business Ethics and Issues

2. Ethics
Ethics is a branch of philosophy which seeks to find answers about the moral concepts
like bad, good, evil, right, wrong, etc. According to OEC (2011) ethic is defined as “a moral
philosophy which is concerned with what is right or wrong, good or bad, fair or unfair,
responsible or irresponsible, obligatory or permissible, praiseworthy or blameworthy”. Many
scholars have associated it with the various feelings and emotions like guilt, indignation,
empathy etc. The ethics deals in the way of doing things and with the generalized matters related
to the public policies and the personalized issues. It is based on the social practices and laws,
religious matters and conscience. These social practices give strength to this branch of
philosophy. It seems to be very general matter but due to its connection to various social issues,
it is often termed to be very complex and difficult to employ.
With the passage of time, many companies have started giving importance to the
corporate ethics and their responsibility towards the society and communities. Today, many
businesses have gained lot of reputation and recognition by being in business and following the
morals when conducting their business activities while many others have lost their reputation
only because of bad business practices. To many, business is an economic activity to maximize
their profits and the main focus for them behind this activity is money. There is nothing wrong
with the money itself but the some businesses acquire money and gain profits matters most and
their manner raises several questions related to the ethical behavior.
Business Ethics
Business ethics strives to understand whether or not a specific business practice is
morally and ethically acceptable. The American Heritage Dictionary has defined business ethics

3. as “the philosophy of human conduct with the emphasis on determining right and wrong. It
specifies the rules or standards governing the conduct of the members of a profession” (Ferrell et
al, 2009).
It is necessary for the entrepreneurs to follow good business ethics for every part of their
business. There are several global entities, that offer brands to the public for general and
specialized use, are engaged in the bad business practices and many of them have been fined by
the related authorities which accounts for millions. The companies are fined due to their failure
to adhere to the business ethics and ethical laws. The main problem with these companies is the
amount of money they generate is much higher than the fines imposed on them. This outweighs
the opportunity costs associated in their business and they happily pays off all the fines.
It is therefore necessary for the authorities to force business ethics over all the business
entities and their business units. Business ethics can remove the minor issues like the lower wage
rates, work force exploitation as well as the big issues like the children in sweat shops making
sneakers or footballs for the large companies. The above discussed implications explain some of
the important facts related to the business ethics. The importance of ethical business practices is
forced by many local, regional and state level governments to the companies.
Importance of Business Ethics
Being a good person or a person of values, in one’s own opinion, being a person of good
ethical and moral values is not enough in the today’s business scenarios and it is not helpful to
handle the issues related to the ethics that may arise in the organizations. It is very important for
the companies to understand and recognize the relationship between the decision related to ethics
and the legal aspects of business organizations.

4. The importance of business ethics was first recognized, during the 1960’s, when the
social issues in business rise to large extent in the American societies. There were increased
issues related to the public safety, and ecological problems related to the pollution, waste
management system, disposing the toxic wastes etc. in these societies. The then president of
America, John F. Kennedy, gave a special message to the general public and the companies to
safeguard the consumer rights of safety, the right to be informed and right to choose, which is
widely known as consumer bill of rights. In the late nineties, business ethics became an emerging
field in the societies. Lot of emphasis on this field was placed by the theologians and
philosophers who suggested that some of the principles of ethics are applicable to business
activities. This gave rise to the academic and research writings about Corporate Social
Responsibility of a company (Ferrell et al, 2009).
The importance of ethical practices can be recognized by considering the fact there is an
international Federation Sentencing Guidelines for Organizations (FSGO) which was established
in late 90’s to set the standards and code of conduct for the companies working in the business
environments. There are ten basis guidelines for the organizations specified by FSGO which
must be followed by the companies in order to remain ethical in the business (Ethics Resource
Center, 2005).
Ethical Issues in Business
Due to increased emphasis on the business ethics over last three decades, this field is
suffering and is troubled by the lack of proper directions and is struck, just like Alice in the
wonderland, in the issues like logic, reasons etc. Much of the research emphasis is given on the
two basis approaches to understand the relationship between ethics and the business practices.

5. These approaches used by the researchers are termed as normative approach and empirical
approach (Donaldson and Dunfee, 1994).
The past conception of the companies about the ethical issues in business was related to
the administration of rules, regulations in the organizations and making sure that the people are
complying with these rules or adhere to the standards set by the organizations to stay ethical.
This conception is now nowhere implemented, today, people from the top management level and
the business owners have understood that this concept of ethical issues in business is far superior
than handling the rules and regulations and their effective implementation.
There are wide ranges of issues related to the business ethics currently observed by the
market analysts. According to the online report published by UK Energy Saving Website (2011),
today, there is wide range of areas listed under the head of ethical issues in business. These
issues can be of varying nature ranging from professional ethics which may include the moral
duties of engineers, doctors, and architects, lawyers as well as the employee right issues. The
issues related to employee rights may further be divided into various categories like issues
related to wages, safe working environment, non-discriminatory policies etc. The functional
areas of business like marketing, management, accounts etc. also reported to have ethical
business issues.
Due to the varying natures of these issues, it is difficult to conclude whether or not any
company or a supply chain partner is adhering to the ethical principles. In the current business
environment, the issues like fairness, justice and honesty are the main issues that are posing
complex dilemma to the businesses. Any wrong or biased decision can have a profound impact
on the goodwill of the company as well as its market position. To deal with such issues, many

6. companies follow the ethical guidelines so that they “do not lose sight on the essential value of
fairness. However, if they choose to use legality and profitability as their measurement in
determining what is right from wrong then business ethics will surely become irrelevant” (CFA,
2009).
Business Function Ethics: Marketing Ethics
Marketing is among the most crucial functions of a business in an organization. The
function of this business unit is to provide understanding about the four basic aspects of a
business- Product, Price, Place and Promotion. It provides interface to the management related
not only to the customers but the other related parties like media, investors, distribution system,
supply chain partners, legal framework, as well as others. The importance of marketing ethics is
vital to the organization due to the diverse nature of stakeholders associated with this business
function (Ferrell, 2007).
While Ethic deals in the determination and study of what is right, wrong, good, evil etc.,
for marketing managers, workplace ethics deals with the rules, regulations, principles for
governing the code of conduct of the members of an organization (Ferrell, 2005). Therefore,
ethical marketing can be defined as “practices that emphasize transparent, trustworthy, and
responsible personal and organizational marketing policies and actions that exhibit integrity as
well as fairness to consumers and other stakeholders” based on normative perspective (Murphy
et al, 2005).
The concept of marketing ethic emphasizes on the practices and standards that are
deemed acceptable in the marketing conduct. These operative standards are usually determined
by the stakeholders and the organization as a whole which is responsible for the marketing

7. related activities. The marketing team is required to adhere to these standards and make sure that
these prescribed standards are in fit with the societal needs and expectations. According to
Ferrell (2005) the ethical marketing practices are most significant in establishing and retaining
long term relationship, and development of customer trust. The nature of marketing is very
diverse which in turn started large numbers of ethical issues incurred by the businesses today.
Key Issues in Marketing Ethics
As the 21st century started, the companies and business started to give more importance
to the business ethics due to the various scandals emerge early this century related to Enron,
Tyco, and Sunbeam etc. most of the business scandals were related to the accounting frauds or
supply chain management. During this phase, the journal of marketing consisted of wide range of
articles that were associated not only to ethics but especially to the issues related to business
ethics (Klein, Smith and John, 2004).
The marketing ethical issues are defined by the stakeholders and the company and
therefore these issues must be resolved in the timely manner to improve the level of trust and
build long term relationships with these people. Murphy et al (2005) suggested that due to the
nature of marketing issues, the marketers are sometimes need to deal with the choices that are
subjective and moral in nature requiring them make decision regarding the moral standards.
Due to these ethical standards, the companies and their stakeholders must conform to the
moral principles. Many companies have started fair trade system to operate ethically with their
supply chain partners. For example, the star bucks has started the fair trade system to engage
with their farmers by offering right prices and maintaining business relations as well as direct
purchasing options (Starbucks, 2011). When applying ethics to the marketing practices some

8. factors are important to be considered. First, the marketers should understand the objectives of
the company. Second, they must balance the marketing practices with the objectives of the
company. The balancing may involve compromise at any point of business or tradeoffs (Ferrell,
2007).
Most of the marketing ethics are related to the fairness, justice and honesty as well as
conflict of interest, fraud, discrimination and privacy etc. Talking about the global business
practices, many countries trade departments have established regulatory groups like better
business bureau etc that mainly deals with the issues related to the ethical marketing. The
governments have also developed trade commissions that forces laws related to the consumer
protection. These government regulated bodies includes Federal Trade Commission, Food and
Drug Administration etc. these organizations strives to help the consumer in identifying fraud,
deception and public safety. These and many other related agencies focus on identifying the
major issues that are of ethical concern for the marketers. Examples of these issues includes the
communication practices adopted for marketing, wrong advertising, hidden pricing, wrong
information presentation in the internal and external communication system, misleading ads, etc.
to deceive the customers (Ferrell, 2007; Leclair, Ferrell and Fraedrich, 1998).
A lot of progress is been made in the field of ethical marketing based on research and
theory. In order to obtain promising results various codes of conducts have been developed by
the organizations like American Marketing Association, Marketing Research Association etc.
which has elevated the marketing practices. Moreover, many organizations have developed code
of ethics which helps them address various marketing practices related ethical risk areas.

9. References
CFA (2009) Ethical Issues in Business and the Importance of Ethics, retrieved on July 29, 2011
from http://cfagbata.com/ethical-issues-in-business-and-the-importance-of-ethics/
Donaldson, T. and Dunfee, T. W. (1994) Toward a unified conception of business ethics:
integrative social contracts theory, The Academy of Management Review, Vol. 19, No. 2, pp.252-
284
Ethics Resource Center (2005) Federal Sentencing Guidelines for the organization, ethics org,
retrieved on July 29, 2011 from http://www.ethics.org/resource/federal-sentencing-guidelines
Ferrell, O.C. (2005). A Framework for Understanding Organizational Ethics. In Business Ethics:
New Challenges for Business Schools and Corporate Leaders. R.A. Peterson and O.C.
Ferrell, (eds.) Armonk, New York: M.E. Sharpe, 3-17.
Ferrell, O. C. (2007) nature and scope of marketing ethics. In G. Gundlach, L. Block & W.
Wilkie (Eds), Explorations of marketing in society, Mason, OH: Texere/ Thomson South
Western
Ferrell, O. C., Fraedrich, J. and Ferrell, L. (2009) Business Ethics: Ethical Decision Making and
Cases, 7th edition, USA: South Western Cengage Learning
Klein, J.G., N.C. and John A. Smith. (2004). Why We Boycott: Consumer Motivations for
Boycott Participation. Journal of Marketing, 68 (3): 92-110.
LeClair, D.T., O.C. Ferrell, and J.P. Fraedrich. (1998). Integrity Management: A Guide to
Managing Legal and Ethical Issues in the Workplace. Tampa, Florida: University of Tampa
Press.
Murphy, P.E., G.R. Laczniak, N.E. Bowie, and T.A. Klein. (2005). Ethical Marketing, Upper
Saddle River, New Jersey: Pearson Prentice-Hall.
OEC (2011) Defining Ethics and Morality, OEC org, retrieved on July 29, 2011 from
http://www.onlineethics.org/Education/precollege/scienceclass/sectone/chapt2.aspx
UK Energy Saving (2011) Ethical Issues in Business, retrieved on July 29, 2011 from
http://www.uk-energy-saving.com/ethical-issues-in-business.html
Starbucks (2011) Fair Trade, retrieved on July 29, 2011 from
http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf

10. Further Reading
1. Business Ethics Cases:
http://www.scu.edu/ethics/practicing/focusareas/cases.cfm?fam=BUSI
2. Performance Appraisal case:
http://www.scu.edu/ethics/dialogue/candc/cases/performance.html
3. Applied Ethics Resources:
http://www.ethicsweb.ca/resources/business/topics.html
4. Business Ethics:
http://en.wikipedia.org/wiki/Business_ethics
5. Cutting-edge issues in business ethics: continental challenges to tradition:
http://books.google.com/books?id=RsBfMI6di8gC&pg=PA87#v=onepage&q&f=false
6. A companion to business ethics:
http://books.google.com/books?id=PDXVnfyKHBIC&pg=PA178#v=onepage&q&f=false
7. Harvard Business Reviews: Business Ethics:
http://www.businessweek.com/managing/company/business_ethics/
8. Business Ethics and Stakeholder Analysis:
http://www53.homepage.villanova.edu/james.borden/vsb1001/Goodpaster.pdf
9. Ethical Decision Making
http://www.scu.edu/ethics/practicing/decision/
10. Importance of Ethics in Business

11. http://www.accountantnextdoor.com/importance-of-business-ethics-importance-of-ethics-in-
business-investment/
11. The Critical Importance of Business Ethics For Effective Leadership
http://www.businessexpertwebinars.com/content/view/471/29/
12. Business Ethics Manual
http://www.trade.gov/goodgovernance/adobe/bem_manual.pdf