A Closer Look: Definition of Business Ethics

Business ethics are ethics that refer to the moral rules and regulations governing the business world. In other words, they are the moral values that guide the way corporations or other business make decisions.

Some business ethics are imposed by law. For example:

The Securities and Exchange Commission governs the way investment bankers and stock brokers do business
Court rules dealing with attorney client privilege dictate some ethical decisions for attorneys.

There are also business decisions that do not fall within the guidelines of the law, in which the businessperson must make their own ethical or moral judgments.

Factors That Affect Business Ethics

Ethical codes that govern businesses often address certain main areas. These areas, as compiled by the NIEHS branch of the U.S. National Institutes of Health include:

Honesty
Objectivity
Integrity
Carefulness
Openness
Respect for intellectual property
Confidentiality
Responsible publication
Responsible mentoring
Respect for colleagues
Social responsibility
Non-discrimination
Competence
Legality
Human subjects protection

These principles are important in all fields of business; however, they may apply in different ways in different fields. For example:

Accounting ethics - especially for accountants of publicly-held corporations - depend upon complete honesty and transparency. When accountants do not behave ethically, or violate these principles of ethics, shareholders can be harmed. The accountants at Arthur Anderson did not behave with honesty, openness and responsible publication when auditing Enron. As a result, shareholders were harmed, the company collapsed, and some Arthur Anderson accountants were held legally liable for their breach of business ethics.

Attorney ethics call for complete confidentiality. The law recognizes that attorneys have such a high moral obligation to keep their clients secrets confidential, that if an attorney violates this ethical duty, he can lose his license to practice law.

Medical or medical research ethics call for protection of their human subjects when it comes to treating patients or conducting experiments on patients. Peer review boards and other such institutions govern experiments designed to be conducted on human subjects to ensure that business ethics are followed and that experimenters make the best moral and ethical decisions.

Setting Codes of Business Ethics

While the law imposes some ethical rules, legislation cannot possibly define business ethics as a whole and cannot address every situation in which ethical dilemmas may arise.

A code of ethics is a set of principles and rules used by companies, professional organizations and individuals to govern their decision making in choosing between right and wrong. Depending on the context of a given code of ethics, penalties and/or sanctions may result from a violation.

Codes of ethics are generally used in the business and professional context to assure the public that corporations and members of regulated professions are acting in a socially and professionally acceptable manner. Organizations with an established and published code of ethics have in place review processes and appeals procedures to guard against malicious or self-serving use of the code for individual benefit.

Companies and professional societies such as the American Medical Association and the American Bar Association set their own ethical standards in an attempt to provide guidance for difficult choices.

These ethical rules are often referred to as a code of conduct or rules of conduct, by which those in the group abide.

Each group determines their ethical stance based upon different guidelines, whether it is established principals, religious book, or group agreement.

While members of the group may follow the ethical guidelines as a principle by which they believe everyone should act, they might also have a set of personal ethics which also governs their own behaviors.

Examples of Codes of Ethics

Codes for Professionals

Lawyers

An excellent example of a code of ethics relating to a profession is the American Bar Association Model Rules of Professional Conduct. The first rule in the American Bar Association's Code of ethics addresses attorney competence. Called Rule 1.1, this rule reads:

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

This code of ethics provides guidance for lawyers on matters ranging from client confidentiality to partnerships to treatment of witnesses inside and outside the courtroom. Proven violations of the Rules of Professional Conduct can result in penalties ranging from verbal and written censure up to loss of the ability to practice law.

In this case, adherence to a written code of ethics is assumed to be a part of participating in the legal profession and is a responsibility on the part of each individual attorney.

Professional codes of ethics rely on sanctions and penalties to ensure that they are followed and that those involved in the profession in question, as well as those served by the profession, will report violation to maintain the integrity and quality of service provided.

Paralegals

Paralegals, like lawyers, are held to a code of ethics. Unlike lawyers, these codes of ethics are imposed as a result of voluntary membership in professional organizations and not by a licensing board such as the ABA. Still, the ethical rules set forth within the codes are very important.

Consider the first three Canon's of the Code of Ethics published by the National Association of Legal Assistances:

Canon 1: A paralegal must not perform any of the duties that attorneys only may perform nor take any actions that attorneys may not take.
Canon 2: A paralegal may perform any task which is properly delegated and supervised by an attorney, as long as the attorney is ultimately responsible to the client, maintains a direct relationship with the client, and assumes professional responsibility for the work product.
Canon 3: A paralegal must not: (a) engage in, encourage, or contribute to any act which could constitute the unauthorized practice of law; and (b) establish attorney-client relationships, set fees, give legal opinions or advice or represent a client before a court or agency unless so authorized by that court or agency; and (c) engage in conduct or take any action which would assist or involve the attorney in a violation of professional ethics or give the appearance of professional impropriety.

Physicians

The American Medical Association also imposes a Code of Ethics on physicians. This code of ethics addresses everything from interpersonal relationships with other staff members such as nurses, to information on patient care.

Different opinions within the AMA's code address different issues. For instance, opinion 8.021:

Ethical obligations of medical directors, specifies that:(1) Placing the interests of patients above other considerations, such as personal interests (eg, financial incentives) or employer business interests (eg, profit). This entails applying the plan parameters to each patient equally and engaging in neither discrimination nor favoritism, is part of adherence to professional medical standards.

Codes for Corporations and Non-Profit Organizations

Corporations and non-profits have codes of ethics to assist workers in determining if certain behaviors are appropriate and acceptable in their dealings with clients and outside agencies.

Examples of governed behaviors include:

Giving or accepting of gifts or services between an employee and a client or official
Making promises regarding company performance and responsibilities
Profiting from, or enabling others to profit from, inside information regarding company performance, financial stability or internal problems

Many organizations require employees to attend yearly training on ethics and responsibilities and in some cases, to sign statements promising to adhere to all company ethics guidelines.

Ethics guidelines have become a greater topic of public interest following recent events in the home mortgage and financial sectors that called into question whether ethics policies were actually being followed or merely given lip service while pursuing the greatest profit for the company.

Planned Parenthood

Different types of organizations also have to address different issues depending on their purpose. For instance, the not-for-profit Planned Parenthood has a code of ethics for peer educators. One excerpt from this code of ethics reads:

As a Peer Educator, I agree to follow the rules and policies which govern the program. I understand the following and accept them as my personal "code of ethics" as long as I continue to be involved as a Peer Educator:
I will respect the integrity and individuality of the person I am helping and of my fellow Peers Educators
I will respect the rules of confidentiality with regard to helping people and education.

Susan G. Komen

Susan G. Komen, a breast cancer foundation, also provides a code of ethics for affiliates of the organization. According to their Code of Ethics:

Every board member, officer, employee, staff member, grant reviewer, Race director, committee chair, and committee member (individually and collectively “Individual”) of an affiliate of the Susan G. Komen Breast Cancer Foundation (the “Affiliate”) shall avoid any conflict between his/her personal, professional or business interests and the interests of the Affiliate in all actions taken by or on behalf of the Affiliate.

Conflicts in Business and Personal Ethics

Sometimes business ethics and personal ethics may conflict. This dilemma occurs commonly in attorney ethics. For example:

An attorney may represent a client who commits murder, and that client may tell the attorney where the body is buried.
In every other situation, a person would likely have a strong ethical and moral obligation to go to the police.
Attorney ethics dictates that the lawyer keep the client's secret. In fact, it would be unethical to not keep the secret.
In this case, the attorney must put business ethics first in order and keep the secret to protect the structure of the American justice system.

If the attorney did not act under these special rules of business ethics, people would be deprived of their constitutional right to a fair trial and competent defense in the court systems. Therefore, business ethics can change the rules of normal ethics in order to serve a higher purpose.