Business Ethics

Dr. Bhumija
Chouhan

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Business ethics may be defined as a form of applied

ethics that examines ethical principles and moral or
ethical problems that arise in a business environment.
The origin of word ethics can be traced to the Greek
word ethikos which refers to human character and
conduct.
According to Websters collegiate thesaurus, the word
ethics can be defined as:
The code of conduct governing an individual or a group.
The discipline dealing with good and bad and with moral
duty and obligation.

3. The complex of ideals, beliefs or standards that

characterizes a group, community or people.
4.
A group of moral principles or set of values.
Ethics are concerned with actions that are proper or
improper, conduct that is right or wrong, decisions that
are fair or unfair. Morality varies from individual to
individual because the values and cultural traits of
individual may differ.

Business Ethics is a specialized study of moral right and

wrong. It concentrates on moral standards as they apply
particularly to business policies, institutions, and behavior.
It can be said that business ethics is a multi-dimensional
field that addresses numerous issues, problems and
dilemmas. It may mean many things to many people:
It is an application of ethics to the complete community
It is the identification of important business and social
issues.
It is a way to determine responsibility in business dealings.

 Ethical Intensity Levels and Action Parameters

Global Level: concern for environment, human duties and

technology transfers integrity.
Societal Level: concern for issues like cultural respect,
intellectual rights, legal, political and economic propriety.
Corporate Level: concern for issues like corporate
governance, market integrity and social responsibility.
Individual Level: concern for issues related to bribery or
corruption, information ethics, strive for spiritual
development and violation of personal norms.

 Some ethical standards should be followed by top

executives:

The golden rule: Act in a way you would expect others to

act towards you.
The utilitarian principle: Act in a way that results in the
greatest good for the greatest number.
Kants categorical imperative: Act in such a way that the
action you take could be a universal law or rule of
behaviour under the circumstances.

The professional ethics: Take actions that a disinterested

panel of professional colleagues would view as proper.
The TV test: Ask: would I feel comfortable explaining to a
national TV audience why I took this action

 Importance of Business Ethics:

Ethical motivation: It protects or improves reputation of

the organization by creating an efficient and productive
work environment.
Balance the needs and wishes of stakeholders
Global challenges: Business must become aware of the
ethical diversity of this world because of increasing
globalization of the economy. It must learn the values of
other cultures, how to apply them to its decisions, and how
to combine them with its own values.

Ethical pay-off: They serve to protect the organization

from significant risks, and to some degree help grow the
business.
Employee Retention
Prevention and Reduction of Criminal Penalties
Preventing civil lawsuits
Market Leadership

 Moral Standards:
Moral

standards include the norms we have about

the kinds of actions we believe are morally right and
wrong as well as the values we place on the kinds
of objects we believe are morally good and morally
bad.
Moral norms can usually be expressed as general
rules, i.e. Always tell the truth. Moral values can
usually be expressed as statements describing
objects or features of objects, i.e. Honesty is
good.

During childhood moral standards are absorbed from

family, friends and various societal institutions. Later in life
experiences, learning and intellectual development help a
person in forming these standards.

Why business should act ethically?

To protect its own interest

To protect the interests of the business community to
develop trust of public
To meet stakeholder expectations
To prevent harm to the general public
To protect themselves from abuse of unethical employees
and competitors.
To protect their own reputation
To protect their own employees
To create an environment in which workers can act in ways
consistent with their values

 Code of Conduct and Ethics for Managers:

Integrity
Impartiality
Responsiveness to the public Interest
Accountability
Honesty
Transparency

 Principles of Personal Ethics:

Concern and respect for the autonomy of others

Honesty and the willingness to comply with the law
Fairness and the ability not to take undue advantage of
others
Benevolence and preventing harm to any creature

 Principles of Professional Ethics:

Impartiality: Objectivity
Openness: full disclosure
Confidentiality: Trust
Due Diligence/duty of care
Fidelity to professional responsibilities
Avoiding potential or apparent conflict of interest

 Organisational Tools that help to cultivate ethics

are:

A well developed MIS at the corporate level , the industry

level ad at the functional area level.
Fair payment system and rational wage system
A three tier grievance procedure for quick redress of
grievances.
Adopting a problem solving approach
Regular management employee communication
meetings
Developing a union-management forum

Open door policy of top management

Quality circles
Consultative mechanism and open organisational culture
Workers participation in decision making
Well delegated discretionary authority

Forces shaping ethical decision

making

Personal Ethics

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Beliefs and Values

Moral Development
Ethical Framework

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Organisational Culture

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Rituals
Ceremonies
Stories
Languages
Slogans
Symbols
History

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Organisational Systems

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Structure
Policies
Rules
Code of Ethics
Reward System
Selection

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 Corporate Social Responsibility

Social Responsibility recognizes that organisations have

significant influence on the social system, which must be
considered and balanced in all organisational actions.
Corporate Social Responsibility is defined as the ethical
behavior of a company towards the society, and usually
manifests itself in the form of programs initiated by
business organisation in various sectors like education and
health etc.
Corporate social respnsibility is basically a new business
strategy to reduce investment risks and maximise profit by
taking all the key shareholders into confidence.

Corporate Social Responsibility is towards:

1.

Society
Government
Community
Owners/Shareholders
Customers/Buyers
Suppliers
Employees
Special Interest Groups

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Levels of Corporate Social Responsibility

Social responsibility can be exercised at three levels:
Level 1: Social Obligation- The organisation fulfill
economic and legal responsibilities laid out in government
regulations and are socially responsible for eg. Tobacco
companies carry the statutory warning on cigraettepacks
etc.
Level 2:Social Responsiveness- organisations respond to
issues raised by aware citizens, the media and other
interest groups. For eg: Johnson and Johnson chose to
loose money to be socially responsive, but in the long run
they gained the trust of their customers.

Level 3:Social Responsibility- Organisations go beyond the

mandatory obligations and exhibit responsible behavior
proactively.The teach India intiative of The times of India is
one such pro-actuive, socially responsible behavior.
The best level of social responsibility is level 3 where
organisations naturally take decisions by keeping the larger
interest of all stakeholders and society. In order to increase
voluntary and proactive socially responsible behavior the
ethical orientation of people working in the organisation
must be encouraged.

Importance of Corporate Social Responsibility at

internal as well as external level:
Externally it helps organisation in following ways:
(a) To create positive image among amongst the people for
its company.
(b) Earn a special respect for the top management and the
subordinates
Create short term employment opportunity by taking
various projects like campaigns against smoking, literacy
programs etc.

(c) By having good reputation, it is easy for the

management to recruit employers and move important is to
retain them.
(d) By controlling pollution and minimizing wastes by
recycling used products.
Internally it is helpful to an organisation through various
ways:
(a) It creates a sense of loyality and trust amongst the
employees in the employees in the organisational ethics.
(b) It serves as a diversion from routine workplace practice
and gives a feeling of a satisfaction to the employees

(c) It improves operational efficiency of the company by

increasing the efficiency of employers resulting into
increase in quality of product and productivity.
(d) Employers feel motivated and are more productive.
(e) Corporate social responsibility helps to ensure that the
organisation employees wit regulatory requirement.