Ethics in Business: Why we study Ethics.

Nobel-prize winning economist Milton Friedman (1912-2006) famously argued that a corporate manager's primary responsibility is to the owners of the organization, that is, to shareholders. Unless the owners explicitly provide otherwise, managers should make the company as profitable as possible while also complying with the law.

Others have argued that corporations should instead consider all company stakeholders, not just shareholders. Stakeholders include employees, customers, and the communities and countries in which a company operates. This choice can create an obligation to such broad categories as "society" or "the environment" After 20 first-graders and 6 educators were shot to death at the Sandy Hook Elementary School in Newtown, Connecticut, General Electric Co. (GE) stopped lending funds to shops that sell guns. Many of GE's employees lived in the area, and some had children in Sandy Hook.GE was putting its employees ahead of its investors.

Managers face many choices in which the most profitable option is not the most ethical choice. When profitability increases and, with it, a company's stock price, managers benefit because their compensation is often tied to corporate results, either explicitly or through ownership of stock and options. That connection creates an incentive to do the wrong thing.

Conversely, making the ethical choice will sometimes lead to a loss of profits or even one's job.

Reference

Beatty, J. F., Samuelson, S. S., & Sanchez Abril, P. S. (2019).Introduction to business law(6th ed.). Mason, OH: Cengage Learning. ISBN: 9781337404341. URL:https://www.gcumedia.com/digital-resources/cengage/2019/introduction-to-business-law_6e.php