What are business ethics and the social responsibility of business?
Ethics is the study and practice of decisions about what is good, or right. Ethics guides us when we are wondering what we should be doing in a particular situation. Business ethics is the application of ethics to the special problems and opportunities experienced by businesspeople. For example, as a business manager, you might someday make a decision that you think is best for your company, as did the advertisers for Accutane, described in the Case Opener. Is a company doing the right thing when it attempts to reduce the costs of advertising by not listing all possible complications of the medicine for the consumer?
Such questions present businesses with ethical choices, each of which has advantages and disadvantages. An ethical dilemma is a problem about what a firm should do for which no clear, right decision is available.
To see how ethics relates to accounting, please see the Connecting to the Coreactivity on the text website atwww.mhhe.com/kubasek3e.
For example, imagine yourself in the position of a business manager at Wells Fargo Bank. You know that providing bank accounts for customers has costs attached to it. You want to cover those costs by charging the customers the cost of their checking accounts. By doing so, you can preserve the banks revenue for shareholders and employees of Wells Fargo. So far, the decision seems simple. But an ethical dilemma soon appears.
You learn from recent government reports that 12 million families cannot afford to have bank accounts when they are charged a fee to maintain one. You want to do the right thing in this situation. But what would that be? The study of business ethics can help you resolve this dilemma by suggesting approaches you can use that will show respect for others while maintaining a healthy business enterprise.
Making these decisions would be much easier if managers could focus only on the impact of decisions on the firm. If, for example, a firm had as its only objective the maximization of profits, the right thing to do would be the option that had the largest positive impact on the firms profits.
But businesses operate in a community. Communities have expectations for behavior of individuals, groups, and businesses. Different communities have different expectations of businesses. Trying to identify what those expectations are and deciding whether to fulfill them complicate business ethics. The community often expects firms to do much more for it than just provide a useful good or service at a reasonable price. For example, a community may expect firms to resist paying bribes, even when the payment of such fees is an ordinary cost of doing business in certain global settings. The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders. These expectations must be honored to a certain extent, even when a firm wishes to ignore them, because firms are always subject to the implicit threat that legislation will impose social obligations on them. So, if the community expects businesses to obey certain standards of fairness even when the standards interfere with profit maximization, firms that choose to ignore that expectation do so at their peril. See Exhibit 2-1 for a brief look at Pacific Gas and Electrics approach to social responsibility.