What is Business Ethics?

“The one and Only Responsibility of a Business is to Increase Profits” – Milton Friedman 

  • Friedman argued that when it comes to the idea of ethics, business is no place for them
  • He stated that the point of a business is to turn a profit for the stakeholders, which is does by providing a service (which can be labelled a secondary responsibility)
  • In order to fully understand this quote, we must first ask – what is a business?
  • A business is not a physical thing. Think of Google. The Google HQ, though a massive building and a hive of activity, is not the business itself. A business is not one physical thing, one machine
  • A business is the people which make it up – the man who had the idea to begin it, his stakeholders, the workers etc.
  • If we accept that humans are expected to act morally and with ethics in mind – then why does this change for a business?
  • If a business is just a group of people – why are they exempt from the same expectations as the rest of humanity?
  • We can conclude that Milton Friedman is entirely wrong, as he makes the mistake of trying to identify a business as one single, physical entity.
  • A business is the people which make it up – and if humans are expected to act ethically then businesses have to as well 

The Relationship Between Business and Consumers 

  • In the digital age, consumers have far more control than ever before over the reputation of a business
  • While customer service and satisfaction has always been a priority, now it is even easier for tales of bad service to spread & damage a business’ reputation
  • Due to consumer outcry many companies have been forced to change their behaviour, for example Nike and Gap over child labour, in the face of boycotts & very negative press
  • This affects ethics as it is more important than ever for businesses to be ethical as the consumer has so much power their displeasure could sink an operation
    • Is this a negative thing? Does this lead to businesses only acting ethically to maximise profits?
    • Does motive even matter? Is it ok if a business acts morally regardless of the reason behind it

The Relationship Between Employers and Employees 

  • Employers & employees rely on a mutually beneficial relationship
  • If the employee is paid well, treated well etc. then they work for the company & fulfil their role
  • However, these such relationships do not always work out, whistle blowing is now far more acceptable
    • The Watergate Scandal of 1972 for example, a whistle blower risked his life to reveal the corruption and truth
  • Should whistle blowing be considered ultimately ethical as it reveals previously concealed unsavoury actions of a company? Or is it a misplacement of trust in the employee who betrays the employer?

Globalisation 

  • “The reduction in the difference between one economy and another, trade all over the world, both within and between different countries becomes increasingly similar”
  • In recent years the rate of globalisation has increased rapidly due to:
    • Technological developments, especially in communications
    • Transport developments
    • Deregulation – increase in privatisation & countries able to own businesses in other countries
    • Removal of capital exchange controls so money can be moved more easily between countries
    • Free trade
    • Change in consumer tastes, expansion of the foreign market
    • Emerging markets in developing countries
  • All of this means that busniesses are freer to choose where they operate from, where to locate factories and select labourers
  • This has meant that much infrastructure has relocated to countries with more lax labour laws such as India
  • Globalisation brings several problems
    • Trade is often not fair, some of the richest countries such as the USA have trade barriers to protect their national interests
    • Increase in labour abuses – as laws improve in certain countries industry just moves to others
    • As well as lax labour laws the countries often have different restrictions on CO2 emissions, pollution etc. which leads to further abuse of the environment
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