Business Ethics in Management: Big Business vs. Small Business

Introduction

It is not a surprise that managers and companies at all levels find themselves increasingly concerned with ethics. Ethical scandals around the globe have shaken consumer confidence in big business, caused tremendous hardships for both the employees and shareholders of affected companies, and created consequences that continue to reverberate through the business community. However, ethical scandals are not only billion-dollar affairs like the U.S. Enron scandal. On the contrary, ethical scandals can erupt in any size corporation and at any level in the workplace. While such high-profile scandals attract vast media attention and carry almost unimaginable financial consequences, most people will not be directly impacted by an ethical scandal of that magnitude. That does not mean, however, that people are unlikely to be touched by ethical misconduct. In industrialized nations, people do business with a huge variety of entities across many different types of businesses, and they are likely to be personally affected by corporate or business ethics at some point during their lifetimes.

Because they have seen scandals destroy people's lives, consumers have responded by demanding increased government regulation of both big and small businesses. This increase in regulation has made some practical differences in the way businesses are run around the world. However, government regulation can only provide so much protection from unethical business practices, because what is ethical is not always the same as what is legal. Furthermore, regulations can differ across jurisdictions and may compete or conflict with one another, making it more difficult to determine the ethical course of action when faced with dilemmas. In fact, it is possible that the successful resolution of an ethical dilemma will sometimes require a person to ignore or violate a particular law. Therefore, from a consumer's point of view, it seems clear that business people should be aware of areas of potential ethical conflict — not simply the law.

As important as ethics may seem to the consumer, it is difficult to understand why not everyone believes that business students should be required to study ethics, or that ethics are an important component of modern business. Many management educators, scholars, and business people are skeptical regarding the efficacy and appropriateness of ethics-themed education in the business-school environment. Like many laypeople, some scholars believe that people are either inherently ethical or unethical, and that education cannot change someone's basic nature. It may be true that, if initially presented with clear moral dilemmas, people could rely upon their personal judgment to make the ethical choice. After all, at least within shared cultures, moral and ethical values are relatively consistent. That consistency means that the majority of people will arrive at the same conclusion when faced with a clear ethical dilemma.

However, the problem is that moral dilemmas are rarely black and white. Most ethical dilemmas pit the interests of one party against those of another, so that reaching a decision requires one to evaluate the relative merits of each party's claims, the relative benefits and harms to each group, and — because this is business — the financial implications of each choice. As a result, even the most seemingly simple ethical issues are actually incredibly complex, making it possible for even the most ethical and conscientious of people to make a mistake. Furthermore, the complexity of ethical decisions tends to grow as businesses grow, because the larger the business, the more people directly involved in each ethical dilemma, and the greater the impact of each unethical decision.

It is also essential to remember that a tremendous number of factors can affect ethical decision making. It is impractical to think that education alone can prepare someone to anticipate every possible ethical issue or to understand all of the considerations that come into play. Many of these factors operate on a subconscious level, so that people may not integrate them into their decision-making processes. For example, every ethical decision a person makes will be shaped by their ethical and moral viewpoint, which is itself shaped by ethnicity, culture, background, religion, gender, and societal expectations. No amount of education can entirely remove a person's background or change their core beliefs about moral and immoral behavior. However, ethics-based education can make people more aware of how their personal histories guide and shape their own ethical decisions, and make them more likely to consider other viewpoints.

To understand how personal background can impact ethical decisions, one need only look at the tremendous changes that business has faced in the last century. Only about 100 years ago, the face of Western business was male and Caucasian. Not only was it considered ethical to do business only with other Caucasian males, it may even have been considered unethical to do business with diverse people. Furthermore, people conducted business in a different manner. There was an absolute lack of regulation for the majority of businesses, and the building of monopolies and other seemingly unethical practices were not necessarily recognized as such. It was with the great growth of business that accompanied industrialization that many people discovered how unethical big business could be. The introduction of diverse groups into the business environment has since helped transform the face of business.

For example, the introduction of women into the workforce is relatively recent, and it has changed the ethical environment of business considerably. First, it introduced the issue of sexual harassment and revealed significant gender-based power disparities that must be considered in today's mixed-gender workforce. It has also revealed subtler gender differences, showing that men and women may approach an ethical dilemma in different ways and arrive at different conclusions, even when they share other cultural traits. Therefore, gender can affect ethical decision making both through the introduction of bias and through the introduction of different points of view. When people do not understand the dual impact that gender can have on ethical dilemmas, they risk making an unethical choice simply due to ignorance.

Like gender, cultural background — including ethnicity, tradition, and religious heritage — can have a tremendous impact on ethics. Different cultures have different values and norms, which can result in different expected resolutions to an ethical dispute. The impact of cultural differences is only going to increase because of the growing globalization of the economy. Of course, the globalization of business is nothing new; Western countries have been involved in global commerce for well over a thousand years. What is new is that Western countries and companies are approaching global interests in a more equitable, non-colonial manner. Those companies that have not embraced a more globally sensitive perspective face adverse consequences, from increased legislation and pressure in non-industrialized nations to growing awareness and concern from customers in industrialized nations. This concern for global ethics sometimes requires extensive knowledge about other cultures, ethnicities, and religions, but can frequently be addressed by acknowledging cultural differences and approaching ethical dilemmas with an open mind.

Finally, concern for the environment may be the single most pressing modern ethical issue facing businesses today. Most educated people have embraced the reality that industry has had — and continues to have — an extremely negative impact on the earth. Though some scientists continue to dispute the idea of human-driven global warming, environmental concerns are not based solely on fears of climate change. The negative impact of other types of pollution is absolutely clear, as is the fact that the world's natural resources are being utilized at an unsustainable rate. Corporations have cause to be concerned, because they know that resources are finite and could face global shortages and price increases if practices are not changed. Therefore, corporations have had to begin looking at the long-term consequences of their behavior, not merely the bottom line.

Businesses also have to be concerned because consumers have become aware of environmental issues, and many are demanding earth-friendly products while showing a willingness to pay a premium to competitors who observe environmentally responsible practices. Interestingly, this demand has given rise to its own ethical dilemma: because there is no real regulation defining what a product must do to be regarded as earth-friendly, companies determine which of their own products qualify. The result is that some products are labeled "green" or "organic" even when they have been produced in a conventional manner, leading consumers to choose them over competing products and sometimes pay a premium price. Therefore, corporate responses to environmental concerns can actually serve to create additional ethical difficulties.

As a result of these growing concerns and in light of recent ethical scandals, most business people are concerned about ethical awareness and education in their businesses, even when that concern is driven primarily by a desire to remain profitable in an increasingly competitive environment. Most scholars and commentators discuss ethics in the context of corporations and big business, but it is erroneous to think of ethics as solely the concern of large enterprises. On the contrary, small business people may need to be even more concerned about ethics than their counterparts in big business. If a large corporation deals unethically with a single customer, partner, or provider, that transaction is unlikely to have a meaningful adverse impact on the business; it can take hundreds of unethical transactions to tarnish the reputation of a company already known for good customer service. Therefore, many big businesses are somewhat insulated from minor ethical lapses.

Small businesses, however, do not enjoy the same protection. A single unethical business transaction could literally lead to the demise of an entire small business. In addition, small business owners frequently live in the same communities as their businesses, which means that unethical behavior can have very real consequences for their standing in the community, personal relationships, and personal reputation. Therefore, this paper examines current literature regarding ethics and management and compares the concerns mentioned in that literature with the ethical concerns of a small business owner, to help determine whether small business owners share the same ethical concerns as those engaged in big business.

Literature Review

When people first began the formal study of business, few bothered to mention ethical concerns. This has led some modern commentators to believe that ethics are not an essential part of business study. Other commentators disagree. For example, Schwartz is aware of the relative newness of the study of business ethics and the skepticism that many management educators harbor about its relevance. However, he has studied some of the pioneers in management theory and believes that three essential questions can help explain the importance of ethics in management. He asks: what are "the ethical implications of Frederick Taylor's theories?...What did Chester Barnard say about the moral status and responsibility of executives? Why is Peter Drucker so concerned with the social responsibilities of business?" (Schwartz, 2007, p. 44). According to Schwartz, the answers to those questions quickly reveal the primary role that ethics has played in the study of business since its inception.

Frederick Taylor may not have directly addressed business ethics, but he was one of the forerunners in the study of business and management. "Frederick Taylor is recognized as the leading advocate of scientific management. He is considered one of the first major management theorists... Taylor proposed a 'scientific' system for breaking down each activity into its component parts and determining the most efficient means by which to perform each task." (Schwartz, 2007, p. 45). This scientific system would have allowed for greater production with fewer resources, thus maximizing profit — but at what expense? "Taylor's theory... despite not specifically addressing business ethics, generates significant business ethics implications. For example, discussion of any employee-related business ethics issue such as employee job satisfaction, well-being, participation, or rights, might be related to Taylor-based management practices." (Schwartz, 2007, p. 45). By focusing on output, Taylor's theory has been characterized as cold because it might encourage managers to replace those who could not perform to expectations and reduce camaraderie among co-workers by turning them into competitors. Taylor was aware of these criticisms, and his responses demonstrated that from the beginning, theorists studying business were aware of ethical concerns: he cautioned that optimum performance should be based on a sustainable rate and that workers should be encouraged to suggest improvements to the production process.

Chester Barnard was another of the first theorists to engage in the formal study of business, though his approach differed from Taylor's scientific model. Barnard "focused on formal organizations as cooperative systems. His main contribution to management theory was his attempt to bridge the requirements of the formal organization with the needs of the socio-human system." (Schwartz, 2007, p. 46). In that way, Barnard may have been one of the first management theorists to focus on employees as individuals. He "recognized that individuals in an organization have their own motives (i.e., purposes, desires, and impulses) which can be modified through the executive function to match the goals of the organization (i.e., by offering incentives or changing attitudes). If the individual and organizational goals match and cooperation is achieved, the system is considered effective." (Schwartz, 2007, p. 46).

As a management theorist, Barnard advocated that companies strive to align those goals, which opens up the possibility that companies will try to manipulate employee goals — an action that raises its own ethical concerns. However, it is important to realize that those ethical issues are not the product of Barnard's theory itself, but rather the possible product of management without ethical guidance. In response to those concerns, Barnard also recognized the ethical responsibilities of managers: (1) they must hold some moral code; (2) they must demonstrate a high capacity for responsibility; and (3) leaders must be able to create a moral code for others (Schwartz, 2007, p. 47). As a result, Barnard may have been the first management theorist to discuss how to improve ethics in a business context.

Finally, Schwartz examined the theories of Peter Drucker, who may be considered the founder of American management theory. Schwartz believed that Drucker "arguably provided two major contributions to management theory: (1) advocacy of the federally decentralized organization; and (2) the concept of 'management by objectives' (MBO)." (Schwartz, 2007, p. 48). Drucker's work carries significant ethical implications:

His support of decentralization raises several ethical concerns such as increased reliance on the moral judgment of autonomous managers. The creation of autonomous profit/loss centres in a decentralized organization may generate inter-organizational competition for resources which is detrimental to the organization as a whole. MBO also leads to an emphasis on the maximization of financial performance and results, often short-term, which may in turn create pressures for short cuts and ethical abuses by managers and employees. (Schwartz, 2007, p. 48).

However, it would be unfair to suggest that Drucker himself was unethical, because he recognized the dangers inherent in his own business theories and warned against the pitfalls of a purely profit-based model. In addition to discussing how to maximize profits and short-term gains, Drucker specifically addressed three ethical arguments: "(1) profits, though important, are not the purpose of business; (2) corporations are social institutions and therefore have social responsibilities; and (3) business has special responsibilities towards its employees." (Schwartz, 2007, p. 49).

While Schwartz found Barnard's theories relevant to the modern study of business ethics, not all modern commentators are fans of Barnard's approach. Some have indicated that it represents a personal rejection of his formerly Christian heritage, with its built-in moral code, and that without that religious background, Barnard's theory is simply insufficient to develop management ethics. Feldman examined Barnard's The Functions of the Executive to understand his approach to developing management ethics (1996). Feldman looked at four moral justifications developed by prior authors to explain Barnard's theory and highlighted the central themes in Barnard's attempts to justify management ethics. Feldman found Barnard's attempts, as well as the four moral theories developed by others to justify those attempts, insufficient to explain the critical role that ethics must play in business. Fundamentally, Feldman believes that:

Barnard's new ethics is an attempt to replace the authority of the traditional moral belief system of Judeo-Christian heritage with a historical belief system based on rationality and individualism. Indeed, despite his labours to create a new management ethics, he actually says very little about specific ethical values. Instead, he presents an abstract discussion about how to resolve ethical conflicts: ethical conflicts are resolved by morally superior individual executives using rationally superior capacities or what Barnard calls "moral creativity." There are no established moral standards, only the continuously mobile effort of executives to synthesize conflicting moral codes. (Feldman, 1996, p. 34).

According to Feldman, Barnard's theories went so far as to weaken humans as ethical creatures. By insisting that humans could be split into an individual-person dichotomy, Barnard "destroys the moral autonomy of the 'person' by subsuming him/her into a functional role... Barnard's functional definition of the 'person' shifts the moral responsibility from the individual to the organization. When relationships are 'depersonalized,' the basis for personal dedication is destroyed." (Feldman, 1996, p. 36). It is almost as if Feldman perceived Barnard's theories as shifting responsibility from the individual to the organization — and, because organizations are by their very nature amoral and incapable of ethical reasoning without crucial individual input, such a shift could only have negative consequences for the development of ethics in business.

While there is obviously some disagreement about the role that the first business theorists played in the development of modern business ethics, most people do agree that the modern study of business requires the study of business ethics. Various management roles face differing ethical challenges, and the study of the underlying ethical issues can only assist managers in arriving at the most ethical decisions. Human resources management is an area where one would anticipate finding many ethical conflicts, and they certainly do exist in that field. However, it is important to keep in mind that all supervisory positions create their own realm of possible ethical dilemmas.

For example, quality management, though it deals with products, is an area rife with ethical issues. Fisscher and Nijhof identified three areas of overlap between quality management and business ethics:

(1) An obvious connection is that both quality management and business ethics focus on the responsibilities of an organisation towards different stakeholders. However, on closer inspection, the responsibility discussed in quality management refers to the organisational responsibility of employees, while business ethics is more concerned with professional, relational, and social responsibility. (2) In order to achieve the organisational responsibility desired in quality programmes, it is necessary to have some leeway in relational responsibility. This is illustrated by the apparent paradox of control, which shows that excellent performance can only be achieved by making a delicate balance between control of behaviour on the one hand and freedom to act on the other. (3) A third link between quality management and business ethics refers to the necessity of linking a meaningful answer to the good intentions stressed in ethics programmes. The ability to act in congruence with personal motives on an individual level, and a code of conduct on a collective level, should be organised and managed. Quality management tools, including the control of internal processes, create an essential part of this ability. (Fisscher & Nijhof, 2005, pp. 156–157).

Despite the fact that ethics have been a concern since people began the formalized study of business, some people believe that it may be inappropriate to expect businesses to behave in an ethical manner. According to Barrett, it may be foolish to try to inject normative ethical values into the corporate setting (1999). While he does not appear to believe that morality is or should be the guiding light in the workplace, he also points out that the concept of justice is ambiguous (Barrett, 1999, p. 310). Not only do people differ on what they believe is just or unjust, but their "sentiments will also be influenced by an individual's social position: whether they perceive some benefit or disadvantage under a particular pattern of distribution will have some bearing on their evaluation of it." (Barrett, 1999, p. 311). With differing views of what is just, it seems impossible to arrive at a universal decision about what is moral and fair.

Furthermore, even the discussion of rights leads one into difficult territory, because different people have different concepts of rights: "To talk in the abstract about the rights of individuals and the defence of their humanity at work or elsewhere ultimately leads us to an implausible and unhelpful metaphysics. Such arguments tend to obscure consideration of the rights of particular groups like ethnic minorities or women. In general, rights may be better thought of as constructed capacities, specific entitlements and statuses." (Barrett, 1999, p. 311). Therefore, when one examines rights in the corporate setting, one may be reduced to looking at defined legal rights rather than natural rights, since different cultures view natural rights in different ways. However, since so many corporations are now multinational, they may have to deal with different, competing legal frameworks — which means that many corporations will not be able to rely solely upon the law for ethical guidance.

However, the existence of ethical difficulties does not mean that businesses should abandon their quests to behave ethically; rather, the increased scope of these dilemmas merely increases the need for ethics education. Capitalism, an underpinning of Western business study, may absolutely need ethics to survive. "Corporate ethics is an important ingredient in social responsibility, and in turn a determinant of good capitalism. In and of itself, being ethical requires one to embrace a belief in incorporating social responsibility into one's corporate thinking and planning." (Svensson & Wood, 2005, p. 138). That idea may seem counter-intuitive when one looks at historical capitalism, which developed with robber barons monopolizing natural resources and amassing tremendous wealth compared to the majority of workers. However, capitalism developed in a very different environment, and unethical behavior was far more difficult to detect. In today's modern society, a company's unethical behavior is much more likely to be detected — and certain behavior is far more likely to be considered unethical today than it would have been in the past.

Many commentators think that ethics are so important that they should play a primary role in business and business education. However, they do not necessarily endorse every aspect of the current ethics movement. Baccarani cautions that the words "ethics" and "quality" have been so overused as to have lost a substantial part of their meaning; he urges businesspeople to "restore real content to them, making them useful for management and for the related decision-making processes." (2008, p. 155). He also acknowledges that if one believes the sole aim of a business is to maximize profit, then ethics and business are not compatible. However, he disagrees with the assumption that a business' sole aim is to generate profit. On the contrary, he believes that profit can be "seen as the residual and natural consequence of seeking to bring benefit to the stakeholders." (Baccarani, 2008, p. 156). As a result, he stresses that ethical behavior by a company does not exclude profit.

While ethical behavior is not incompatible with profit, it is important to realize that putting ethics first will change the nature of how a company views profit. Instead of viewing profit as its primary goal, an ethical company "considers profit as the just residual remuneration for the activities carried out by the business in terms of entrepreneurship and risk and as an invaluable tool for promoting and supporting the activities of the business." (Baccarani, 2008, p. 156). Moreover, ethical behavior can actually provide greater rewards than unethical behavior, especially if one takes a long-term view of risks, rewards, and profits.

Svensson and Wood seem to agree with Baccarani's point of view, believing that corporate ethics should influence the core values of a corporation, which in turn influence the techniques and tools selected by the corporation (2005, p. 141). They believe that "the principal parameters of corporate ethics in TQM are management expectation and perception vs. employee expectation and perception," and identify the potential gaps that can lead to ethical dilemmas (Svensson & Wood, 2005, p. 142).

Svensson and Wood examined corporate ethics in an intra-corporate relationship to develop and describe a conceptual framework of corporate ethics in TQM fitting into the generic three-component management system set out by Hellsten and Klefsjo — core values, techniques, and tools (2005). They explained the differences and similarities between corporate ethics and business ethics as follows:

Ethics, business ethics and corporate ethics are dependent upon reigning values in the societal, business, and organisational environments. Reigning values, norms, and beliefs construct current ethics. Therefore, ethics might be seen as an on-the-spot account that reflects the society in general. Business ethics considers the gap between the corporation's ethical behaviour and the marketplace's perception of the corporation's ethics in its business operations. Corporate ethics, on the other hand, has an internal emphasis. In particular, corporate ethics considers the gap between the management's ethical behaviour and the employees' perception of the management's ethical behaviour in business operations... Business ethics applies an outside-in perspective of the corporation's business operations, while corporate ethics has an inside-out perspective. (Svensson & Wood, 2005, p. 138).

Other scholars believe that the field of business ethics is still in development, and that ethics may not yet fit comfortably into existing business models. Fisscher and Nijhof believe that three changes are essential to its development: first, relational responsibility needs to be implemented into quality management models; second, researchers should explore the use of quality management tools in the business ethics context; and third, leadership needs to balance control and space to act (2005, pp. 158–159).

Many scholars share similar views about the role of ethics in business scholarship. Warren, a professor who taught a business ethics class, stated that his objectives included helping students to: depict business as a system of relationships, responsibilities and purposes in society; challenge cynicism and destructive attitudes to business practice; develop moral awareness and imagination; introduce ethical theory and its application in business contexts; and take pride in a business career and the opportunities it affords to contribute to purposes beyond the self (Warren, 1995, p. 17).

One of the most ironic aspects of the study of business ethics is that even the study of ethics in corporations can raise ethical concerns. For example, how does one collect data about the management process without introducing bias? Self-reporting questionnaires tend to show that managers believe they act in ethical and appropriate manners, yet ethical issues abound in the corporate world. Likewise, people who know they are being observed are likely to act differently than those who are unaware of observation. However, covert observation in a corporate setting generally requires at least low-level deception.

Oliver and Eales investigated the ethical implications of using covert participant observation as a means of data collection regarding organizational problems (2008). They determined that covert observation can be very insightful "because of its ability to access real-time problems in real-time situations." (Oliver & Eales, 2008, p. 354). Though covert observation can raise ethical issues, if done in an appropriate manner — especially with the goal of improving working conditions — it does not appear to be a blatantly unethical practice. However, researchers using covert observation frequently have to engage in low-level deception, which can have a detrimental impact on the researchers themselves. As a result, Oliver and Eales suggest that researchers "consider not only the ethical questions of the rights and consequences of research participants, but also... the consequences of conducting research in this way... on the researcher themselves." (Oliver & Eales, 2008, p. 355).

Given significant questions about what ethics classes should contain, whether they should be required, and whether they actually have a positive impact on business behavior, Emiliani sought to determine whether management education as taught in business schools in the United States was beneficial to society (2004). What he discovered was that current management-education practices are lacking, as evidenced by recent corporate scandals with direct costs of over $200 billion (Emiliani, 2004, p. 482). "Ethics courses, as well as organizational behavior courses, attempt to create awareness of situations, often shades of gray, in which small problems can increase to become much bigger problems with undesirable consequences." (Emiliani, 2004, p. 482).

After examining what current ethics education has to offer, Emiliani concluded that in order for management education to benefit society, it must result in at minimum: value creation (both financial and non-financial) for customers, employees, suppliers, investors, and communities; economic growth and improved competitiveness; improvement of the human condition; and balance between social and economic interests (Emiliani, 2004, p. 484). He also determined that several core business principles should be included in an ethics curriculum: (1) business has a responsibility beyond its fiscal responsibility to shareholders; (2) businesses should have a social and economic impact that improves their surrounding communities; (3) businesses need to set ethical standards higher than those set by the law; (4) businesses need to respect domestic and international rules; (5) businesses should support world trade; (6) businesses should respect the environment; and (7) businesses must avoid illegal or illicit activities (Emiliani, 2004, p. 487). Emiliani also suggests that education needs to focus on root cause analysis. Currently, many managers stress perfection — an impossible goal — resulting in people hiding mistakes. Root cause analysis permits imperfection and attempts to problem-solve by determining what factors contributed to a mistake, rather than encouraging people to conceal errors (Emiliani, 2004, p. 492).

While the study of ethics has many scholarly applications, it cannot be forgotten that ethics have a real-life utilitarian value. One of the most pressing ethical issues for most businesses is the obligation they owe to their shareholders — and the challenge of fulfilling that obligation without behaving unethically towards others. In many countries, publicly held corporations have a fiduciary duty to their shareholders, and by placing a legal and moral obligation on these corporations, such fiduciary duties can themselves lead to ethical dilemmas:

If the law places responsibility on the management of public companies to have regard for the interests of its current and future owners, in practice it would seem that the interests of existing investors tend to prevail, along with their expectations of short-term returns on investment. The key discipline on management is the maintenance of the share price and dividend levels... It is not too difficult to see how these arrangements can impact adversely on top management's willingness to make long-term commitments to training and development, let alone a serious, long-term commitment to workplace justice. (Barrett, 1999, p. 312).

Another problem facing corporations is that many people believe they should be able to rely upon personal ethics alone to resolve business ethical dilemmas. Holian investigated the ethics of decision making and determined that "the differences in decision making associated with the use of different modes are related to generation of options and assessment of expected outcomes." (Holian, 2002, p. 868). In other words, how a person resolves an ethical dilemma is based on their perception of the possible outcomes. The problem is that even good people can make bad ethical decisions, partly because resorting to personal ethics often prevents people from considering other viewpoints and the impact their decisions may have on people who think and feel differently than they do.

"While Judgment and Integrity may be primary requirements for ethical decision making, and Courage a necessary precursor, these three alone may not be sufficient for ethical decisions. Humanity may contribute to Judgment before a decision is made and be an important element in resilience to stressors associated with both choices and consequences." (Holian, 2002, p. 868).

Individual ethics not only determine how a person would resolve an ethical dilemma, they also influence how someone views their corporation's ethical decisions. People generally tend to view themselves as ethical and therefore have a desire to view their corporations as ethical as well. In some instances, this desire can have a positive impact, because people can pressure their corporations to act ethically. However, this desire can also have a negative impact, because it may cloud people's judgment about the true nature of their decisions. As a result: "The general consensus among those writing about business ethics is that it is no longer enough for employees to rely on an inner voice or a feeling to tell them what is right and wrong. In a society where getting rich quickly is looked upon as a virtuous goal, people need explicit guidance on working together in an ethical manner." ('Strange Bedfellows,' 2006, p. 9).

A survey of members of the Institute of Management revealed some interesting findings about the interrelationship between personal and corporate ethics. About 90% of respondents believed that they had adopted an ethical perspective towards management and characterized themselves as prepared to speak out about ethical issues at work (Brigley, 1995, p. 32). More than 75% believed that their organizations shared their ethical viewpoints, but also felt that their organizations were more likely to be ethically blind on issues that could affect their competitiveness (Brigley, 1995, p. 32). Only a minority of managers reported feeling an ethical mismatch between their ideals and their companies' ideals, and these mismatches were most likely to occur in areas relating to salary and pay (Brigley, 1995, p. 32). More than 80% of respondents reported using "their own moral values to decide on ethical issues." (Brigley, 1995, p. 33).

The most significant problem with Brigley's analysis is that it relied upon self-reported behavior. The managers surveyed may have believed that they and their companies were acting ethically, but there was no external verification. Even if Brigley had attempted external verification, the nature of ethics would make it difficult to determine whether gray-area behavior was or was not ethical. Cognitive dissonance theory suggests that people like to view themselves as good, ethical, moral people and may therefore cast questionable ethical decisions in a favorable light when required to make them in the course of their employment.

In addition, Brigley's results do not appear to represent the norm. O'Dwyer's interviews of 29 executives revealed that, while executives are not adverse to ethical practices, the majority of them still put shareholder concerns above other ethical concerns (2002, p. 548). Many of them were nonetheless concerned about the impact that their businesses had on the local area, regardless of whether their customer base was primarily local.

The discrepancy between O'Dwyer's results and Brigley's results may be rooted in the difficulties surrounding the definition of ethics. As one source notes: "unethical behaviours include all actions that result in unfairness to others, whether those behaviours are legal or not." (Wells & Spinks, 1996, p. 28). However, all resource allocation means that one person is deprived of a resource so that another can have it. "The line between ethical and unethical actions is far from being distinct. In today's complex business world, persons who wish to be ethical may not know exactly what actions will have ethical results and what actions will not. A highly competitive situation prevents most organizations from being conservative in defining ethical behaviour." (Wells & Spinks, 1996, p. 28).

In the practical application of ethics, managers face a variety of challenges on a daily basis. One primary function is evaluating the performance of subordinates. Some commentators suggest that measuring performance may be inherently unethical, because "traditional models and approaches to performance management generally do not succeed in meeting their objectives, are flawed in implementation, act to demotivate staff, and are often perceived as forms of control which are inappropriately used to 'police' performance." (Winstanley & Stuart-Smith, 1996, p. 66). However, Winstanley and Stuart-Smith believed that an ethical approach to measuring performance was possible by incorporating four ethical principles: "(1) respect for the individual, (2) mutual respect, (3) procedural fairness, and (4) transparency of decision making." (Winstanley & Stuart-Smith, 1996, p. 66).

Of course, one of the premier ethical concerns facing corporations today is how to use natural resources ethically. Companies are worried about being environmentally responsible, because consumers are increasingly concerned about environmental consequences and because natural resources are finite. However, some unethical companies have noticed the increase in profits associated with an environmentally friendly image and have labeled their products and companies as "green" even when they are not what experts would consider environmentally responsible — partly because there are no real guidelines defining what "environmentally friendly" actually means.

One of the problems with resource management is that the earth's natural resources are not consumed proportionately. A small percentage of people from the world's wealthiest countries use a far greater percentage of the world's natural resources than the larger populations of less affluent countries. However, those populations in less affluent countries, including India, most of Asia, and Africa, are growing at exponential rates. Therefore, the ethical management of natural resources must take into account not only meeting current needs, but also those of an exploding population. "The concept of carrying capacity cannot be applied in a simplistic way to humans since a variety of other factors such as trade, technology and consumption patterns alter the carrying capacity in drastic ways." (Ramakrishnan, 1998, p. 207).

In fact, the green revolution has not necessarily helped impoverished people; it has sometimes made items less affordable for the most marginalized groups and has had a negative impact on impoverished women by moving them from cultivators to laborers in the agricultural process (Ramakrishnan, 1998, p. 209). Although that example does not mean that green processes are inherently unethical, it certainly highlights the fact that ethical concerns can arise in many contexts.

Another factor that has impacted management ethics is the gender integration of the workforce. It was only in the latter half of the 20th century that any substantial gender integration occurred in the business environment. "Instead, gender works indirectly through power, organizational politics / political savvy, conflict management and trust and produces differences between female and male top executives' approaches to decision making thereby exerting influence on the decision-making cycle." (Klenke, 2003, p. 1025). Building on the argument that ethics has been conceptualized from a masculine standpoint, Limerick and Field investigated what was needed to build a more ethical public service (2003, p. 398). Female leaders identified four critical elements for increasing ethics in public service: (1) the importance of role-modeling and community engagement; (2) the importance of encouraging dialogue and open debate about work practices; (3) the importance of understanding and enacting relationship-based management; and (4) the importance of reaffirming that public service is about service (Limerick & Field, 2003, p. 399).

Globalization and intercultural relationships have also impacted the ethics of even local businesses. "As many companies have international branches, what is perceived to be fair may not be shared by colleagues overseas. So, although policies and practices could be disseminated from the centre, fairness may not be agreed nor achieved." (Woodd, 1997, p. 113). Pomeranz looked at the impact that the global rise of Islam can have on business ethics — an interesting perspective because it demonstrates how much culture can shape a business' ethical environment. Islam is a lived religion, which means that Muslim-run businesses will feel a religious imperative to incorporate their beliefs into their operations. Muslim countries generally have a "unified political and economic system." (Pomeranz, 2004, p. 11). Traders are encouraged to keep good records, including records of debt, and there are religious prohibitions against fraud and unjust trade (Pomeranz, 2004, p. 11). However, that does not mean that globalization produces universal acceptance of Western ethical principles; on the contrary, there has been resistance to embracing Western accounting principles in Islamic countries.

Although not its own ethical issue, companies cannot afford to ignore the fact that ethics and values have an impact on job performance and job satisfaction. After investigating the relationship between organizational ethics and job satisfaction, Chye Koh and Boo discovered a "significant and positive influence of both organisational ethics and job satisfaction on organizational commitment." (Chye Koh & Boo, 2004, p. 688). They also found "significant and positive links between ethical culture constructs and job satisfaction," though they did not observe a significant relationship between ethical climate and job satisfaction (Chye Koh & Boo, 2004, p. 688). "The practical implication to organizational leaders is that organisational ethics can be used as a means to generate favourable organisational outcomes." (Chye Koh & Boo, 2004, p. 688).

Companies can also examine their lobbying efforts as a measure of ethical behavior. Big corporations interact with lobbying in two ways: they lobby representatives to obtain favorable laws, and they are also subject to a form of lobbying by society. As Harris observes, "as society has higher demands, so it will want its voices heard and society will become more consumer driven and government will have to become more responsive to consumer needs." (2001, p. 1151). An ethical company must always consider the ramifications of its behavior on people who are not its consumers. One example is Walt Disney, whose homosexual-friendly employment policy has resulted in boycotts from very politically active opposition groups. Disney executives have decided that removing same-sex benefits from employee packages would be unethical, and they adhere to that stance.

Methodology

Once a company has recognized its ethical challenges, its next step is to consider how to improve ethics across the organization. Svensson and Wood took an in-depth look at corporate ethics and trust in intra-corporate relationships (2004). They noted that recent scandals had only encouraged a growing trend toward awareness of and discrimination against "corporations that fail to meet the criteria of ethical business operations and ethical management principles." (Svensson & Wood, 2004, p. 320). They observed that "trust appears to be a feature that invariably assists in the better functioning of management operations in business relationships... Trust means that somebody is willing to take a risk, or to expose oneself, in relation to somebody else." (Svensson & Wood, 2004, p. 321). "The presence of trust or distrust will certainly affect the performance in intra-corporate relationships. Therefore, the outcome of an intra-corporate relationship is to a certain extent dependent upon the existing trust between the management and the employees." (Svensson & Wood, 2004, p. 322).

Synthesizing their research, Svensson and Wood came to four conclusions about the role of trust in intra-corporate ethics: (1) business ethics and corporate ethics are not the same — the former shows an external perspective and the latter an internal one; (2) it is important for a company to align its approaches to business ethics and corporate ethics; (3) a lack of business ethics can weaken corporate ethics, and vice versa; and (4) businesses need to be very wary of disenfranchising their own employees (Svensson & Wood, 2004, p. 331).

Trust is a very amorphous concept, much like ethics itself. Grimshaw tackled this issue in his discussion of facilities managers and ethics, arguing that a professional code of ethics is needed because "professional codes have been shown to be useful over and above business codes, they are preferred by members and have a wider credibility. They provide a useful lever for professional facilities managers to resist unethical demands from clients where business needs clearly conflict with the public interest." (Grimshaw, 2001, p. 50).

Conclusion

On the one hand, the personal nature of the ethical disputes seemed to encourage the business owner to act ethically. When his wife revealed her bruise, he understood immediately the impact that such predatory behavior could have on a member of his wait staff and took steps to end it. When he discovered that having a special-needs person working in his kitchen was not practical, he was willing to come up with a creative alternative that still allowed him to employ people with special needs. Who knows whether he would have reached the same conclusions had he not worked personally with the disabled youth or seen firsthand the effects of harassment on his own wife.

On the other hand, the personal nature of the ethical conflicts he faced sometimes made resolving the disputes more difficult. When his two employees stopped dating and were causing difficulties in the workplace, he probably could have stopped their behavior before it got out of control had he not felt personally connected to both employees. He acknowledged that if he were further removed from the day-to-day operations of his business, he probably would have been able to problem-solve more easily when confronted with many ethical dilemmas.

Like Barnard, the small business owner focused on employees as individuals and recognized that individuals brought their own desires into the workplace. Furthermore, like Drucker, he clearly believed that businesses have a social responsibility to their employees. However, the owner's actions also demonstrated that being too focused on the employee as an individual can itself create ethical problems. For example, he was so respectful of his employees' private lives that he permitted two dating employees to disrupt his restaurant with their constant fighting. Instead of making it clear that their behavior was unprofessional and would not be tolerated, he permitted it to continue, causing his other employees and customers to feel very uncomfortable. He continued to allow individual needs to trump the good of the company; for example, he currently has a waitress who appears to be taking advantage of his initial willingness to give her extra time off after a personal tragedy.

However, looking at the business owner's decisions overall, he seems to be a very ethical businessman. While his decisions may not result in everyone being happy, he seems to give careful thought and consideration to the dilemmas he faces and tries to come up with solutions that deliver the best results for the most people. He also seems to have tried to learn from his mistakes and incorporate those lessons into future decision making. In addition, though his dilemmas may be more personal than those faced by big-business managers, they do not differ fundamentally in character from the types of dilemmas discussed by scholars. The small business owner reported facing ethical dilemmas based on gender, cultural diversity, and environmental responsibility — all issues noted by scholars. His dispute with his brother-in-law, while distinctly personal, is not far removed from the challenge any company would face in dealing with a supplier whose ethical values are in question.

What both the literature and the case study make absolutely clear is that good intentions alone are not sufficient to ensure that businesses remain ethical. As Barrett noted, it may be impossible to resolve business ethical dilemmas simply by resorting to normative, everyday ethics. Justice may, indeed, be ambiguous. Therefore, it seems clear that businesses need to concentrate on teaching ethics to their employees, particularly those who have not been trained in management and have limited experience in the work world. People come to the workplace with different ethical ideals and worldviews, and ethics education as part of the employee orientation process could help prevent many ethical dilemmas. This would prevent employers and employees alike from assuming that ethical decisions can be resolved solely by reference to legal rights or obligations.

While the study methodology did not lend itself to the same types of ethical problems typically associated with covert observational studies, it did have limitations. First, the observation was limited to activities that took place in front of customers. There may have been unethical practices occurring in the kitchen or management offices that were not visible during observation. In addition, while the business owner appeared to treat his employees with decency and respect at all times, he was at all times under the impression that he was being observed by a customer; it is possible that his behavior was different when not observed.

Like Brigley's analysis, this study also relied upon self-reported behavior to determine a businessman's ethics. While people are not necessarily dishonest when they self-report, they do tend to view themselves as ethical and cast their actions accordingly. Cynics might suggest that no one ever makes themselves the villain in their own narratives — and this is a true facet of human nature. Therefore, while the small business owner came across as a very ethical and thoughtful man struggling with genuine dilemmas, his account may be more of a reflection of his own self-image than a perfectly accurate record of his actual choices.

Ethics is one of the major hot-button issues in business today, and business people and companies at all levels find themselves increasingly concerned with it. This is partly due to the fact that several recent billion-dollar ethical scandals have caused tremendous financial problems for people around the globe. While those scandals may have heightened awareness of ethical dilemmas, they do not account for the majority of consumer skepticism about business ethics. People seem concerned about a lack of ethics at all levels of business. After all, in an increasingly global economy, people interact with thousands of different companies — whether directly or indirectly — during their lifetimes. Unethical actions by any of those companies can impact consumers. Some impacts are direct; for example, many Westerners were surprised to find that toys marketed and sold by Western toy companies were manufactured according to inadequate safety standards and contained items like lead paint, which has long been recognized as toxic to small children. Other unethical actions may pose no direct harm to Western consumers, but are no less significant. Many Westerners did not learn of the unethical origins of gemstones — especially diamonds — until recent media events, including a Hollywood film, brought the issue to mainstream attention. Upon discovering that children literally die so that people can purchase affordable jewelry, many consumers felt personal guilt and felt actively betrayed by the jewelry industry.

Despite the almost inevitable reality that business scandals will impact people's lives, there are still some commentators who believe that business students should not be required to study ethics. Part of this is due to the belief that ethics are a reflection of character and that people are either ethical or unethical. However, because ethics are determined by personal perspective and point of view, it may be more accurate to say that some people are simply perceived as more ethical because their personal ethics align more closely with the ethics of the majority of society.

Ethics and morality are about more than knowing the difference between right and wrong; they also deal with choosing right over wrong. Just because people may know what is right does not mean that they truly understand the implications of choosing an ethically wrong course of action. Furthermore, ethical dilemmas are rarely black or white. They generally involve competing interests and may involve conflicts between core elements of the people involved. Someone called upon to resolve an ethical conflict may have to consider cultural, religious, and gender interests simultaneously. Even more daunting is the fact that some of today's major ethical dilemmas pit current human interests against environmental damage and the impact on future generations.

These complexities can also make it understandable when a business person makes an unethical decision. For example, the small business owner made a conscious decision to install low-flow toilets because of his concern about water usage and his belief that the change was ethically appropriate. However, when those toilets proved very inconvenient, he had them replaced with a less water-efficient model. From an environmental standpoint, that decision would appear unethical. However, from the standpoint of his employees — who were otherwise placed in the position of regularly cleaning up overflows — the change probably seemed entirely reasonable. It is exactly these types of conflicts and complications that can make it so difficult to determine the ethical choice.

The small business owner personally experienced some of the main issues that complicate today's ethical decisions. Gender and cultural diversity are two factors that have made ethical decision making more difficult for today's business people. The simple introduction of women and people of other cultures into the workplace has changed the very definition of workplace ethics. Behavior accepted as the norm less than a generation ago has become ethically taboo. These changes have caused both business people and consumers to become increasingly concerned about ethics. Business people are aware of the tremendous ramifications of ethical scandals; they can not only destroy an individual business, but actually shake consumer confidence in an entire industry. Small business people may be even more vulnerable to those concerns because they often feel a greater responsibility for local economies and communities than their counterparts in big business.

However, one big difference between small business owners and large-scale business people is that small business owners appear to have a greater personal stake in the ethical dilemmas they face. Because many small businesses are family-owned, more of their ethical dilemmas have the potential to cause very real reverberations in their personal lives. To determine if this connection is broadly representative, it would be interesting to investigate whether personal owners experience a greater number of personal ethical dilemmas in a business scenario than big business managers encounter.

It would also be interesting to investigate how these hybrid business/personal ethical dilemmas impact other business decisions. A decision viewed by employees as both unethical and personally motivated would likely lead to increased employee dissatisfaction, which might increase the risk of further employee problems. Similarly, an unethical and personally motivated business decision can have a negative impact on consumer confidence. Since these relationships are not direct, it may be difficult to measure the impact that a personal decision has on future ethical problems. Of course, big businesses can also face the imposition of personal needs into ethical decision making; for example, almost all perpetrators of sexual harassment engage in behavior that places their personal desires above the ethical needs of their organizations.

If research were to confirm that small business owners experience more personal dilemmas than large-business managers, it would seem appropriate to determine what type of ethical training would help someone make an ethical decision in a situation where they feel personally invested in the outcome. While large-business managers might be instructed to look more closely at the individuals involved, small business owners may need to learn to step back and look at the big picture in order to make more ethical decisions. Further investigation is necessary to determine the exact nature of the education needed to help small business people make better choices when confronted with personal ethical dilemmas. However, all of the research and the case study examined here reveal that resorting to personal ethics alone is not sufficient to help business people resolve ethical dilemmas. Therefore, ethical education should be made available to all business people, regardless of the scale of their leadership responsibilities — helping them to consider as many relevant factors as possible when facing the ethical dilemmas that are an inevitable part of business life.