The Markkula Center for Applied Ethics explores ethical issues in corporate governance, global business, leadership, executive compensation, and other areas of business ethics.
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An Interview with Theranos Whistleblower Tyler Shultz
What Is Business Ethics?
By Kirk O. Hanson, former executive director of the Markkula Center for Applied Ethics
Ethics in general is the study of standards of behavior that promote human welfare and what is often called “the good.” Business ethics is the study of those standards of business behavior that do the same thing—promote human welfare and the good.
Ethics can really be thought about at three levels: how we act as individuals; how our organizations act; and how we structure our society. Similarly, business ethics can be thought about at those same levels.
At the individual level, we actually can predict what kind of ethical issues we will face in our business careers; a set of unavoidable ethical dilemmas comes with the territory. Once we’ve identified those unavoidable ethical dilemmas, we can prepare for them and deal with them much more effectively.
One way of identifying the unavoidable dilemmas in a particular role is to think about the obligations of the role. If you're a salesperson, you can ask yourself, for example, “What do I owe to the individual person I'm trying to sell to?” There are all kinds of predictable dilemmas: When I know something that the customer doesn’t, when do I owe that information to the customer? If the customer assumes things that aren't true, do I have an obligation to correct that interpretation? If I know something about their competitor, under what circumstances can I share information about the products their competitor has purchased, or is that confidential?” You can also ask yourself what you owe to the rest of the organization? To your fellow salespeople? When does your behavior begin to negatively affect them? What in your behavior might limits their opportunities because you create a bad reputation or get engaged in a set of bad relationships with customers?
Business ethics also operates at the organizational level through how we structure our organizations and therefore the way those organizations direct, guide, and incent people to act. It’s the responsibility of the company to define its values, which are how the corporation wants its employees to behave in all the kinds of interactions. An employee can always refer back to those values and ask, “Okay, is this is how we want to treat our employees? Is this how we want to treat our customers? Does this action I propose reflect the company’s values?”
Finally, business ethics is influenced by how we structure our business society—how we incorporate organizations to participate in commerce, the laws and regulations which bind business organizations.
Obviously, ethics is important for a wide variety of reasons. It creates value through our cooperation, through our seeking together what serves human welfare. That certainly goes for our businesses. Without a shared sense of what good behavior means, there would be no ability to cooperate, no ability to trust others to act in our interest and not against us. If ethics was not present, it would be a very cold and cruel world.