Business ethics refers to how ethical principles guide a business's operations. Common issues that fall under the umbrella of business ethics include employer-employee relations, discrimination, environmental issues, bribery and insider trading, and social responsibility. While many laws exist to set basic ethical standards within the business community, it is largely dependent upon a business's leadership to develop a code of ethics. Practicing strong ethics keeps a business within the parameters of the law; as well as building goodwill and brand equity. Popular social issues largely drive business ethics; as different issues come to the forefront, organizations respond by bringing their ethical tenets in line with the new social norms.

The 1960s brought the first major wave of changes in business ethics. Cultural values were shifting, with individualism and fierce dedication to social issues such as environmentalism and world peace coming into vogue. While young workers were idealistic and wanted to make the world a better place, employers found their work ethic, compared to that of previous generations, to be lacking. Drug use was rampant, and the new focus on individualism caused many workers to look upon their employers with disdain. Companies responded by beefing up human resources departments and establishing mission statements and codes of conduct. In response to the changing desires of their employees, however, businesses also began embracing social responsibility at a level not previously seen; the 1960s saw companies trumpet environmental friendliness for the first time and find new ways to give back to their communities.

During the 1970s and 1980s, two events shaped changes in business ethics: defense contractor scandals that became highly publicized during the Vietnam War and a heightened sense of tension between employers and employees. In response, the government implemented stricter policies governing defense contractors, and companies revamped contracts with employees to focus less on rigid compliance and more on values; popular management philosophy shifted from pure authoritarianism to more collaboration and working on equal footing.

The 1990s saw a rebirth of environmentalism, social responsibility reaching new heights and graver legal ramifications for ethical missteps. Tobacco companies and junk food manufacturers faced heightened scrutiny, along with several highly publicized lawsuits, over the public health ramifications of their products. Oil companies and chemical companies had to tend with increasing public pressure to answer for environmental damage. Class action lawsuits rapidly gained in popularity; in response, businesses were forced to spend more on their legal departments.

From the year 2000 forward, business ethics have expanded to the online realm. The big ethical dilemmas of the 21st century have mostly centered on cybercrimes and privacy issues. Crimes such as identity theft, almost unheard of 20 years ago, remain a huge threat to anyone doing business online – a majority of the population. As a result, businesses face social and legal pressure to take every measure possible to protect customers' sensitive information. The rise in popularity of data mining and target marketing have forced businesses to walk a fine line between respecting customers' privacy and using their online activities to glean valuable marketing data.

  1. How do business ethics differ from industry to industry?

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  2. Why is business ethics important?

    No matter the size, industry or level of profitability of an organization, business ethics are one of the most important ... Read Answer >>
  3. Are investments in the drug sector appropriate for ethical investors?

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  4. How do business ethics differ among various countries?

    Find out why business ethics differ between countries, including laws relating to controversial topics that may differ from ... Read Answer >>
  5. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't ... Read Answer >>
  6. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ... Read Answer >>
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