Principles and Ethical Considerations

Core Principles in Business Operations

1. Fairness

Fairness refers to the level of even-handedness in dispensing justice whereby claims are
recognized in the order of their legal and contractual priority. It is a quality of making
judgments that are free of discrimination. Judges, umpires and teacher should all strive to
practice fairness.

Fairness comes from the old English faeger meaning “pleasing attractive”. This makes
sense given that the word is also used to describe physical beauty.

In the context of business organization, fairness involves balancing the interest involved in
decision-making including any decision related to hiring, firing, and the compensation and
reward system. Fairness can be subjective. What one person sees as unfair may be
perfectly appropriate for another. In general, people see allocations or procedures favoring
themselves as fair.

Overall, fairness has to do with justice, which is to give another that which is due him or
her. More concretely, justice (1) looks at the balance of benefits and burdens distributed
among members of a group and/or (2) can result from the application of rules, policies or
laws that apply to a society or a group.

Principles of Fairness

(i) Treats all people equitably based on their merits and abilities and handle all
essentially similar situations similarly and with consistency.
(ii) Make all decisions on appropriate criteria, without undue favoritism or improper
prejudice.
(iii) Never blame or punish people for what they did not do and appropriately sanction
those who violate moral obligations or laws.
(iv) Promptly and voluntarily correct personal an institutional mistakes and
improprieties.
(v) Not take unfair advantage of people’s mistakes or ignorance,
(vi) Fully consider the rights, interests and perspective of all stakeholders, approach
judgment with open-minded impartiality, conscientiously gather and verify facts,
provide critical stakeholders with an opportunity to explain or clarify and carefully
evaluate the information.

Definition of Justice
 Justice means giving each person what he or she deserves or, in more traditional terms,
giving each person his or her due.

Kinds of Justice

(i) Distributive justice refers to the extent to which society’s institutions ensure that
benefits and burdens are distributed among society’s members in ways that are
fair and just.
(ii) Retributive or corrective justice refers to the extent to which punishments are
fair and just.
(iii) Compensatory justice refers to the extent to which people are fairly compensated
for their injuries by those who have injured them.

2. Accountability

Accountability is the obligation of an individual or organization to account for its activities,

accept responsibility for them, and to disclose the results in a transparent manner.

Corporate accountability refers to the obligation and responsibility to give an explanation

or reason for the company’s action and conduct.

To be accountable is to be liable to explain or justify one’s actions and decisions.

Accountability is the process of explanation and justification. Holding to account is the
process of requiring explanation and justification, but it is also testing, forming a
judgement, and taking the necessary action. Accountability implies responsibility, and it is
only reasonable to hold people to account for those things for which they are responsible.

Accountability is the ability to account for your actions and performance to your
stakeholders. Accountability includes that fact that persons, such as the stakeholders, are
willing and able to hold one accountable. With the willing and able aspects of the definition,
we have an operational understanding of accountability which can guide us in asking
questions to accountability structures in the organization. Accountability, then, is the
obligation to demonstrate that work has been conducted in compliance with agreed rules
and standards or to report fairly and accurately on performance results based from
mandated roles and/or plans.

Definition of Corporate Accountability

Corporate accountability refers to the act of being accountable to the stakeholders of an

organization.

3. Transparency
 Transparency refers to the lack of hidden agendas and conditions, accompanied by the
availability of full information required for collaboration, cooperation, and collective
decision making.

A principle of good governance is that stakeholders should be informed about the

company’s activities, what is plans to do in the future and any ricks in its business
strategies.

Transparency means openness, a willingness by the company to provide clear information

to shareholders and other stakeholders. For example, transparency refers to the openness
and willingness to disclose financial performance figures which are truthful and accurate.

Disclosure of material matters concerning the organizations performance and activities

should be timely and accurate to ensure that all investors have access to clear, factual
information which accurately reflects the financial, social and environmental position of the
organization. Organizations should clarify and make publicly known the roles and
responsibilities of the board and management to provide shareholders with a level of
accountability.

Transparency ensures that stakeholders can have confidence in the decisions-making and
management process of a company.

4. Stewardship

Stewardship is an ethic that embodies the responsible planning and management of

resources.

Stewardship is generally recognized as the acceptance or assignments of responsibility to

shepherd and safeguard the valuables of others.

Stewardship also refers to the duty or obligation to satisfactorily perform or complete a

task assigned by someone or created by one’s own promise or circumstances.

Benefits in designing and implementing business ethics:

(i) Enhanced reputations and good will
(ii) Reduces risks and costs
(iii) Protections from their own employees and agents
(iv) Stronger competitive positions
(v) Expanded access to capital, credit and foreign investment
(vi) Increased profits
(vii) Sustained long-term growth
(viii) International respect for enterprises and emerging markets
 Ethical behavior in business according to Michael Josephson “people have built-in sense of
what is right or wrong.”

Mission statement

A mission statement is an ingrained principle and fabric that guide employee behavior and company
decisions and cations.

The Importance of Ethics in Business

Without ethics , people , especially businessmen will set their own moral standards, moral rules and
moral principles. This would result into a kind of subjective morality , in which case , what is good for
one may be bad for another and vice versa.

Business ethics opens a novel way of resolving moral problems and ethical dilemmas affecting
business transactions and the interactions of people in the corporate world. Business Ethics will
enhance the human and interpersonal skills of managers so they can be more effective in managing
the human side of the organization.

Business Ethics provide the manager a process in which ethical issues and problems benchmarked
against a moral standard so that a moral judgment is made possible.

Characteristics of a Good Moral Standard

1. A good moral standard is one that looks at the issue as something that is very serious.
2. A good moral standard must be grounded on good moral argument.
3. A good argument always tells the truth and a solid moral argument leaves no room of
loopholes and counter arguments.
4. A good standard should be objective and not subjective.
5. A good standard when violated , brings about the feelings of guilt, shame and remorse of
conscience.

Requirements of A Good Moral Judgment

1. A good moral judgment must be logical.

2. A good moral judgment must be based on facts and solid evidence
3. A good moral judgment must be based on sound and defensible moral principles.

Moral Responsibility

In philosophy, moral responsibility is the status of morally deserving praise, blame, reward,
or punishment for an act or omission performed or neglected in accordance with one's moral
obligations. Deciding what counts as "morally obligatory" is a principal concern of ethics.

Human is a rational and free being. Our actions may be done willfully or not, and the cause
of our actions may be rooted either in good or evil intentions. At the end of the day, we shall
experience the consequences of our actions. Moral responsibility refers to holding people
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morally accountable for some past actions. It also means care, welfare or treatment of others
as derived from the specific social role that one plays in the society. It refers to one’s capacity
for making moral or rational decisions on his own.

However, a lot of people confuse morality with legality. In theory and practice, law codifies
customs, ideals, beliefs, and the society’s moral values. Law undoubtedly reflects changes
in society’s outlooks, its views on right or wrong. But it is a mistake to see the law as sufficient
in establishing the moral standards of an individual, a profession, an organization, or even
the society as a whole. Law simply cannot cover the variety of personal and group conduct.

Although useful for alerting us to moral issues and informing us of our rights and
responsibilities, the law cannot be taking as an adequate standard of ethical or moral
conduct. Conformity with the law is neither requisite nor sufficient for determining ethical
behavior. By the same toke, nonconformity with the law is not necessarily immoral, for the
law disobeyed may be unjust. As the saying goes, “what is legal is not always ethics.”

For example, most kinds of lying are perfectly legal, but lying is recognized as unethical.
Another example is capital punishment.

Capital punishment, also called death penalty, is the execution of an offender sentenced to
death after conviction by a court of law of a criminal offense. It is considered immoral
because it violates the condemned person's right to life and is fundamentally inhuman and
degrading. Death is also too permanent of a punishment, considering how easy it is for an
innocent person to be convicted of a crime.

We Christians should be against capital punishment because the State simply does not have
the authority to determine who deserves to die and lawfully kill in the name of justice. The
right to life of a guilty man should not depend on others judging him to be worthy of it. The
right to life is absolute. The death penalty is an extreme form of cruel, inhuman or degrading
treatment. Death penalty will only lead to an increase in violent crime because it contributes
to trivializing brutal behaviour. The best way to prevent crime is not to impose more severe
penalties. It should be enough to guarantee that all crime will be punished. Furthermore,
death penalty does not allow the guilty person to repent. The death penalty is irreversible.
You cannot possibly bring a dead person back to life. It interrupts any process of healing, of
reinsertion into society. It constitutes an admission of failure by society to show solidarity
with those on its extreme margins. Killing a human being means eliminating him, not
punishing him.

Reasons why human held for moral responsbility:

1. Man is rational being.

2. Man is a free being.

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The Relationship Between Ethics and Business

Ethics play a vital role in business. Without morality , business will be a chaotic human activity. Ethics
is not a study of positive laws intended to govern and regulate actions of people doing business. It’s
concern as a philosophical science is to discover that there are unwritten laws, written in the hearts
of men that should govern our human conduct where positive laws may be absent, and in some
cases , not very clear.

Arguments Justifying the Role of Ethics in Business

1. Business is an integral part of human society

2. In business, what is legal may not be necessary moral
3. Laws are insufficient
4. The trend is to train managers to maximize profits by quantifying the operation of the
business.
5. Business enterprise is an organ of society and its actions have a decisive impact on the social
science.

Assumptions of Profit Motive

1. Profit Motive in business is an ethical issue.

2. Profit Motive as an ethical issue operates within the two important aspects of our human
conduct – freedom and the structure of the business.

The Good Side of Profit Motive

1. Profit motive motivates people to do something meaningful

2. Profit Motive promotes ingenuity and cleverness in running a business
3. Profit motive makes people productive
4. Profit Motives generates potential capital for the business.

The Bad Side of Profit Motive

1. Profit motive promotes rivalry among competitors.

2. Profit motive makes people focus only on making money
3. Profit motive turns the businessman from being a reflective and a questioning person because
he focuses his attention only on the practical activity of making money.
4. Profit motive promotes self interest rather than the common good.

Ethical Considerations of Profit Motive in Business

1. Earning profit is a good and valid activity in business.

2. Making excessive profits is totally wrong .
3. Profit is not a be –all and the end – all of doing business.
4. The teachings of the Catholic Church do not totally condemn profit as part of business activity.

Definition of Business Ethics

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Business ethics are the moral principles that act as guidelines for the way a business conducts itself
and its transactions. In many ways, the same guidelines that individuals use to conduct themselves
in an acceptable way – in personal and professional settings – apply businesses as well.

Determining Right and Wrong

According to Shaw, it is the study of what is right and wrong human behavior and conduct in
business. It is a study of the perceptions of people about morality , moral norms , moral rules and
ethical principles as they apply to people and institutions in business. It is the study , evaluation ,
analysis and questioning of ethical standards , policies , moral norms and ethical theories that
managers and decision makers use in resolving moral issues and ethical dilemmas and affecting
business.

Acting ethically ultimately means determining what is “right” and what is “wrong.” Basic standards
exist around the world that dictate what is wrong or unethical in terms of business practices. For
example, unsafe working conditions are generally considered unethical because they put workers in
danger. It might look like a crowded work floor with only one means of exit. In the event of an
emergency – such as a fire – workers could become trapped or might be trampled on as everyone
heads for the only means of escape. While some unethical business practices are obvious or true for
companies around the world, they do still occur. In other instances, determining what practices are
ethical or not is more difficult to determine if they exist in a grey area where the lines between ethical
and unethical can become blurred.

Illustration

For example, assume Company A works with a contact at Company B, an individual through which
they negotiate all the prices for supplies they buy from Company B. Company A naturally wants to
get the best prices on the supplies. When the individual from Company B comes to their home office
to negotiate a new contract, they put him up in a top-tier hotel, in the very best suite, and make sure
that all his wants and needs are met while he’s there. In technical terms, the practice is not illegal;
however, it might be considered a grey area – close to, but not quite, bribery – because the individual
is then likely to be more inclined to give Company A a price break at the expense of getting the best
deal for his own company.