Ethical Models In Business

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25 Jun 2023

Ethical Models In Business Management: How To Make Ethical Decision

Introduction

In nearly all cases, employing ethical models in business management is in a company’s best interest.
Ethical models helps in retaining good staff as well as loyal customers. Customer most times, feel that by supporting ethically minded corporations, they themselves are making ethical choices.
This article breaks down the ethical models and how to use them in business management.
You will additionally learn:

3 Types of Ethical Frameworks
Importance of Business Ethics
How to make ethical decisions in Management
Ethical theories in business

Let’s get started.

Basic concepts

What are Ethical Models?

Markkula Centre for Applied Ethics phrased ethical models on a standard of right and wrong that serves as a basis on which humans should act. It can be in terms of fairness, obligations, benefits to the society, rights, or specific values.
Ethics is not identical to faith, feelings, following the law or social expectations. Rather, ethics encompasses:

Refraining from wrong actions, like larceny, murder or fraud.
Human rights, like the right to life and also the right to privacy.
Virtues, like honesty, compassion and loyalty.

Organizations are to adopt tips that promotes ethical values;

What is Business Ethics?

A general definition of business ethics is that it is a tool a company uses to ensure positivity from managers, employees, and senior leadership, making them act responsibly within and outside the business with internal and external stakeholders.

3 Types of Ethical Frameworks

Utilitarianism

Under the utilitarianism ethical model, an organization ought to make decisions only after considering all potential consequences associated with that decision.
Utilitarianism is said to be a kind of consequentialism, a philosophy that holds that an action’s morality is decided by its consequences.
In other words, once utilitarianism is applied to a business call, there are absolutely no right or wrong selections. Rather, the right decision is the one that points to the most profit and also the least impairment.

Rights and Duties

The rights and duties ethical model, rests on the thought that individual people and teams have rights and the corporation has the duty to respect those rights.
For instance, when developing a parental leave policy, an organization would possibly confirm that every new parent has the right to spend a sufficient quantity of your time with their new born.
After that, the business, recognizing its duty to respect and defend this right, determines a reasonable amount of paid leave time to give new parents.

Virtue Ethics

Under this ethical model, business behavior is driven by asking, “What would a virtuous business/person do?” Therefore, a business leader can make a decision, by referring back to a certain set down guideline already created by the business. Afterward, the individual to make the decision will check to see if it tallies with virtuous adjectives like:

Kind
Helpful
Responsible
Compassionate
Progressive
Fair

A manager facing the choice to probably terminate a worker perhaps due to his personal social media posts would possibly apply the virtue ethics mode. By understanding whether or not terminating the job of the worker shows truthfulness, accountability, or compassion.
This will be a tough call, as firing the worker probably wouldn’t be compassionate to him. However, it may well be the truthful, accountable selection for the company as a whole.
The manager at this point would possibly have to rely on another moral framework like utilitarianism to help him/her make a final choice.

The Importance of Business Ethics

Making ethical decisions in business is quite necessary for developing a positive public image for an organization. It can help the company to avoid lawsuits and also the potential consequences associated with them, like fines and negative media coverage.
Committing to few ethical decisions, like solely operating with vendors that pay their staff fair wages, also can improve workers’ lives round the world.
When making a moral call, an organization leader has to think beyond the decision’s immediate repercussions and take into account all of his decision’s potential outcomes.
Moreso, many corporations are realizing the importance of a code of ethics development and are working to make codes of ethics accordingly. The aim of code of ethics development and resultant ethics coaching is to outline a company’s moral stances.
On topics like material sourcing, conflict resolution, and legal compliance, so to make sure that each member of the corporation understands the ethics code.
Above all, the benefits of getting a code of ethics embody protective employees’ rights, avoiding legal challenges and developing a positive public image of the corporate.

Here are other benefits of ethical code:
It Protects Employees’ Rights

In the same way, a primary purpose of code of ethics coaching is to make sure that managers have an understanding of staff’s legal rights, so should employees know how to advocate for themselves in scenarios like:

Pay disputes
Discrimination
Sexual harassment
Disparate treatment
Resolving conflicts
Pursuing promotions

Following an ethical code concerning worker treatment can defend staff from being exploited and mistreated in different other ways. Educating staff regarding their rights and the way to advocate for themselves is another advantage of getting a code of ethics, as empowering staff to be their own advocates can serve them throughout the rest of their careers.

Ethics Make Difficult Choices Easier

A code of ethics can make the decision-making process in a business easier. The daily task of making decisions as a supervisor or an organisational leader and business operation is not an easy task. Having a code of ethics can make this so much easier and smoother.
Additionally, having a well-developed code of ethics makes it easier for company leaders to develop a good code of conduct for workers. A code of conduct is not equivalent to a code of ethics, whereas a code of ethics states the company’s broad position; a code of conduct is a definite set of directions that team members are expected to follow while employed by the company.
Generally, the code of conduct is written using the positions made public within the code of ethics, and its directions are developed to aid staff to follow the company’s code of ethics.

Building a Positive Image

Another vital advantage of getting a code of ethics is making a positive public image. Customers pay attention to companies’ actions, notably those involving moral choices. Typically, shoppers like supporting corporations they understand to be moral and will pay more for merchandise and services from these corporations.

It Can Stop Lawsuits and Legal Challenges

The importance of code of ethics development is straight away apparent once other corporations within the same trade face lawsuits for moral and legal violations.
In addition, by developing a powerful code of ethics and prioritizing its tenets in each business call, the company’s leaders will probably save the corporate lots of money within the legal fees and fines that may accompany an allegation of wrongdoing.

Creating a Positive Rapport with the General Public

News of moral violations reaches social media and different public retailers quickly.
Also, even a little infraction may have a devastating result on the public’s perception of a brand.
Therefore, by committing itself to the importance of its code of ethics in each action it takes, an organization can prevent itself from all the consequences of negative publicity.
Here are some examples of moral problems within the workplace.
A few samples of moral problems within the work place that may arise includes:

Environmental sustainability
Transparent internal and external communication
Respect for human rights
Fair wages for workers and vendors
Complying with government agency work standards
Fair treatment of staff and contracted employees
Compliance with trade rules
Compliance with state and federal laws

How To Make Ethical Decisions in Management

It is usually the responsibility of managers to make different business decisions for a company. Individuals who are usually affected are either internal or external stakeholders. A big part of management’s responsibility is making decisions to act ethically. Business ethics usually involves following moral or ethical principles outlined by society. It is necessary for corporations to internalize these principles, so managers have a framework for ethical decisions. This framework — often referred to as a code of ethics — provides managers with a blueprint for making decisions based on ethics.
Here are some ways to make ethical decisions in business management:

Create and make managers implement a written code of ethics to follow

The moral principles contained within the code may be descriptive or normative. A descriptive code needs managers to question what individuals suppose is correct and follow that pattern once making decisions. Normative ethics uses ethics from society to assist managers to make decisions by specializing in the end result.

Follow trade tips when making ethical choices

Government agencies most times regulate a bunch of business industries. Mining, health care, production, and money services all have strict rules.
In other words, corporations can mirror their code of ethics against the rules or legal boundaries created by government agencies. This likely ends up in the equitable treatment of all business stakeholders.

Involve many people within the decision-making method

Ethics and moral views are most times totally different from those operating in a company. In other words, having diverse people involved in your decision-making process can offer a lot of insight into the direction of a company’s activities.
Also, every individual can represent a unique cluster of stakeholders in the company.

Ethical Theories in Business

In a trial to determine some ethical tips for business, 3 normative ethical theories have evolved in Western capitalist societies and they include the following:

The Stockholder Theory

The stockholder theory states that increasing profits is solely the goal of a business.
The stockholder theory asserts that the investors in a business basically run the show. They advance capital to their managers, who then make decisions completely for the sake of making more wealth. The stockholder theory has no concern for social responsibility. Increasing the income on investment is solely the goal of the business. It supports a utilitarian theory that ensures optimum gain more than anything else.

The Stakeholder Theory

The stakeholder theory holds that a business ought to take into thought the requirements and needs of its customers, suppliers, owners and workers.
Although, the major goal of this model is to maximise the firm’s monetary value too.
This idea holds that the interests of the stockholders should sometimes be sacrificed in a bid to confirm a company’s survival.
The stakeholder theory relies on Immanuel Kant’s philosophy that each person is to be treated with respect and thoughtfulness and also allowed to participate by voicing their opinions as equal partners.

The Social Contract Theory

This states that maintaining the morale of workers will boost the wealth of a business.
John Hasnas says the most widely accepted business theory is the social contract theory.
Also supported by the philosophies of 18th-century political thinkers like philosopher and John Locke, who tried imagining what the planet would be like without government.
In addition, this theory claims that each business ought to be dedicated to improving the interests of humanity wholly.
It functions such that it considers the well-being of customers and employees–not stockholders only-without violating any rules of integrity.
In this theory, a business should perform an obligation to “social welfare and justice”.
Although the social contract theory isn’t thought of as an actual contract, it holds business ventures to high standards by “imposing important social responsibilities, according to Hasnas in his 1998 article, “The Normative Theories of Business Ethics: A Guide for the perplexed.”

Conclusion

Taking the stance to include ethical models in your business can only yield goodness, as there are benefits to it, like you now know.
Not only can it save you more money and bring more customers your way, ethical models in business management are standards of business management every small business owner should emulate.