The contemporary global business environment is one which necessitates the making of critical decisions by employees at all levels of a firm’s hierarchy. These decisions often involve dilemma’s which are of a moral or ethical nature and such decision making is required in almost all business functions and activities that a firm chooses to undertake. The crux of any moral dilemma that an employee may encounter in the course of daily business activities, usually involves selecting an option which will be beneficial to the organization (or to the individual) or choosing an option which will benefit society. The selection of a particular option is typically mutually exclusive, whereby, what is good for the firm will not benefit society and what is good for society will not benefit the firm. Therefore, according to Shaw (2011, p. 8), business ethics is a method of analysis which is applied to real life business situations in an attempt to ascertain whether or not decisions and actions taken can be considered to be moral or ethical depending on various perspectives. In addition to the retrospective usage of this method of analysis, ethical and moral guidelines may be used by managers and employees to assist them in making future business decisions.
In order, to develop a comprehensive understanding of business ethics, it is important to distinguish between legality and morality. Shaw (2011, p. 12) states that actions which are legal are not necessarily ethical or moral and that illegal actions may not necessarily be immoral or unethical. Examples provided by Shaw include resistance to Nazism which may have been illegal according to the laws of the Third Reich but would be wholly moral according to most ethical perspectives. When applied to business operations this distinction between legality and morality assists strategists and other employees in assessing various policies and actions of the organization using distinct parameters. Therefore, financial policies such as tax avoidance which are considered to be legal in many countries such as the United Kingdom (Prebble & Prebble, 2010), would also be evaluated for their concordance with ethical principles.
According to Jennings (2012, p. 6) the usage of ethical principles and perspectives in order to make business decisions has become increasingly important in an era which has been punctuated with several incidents of fraudulent activities by corporations which were held in high esteem. The examples are numerous and include organizations such as Enron, Arthur Andersen and Goldman & Sachs. The unethical activities of these and other firms has resulted in a serious denting of consumer and stakeholder confidence, which necessitated an emphasis on corporate social responsibility and ethical business practices on the part of all firms.