The Ethical Principles in Business

The Ethical Principles in Business

Mr. Manuel G. Velasquez in his book entitled, Business Ethics Concepts and Cases, discusses 5 Ethical Frameworks based on the principles of ethical reasoning, as follows:

1.       Utilitarian – Basis of cost benefit analysis is whether present and future economic benefits outweigh present and future costs

2.       Rights – An individual’s entitlement to something

3.       Justice and Fairness – Comparative treatment given to members of a group

4.       Ethics of Care – Obligation to exercise special care toward those person with whom we have close relationships

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The Government’s Role in the Business System

What role should the government assume in the business system? Should the government control the conduct of business or let the market freely flow?There are different ideologies ranging between Individualism to Communitarianism. Each has its own arguments and criticisms. In a command system, a single authority makes the decisions about what is to be produced and how it will be distributed, while in a free market system, individual firms make their own decisions about what they will produce and how they produce it.

Free market system recognizes that there is no constraints on the property that one could own and do to those properties. John Locke argued that natural rights is given to man because he is “human”, meaning, there is no limit to a man’s liberty and natural right to private property. However, criticisms to his argument include conflict between negative and positive rights, the dominance of natural rights of individuals over another individual’s natural rights, immorality (legalizing prostitution, drugs and slavery) and conflict with the demands of caring. Another advocate of free market system is Adam Smith, who believed that private individuals are free to seek their own interests in free markets, that unregulated markets and private property will produce greater benefits than any amount of regulation could, and that a system of competitive markets will allocate resources efficiently among the various industries of society that meet consumer demand, thereby promoting social utility. In short, the government should do nothing. However, critics defends that there are unrealistic assumptions in Smith’s argument as contrasted by the presence of monopolies and oligopolies. People also tend to behave irrationally. Other arguments presented include those of Von Mises and Hayek (“it is in principle impossible for the government to allocate resources with the same efficiency because they do not have perfect information”), Keynes (“total demand for goods and services is the sum of the demand of three sectors – households, business and government”), and proponents of Social Darwinism (“Competition is beneficial as it ensures that the best business firms survive, improving the economic system and produces human progress, therefore the government must stay out of the market”).

Command system advocates believe that a single authority makes the decisions about what is to be produced, who will produce it, and who will get it. According to Karl Marx, the real purpose of the government is to protect freedom and equality and plan the production. Inequalities happen during exploitation of workers by the capitalists. However, critics argue that justice does not mean either equality or distribution according to the need. Justice means distribution according to contribution which requires free markets.

On the other hand, mixed economies allow partially free markets to be subjected to some government intervention to ensure competition, moderate the effects of the business cycle, prevent the most egregious kind of exploitation of workers and guard the environment against destructive effects of pollution and mining, soften possible injustices of distribution through redistributive mechanisms, and limit property rights. It comes closest to combining utilitarianism benefits of free markets with respect for human beings.

Comments: In my opinion, the best option to adopt by a society isthe mixed economy which combines both ideologies from individualism and communism. Some conducts of business need to be regulated by the government, while some need to be left freely flowing at the hands of the market players. There is no one best ideology to adopt since the business market is dynamic. Each business pursuit may be treated as a separate case from another. 

Ethics in the Marketplace

Basically this is just saying that under the conditions of either competition or anti-competition such as monopoly and oligopoly, there can still be issues on Ethics.

1.       Perfectly competitive free markets – results to inequalities; does not maximize society’s total utility, especially those who cannot participate; may conflict with the demands of caring

2.       Monopoly – buyers buy under duress; sellers dictate terms to buyers

3.       Oligopoly – price-fixing; manipulation of supply; collusion among players to cause prices to rise; exclusive dealing arrangements

 

Ethics of Consumer Production and Marketing

The ethical issue arises from the opposing interests between the producer and consumer. The most important question is “Where does the consumer’s duty to protect their own interests end and the manufacturer’s duty to protect consumers’ interests begin?” Producers have several duties, including the duty on ensuring that their products are safe, that they do not misrepresent, that they comply with the sales contract, that they disclose right amount of information.

Truly, the goal of all marketing is the sale. Marketing people needs to be very creative to achieve sales. One of the techniques is the use of influence. But issues will arise when unethical means of influencing would be employed, including threats, coercions, deception, manipulation and lying.

Comments: Irresponsible marketing can be partially blamed on why people are becoming more and more materialistic each day. It distorts people’s mind to believe that a particular product is “necessary” even though in reality, it’s not. As a result, people engage aggressively in debt just to make in reality “unnecessary” purchases.

Ethics of Job Discrimination

3 main common sources of ethical issues at work are discrimination, sexual harassment, and unjust compensation.

Comments: Although our constitution and laws uphold very strict standards against job discrimination and sexual harassment, nevertheless, companies and managers still find their ways to circumvent them and practice such. The constitution mandates a “living” wage for workers. However, the minimum statutory wage seems not reflective of the living wage. Top companies choose applicants graduate from specific schools. This means that job discrimination still exists in our current society.

References:

1.       Text 

Business Ethics Concepts and Cases, Seventh Edition - Velasquez, Manuel G.

BUS560M SESSION 5.ppt - De La Salle University-Manila

 

2.       Images

 

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