Page 298 - Encyclopedia of Business and Finance

eobf_E 7/5/06 3:01 PM Page 275

Ethics in Management

ETHICS IN values and decisions affect the various stakeholder groups,
MANAGEMENT and to establish how managers can use these precepts in
day-to-day company operations. Ethical business leaders
Managers in today’s business world increasingly need to strive for fairness and justice within the confines of sound
be concerned with two separate but interrelated con- management practices.
cerns—business ethics and social responsibility.
Many people ask why ethics is such a vital component
of management practice. It has been said that it makes
BUSINESS ETHICS good business sense for managers to be ethical. Without
Perhaps the most practical approach to view ethics is as a being ethical, companies cannot be competitive at either
catalyst that causes managers to take socially responsible the national or international level. While ethical manage-
actions. The movement toward including ethics as a criti- ment practices may not necessarily be linked to specific
cal part of management education began in the 1970s, indicators of financial profitability, there is no inevitable
grew significantly in the 1980s, and is expected to con- conflict between ethical practices and a firm’s emphasis on
tinue growing. Hence, business ethics is a critical compo- making a profit. Our system of competition presumes
nent of business leadership. Ethics can be defined as our underlying values of truthfulness and fair dealing.
concern for good behavior. We feel an obligation to con- The employment of ethical business practices can
sider not only our own personal well-being but also that enhance overall corporate health in three important areas.
of other human beings. This is similar to the precept of The first area is productivity. The employees of a corpora-
the Golden Rule: Do unto others as you would have them tion are stakeholders who are affected by management
do unto you. In business, ethics can be defined as the abil- practices. When management considers ethics in its
ity and willingness to reflect on values in the course of the actions toward stakeholders, employees can be positively
organization’s decision-making process, to determine how affected. For example, a corporation may decide that busi-

Former Tyco CEO L. Dennis Kozlowski leaves court in New York, June 17, 2005, after being convicted of looting the industrial
products and services company of more than $600 million in corporate bonuses and loans. AP IMAGES

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 275