UNIT - II

Business Ethics
Meaning and Definition
Ethics has become a buzzword in the corporate world. The reason for this is the globalization and the
explosion in the communication in the organization. As a result, businesses are focusing more on the
ethics part. The rules or the principles of the organization should be maintained. Business ethics are
given much importance nowadays.
Ethics means the set of rules or principles that the organization should follow. While in business
ethics refers to a code of conduct that businesses are expected to follow while doing business.

Through ethics, a standard is set for the organization to regulate their behavior. This helps them in
distinguishing between the wrong and the right part of the businesses.

Code of conduct is another term that is used extensively in businesses nowadays. It is a set of rules
that are considered as binding by the people working in the organization.
Business ethics compromises of all these values and principles and helps in guiding the behavior in
the organizations. Businesses should have a balance between the needs of the stakeholders and their
desire to make profits.

While maintaining these balances, many times businesses require to do tradeoffs. To combat such
scenarios, rules and principles are formed in the organization.

This ensures that businesses gain money without affecting the individuals or society as a whole. The
ethics involved in the businesses reflect the philosophy of that organization.

One of these policies determines the fundamentals of that organization. As a result, businesses often
have ethical principles. There is a list of ethical principles involved in the businesses.

Ethical Principles in Businesses from an Indian Perspective

Essentially, any businesses that run in India comprises of these ethical principles.

Integrity

Whenever there is great pressure to do right instead of maximizing profits, this principle is tested.
The executives need to demonstrate courage and personal integrity, by doing what-what think is
right.
These are the principles, which are upright, honorable. They need to fight for their beliefs. For these
principles, they will not back down and be hypocritical or experience.

Loyalty

No ethical behavior can be promoted without trust. And for trust, loyalty needs to be demonstrated.
The executives need to be worthy of this trust while remaining loyal to the institutions and the
person. There should be friendship in the time of adversity and support and devotion for the duty.

They should not use or disclose personal information. This leads to confidence in the organization.
They should safeguard the ability of a professional to make an independent decision by avoiding
any kind of influence or the conflicts of interest.

So, they should remain loyal to their company and their colleagues. When they accept the other
employees, they need to provide a reasonable time to the firm and respect the proprietary
information attach to the previous firm. Thus, they should refuse to take part in any activity that
might take the undue advantage of the firm.

Honesty

The ethical executives are honest while dealing with their regular work. They also need to be
truthful and do not deliberately deceive or mislead the information to others. There should be an
avoidance of the partial truths, overstatements, misrepresentations, etc. Thus, they should not have
selective omission by any means possible.

Respect and Concern

These are two necessarily different forms of behavior in the organization. But they go in tandem
that is why they have been put under one principle. When the executive is ethical he is
compassionate, kind, and caring.

There is one golden rule which states that help those who are in need. Further, seek their
accomplishments in such a manner that the business objectives of the firm are achieved.

The executives also need to show respect towards the employee’s dignity, privacy, autonomy, and
rights. He needs to maintain the interests of all those whose decisions are at stake. They need to be
courteous and treat the person equally and rightly.

Fairness
The executives need not be just fair in all the dealings, but they also should not exercise the wrong
use of their power. They should not try to use over each or other indecent manners to gain any sort
of advantage. Also, they should not take undue advantage of anything or other people’s mistakes.

Fair people are inclined more towards justice and ensure that the people are equally treated. They
should be tolerant, open-minded, willing to admit their own mistakes. The executives should also be
able to change their beliefs and positions based on the situation.

Leadership

Any executive, if ethical, should be a leader to others. They should be able to handle the
responsibilities. They should be aware of the opportunities due to their position. The executives
need to be a proper role model for others.

Essay on the Importance of Ethics:

The business organisations which act legally and ethically not only save lot of money but also

gain public support and reputation in whatever new ventures the organisation takes. The
importance of ethics in business is many folds.

They are:
(1) Part of Society:
Business is part of society. Whatever ethical principle apply in society apply to business.

Example tax evasion is considered unethical in society. If a company deliberately evades tax
payments the company is treated unethical.

(2) Expectations of Public:

All stakeholders have an eye on the culture and behaviour of a business organisation due to

dominance of economics in the society. The public expects a high level of ethical behaviour from
the business organisations.
‘Doing the right thing’, ‘Do no harm’ and ‘Good to all’ are the expectations of general public

from business. Example: a company manufacturing a tobacco based products say ‘pan masalas’

and making advertisements appealing to college students in not respected. Whereas a company
that recalls unsafe product is respected.

(3) Trust of Employees:

High level of morale and productivity can be easily obtained in companies that treat their all

employees with equality, encourage good team and work culture, and with ethical practices. The

employees in the company as well as those connected feel good and develop a mutual trust.
Employees get attraction to ethically and socially responsible companies.

(4) Image:
An ethical organisation command trust and respect of all its stakeholders. The organisation
builds image for itself. Ethical good image is important because all stakeholders stand to gain.

(5) Costs:
Deterioration of relationships, damage to reputation and reduction of employee productivity,

loyalty that come out of unethical practices cost companies. An uncaring employer will find it
difficult to employ good professions for his business.

(6) Pride of Best Companies:

The ethically managed companies command respect from public as well as government

organisations. ‘Fortune’ magazine publishes yearly best companies. Similarly Indian will

managed companies are published by ‘Business India’. These companies have a brand value and

accepted as leaders in the industry. The company policies with regards to profit sharing bonuses,
social responsibility, balance of work and social life are quoted.

(7) Overall Benefit:

Ethical behaviour of an industry or business gives a win-win situation to all the stakeholders and

general public. The governments also encourage such companies. The integrity and ethical
practices become all-pervading in the organisation and increase organisational effectiveness.

Nature of Ethics
Ethics deals with human beings only. It is only human beings who have the freedom of choices.

Ethics is a normative science. Normative science is judging the situations, analyse the facts,

weigh the consequences in terms of an idea and take judgment. The judgments are taken many
times based on what the end results should be. Ethics deals with human conduct.

The human conducts are sometimes voluntarily, sometimes forced depending on the situations

and the end expectation of results. In other words ethics deals with moral judgment regarding
voluntary human conduct. Fig. 8.2 below gives the various aspects of decision making in ethics.

Any decision in situational ethics takes it into account, the goals, the motives, the methods

and the consequences and their sub-factors as detailed in the figure:

Business ethics is application of ethics in business. Business itself is considered ethics as profit

can be made by ethical means. Discussions are held regarding the profit maximisation and social
responsibilities as opposite ends. By a proper management decisions these two ends can be made
to give better results by following ethical business practices.

The characteristics or features of business ethics are:-

 Code of conduct : Business ethics is a code of conduct. It tells what to do and what not to do
for the welfare of the society. All businessmen must follow this code of conduct.
 Based on moral and social values : Business ethics is based on moral and social values. It
contains moral and social principles (rules) for doing business. This includes self-control,
consumer protection and welfare, service to society, fair treatment to social groups, not to
exploit others, etc.
 Gives protection to social groups : Business ethics give protection to different social groups
such as consumers, employees, small businessmen, government, shareholders, creditors, etc.
 Provides basic framework : Business ethics provide a basic framework for doing business. It
gives the social cultural, economic, legal and other limits of business. Business must be
conducted within these limits.
 Voluntary : Business ethics must be voluntary. The businessmen must accept business ethics
on their own. Business ethics must be like self-discipline. It must not be enforced by law.
 Requires education and guidance : Businessmen must be given proper education and
guidance before introducing business ethics. The businessmen must be motivated to use
business ethics. They must be informed about the advantages of using business ethics. Trade
Associations and Chambers of Commerce must also play an active role in this matter.
 Relative Term : Business ethics is a relative term. That is, it changes from one business to
another. It also changes from one country to another. What is considered as good in one
country may be taboo in another country.
 New concept : Business ethics is a newer concept. It is strictly followed only in developed
countries. It is not followed properly in poor and developing countries.

Needs of Ethics
1. Stop business malpractices: Some unscrupulous businessmen do business malpractices
by indulging in unfair trade practices like black-marketing, artificial high pricing,
adulteration, cheating in weights and measures, selling of counterfeit (duplicate) and
harmful products, illegal hoarding, etc. These business malpractices are harmful to
consumers and the safety of society. Business ethics help to stop these malpractices and
safeguard society. It creates a healthy business environment for everyone.
2. Improve customers' confidence: Business ethics are needed to improve the customers'
confidence about the quality, utility, reliability, quantity, price, etc. of the products. The
customers have more trust and confidence in the businessmen who follow ethical
business rules or principles. They feel safe that such businessmen will not cheat them.
Ethics binds businessmen to maintain trust by offering quality products and services to
customers.
3. Survival of business: Business ethics are mandatory or compulsory for the survival of
any business. The businessmen who do not follow it will only have short-term success,
but they will fail in the long run. This is because they can cheat a consumer only once.
After realizing being cheated, the consumer will not buy goods or services from that
businessman. He will also tell others not to buy from that businessman. So, this will
defame his goodwill or image and provoke negative publicity in the market. This will
result in the failure and even closure of the business. Therefore, if the businessmen do not
follow ethical rules, he will fail in the market. So, it is always better to follow appropriate
code of conduct to survive in the competitive market. Hence, ethics is essential for the
survival of business.
4. Safeguarding consumers' rights: The consumer has many rights such as the right to
health and safety, right to be informed, right to choose, right to be heard, right to redress,
right to be satisfied, etc. But many businessmen do not respect and protect these rights of
their consumers. Business ethics are must to safeguard these basic rights of the
consumers. A business who safeguards its consumers' rights, in fact, safeguards its own
existence.
5. Protecting employees and shareholders: Business ethics are required to protect the
interest of employees, shareholders, competitors, dealers, suppliers, customers,
government, etc. It protects them from exploiting each other through unfair trade
practices like cheatings or frauds. Ethics compels each entity participating in the business
activity to properly execute its role by adhering the established code of conduct. Since
everyone is disciplined and function appropriately, business grows well in the long run.
6. Develops good relations: Business ethics are important to develop good and
friendly relations between business and society. This will result in a regular supply of
good quality goods and services at low prices to the society. It will also result in good
profits for the businesses thereby resulting in the growth of the economy. If the economy
keeps growing, it ultimately improves the standard of living of the society.
7. Creates good image: Business ethics create a good image for the business and
businessmen. If the businessmen follow all ethical rules, then they will be fully accepted
and not criticized by society. The society will always support those businessmen who
follow the necessary code of conduct and avoids engaging in unscrupulous activities. If
the business succeeds in creating and maintaining its goodwill in the society, it flourishes
well even in the most competitive markets.
8. Smooth functioning: If the business follows all the business ethics, then the employees,
shareholders, consumers, dealers, and suppliers will all be happy. So, they will give full
cooperation to the business. This will result in the smooth functioning of business
activities. So, the business will grow, expand and diversify easily and quickly. It will
have more sales and eventually more profits. If even one entity participating in the
business activities is unhappy and not fully satisfied then also the business will not
function smoothly. The satisfaction of all involved parties is necessary for the smooth
functioning of a business. Business ethics maintain this safe level of satisfaction and
protects the business from being dysfunctional.
9. Consumer movement: Business ethics are gaining importance because of the growth of
consumer movements all over the world. Today, consumers are well aware of their rights.
Now, they are more united and organized, and hence cannot be easily cheated. They take
actions against those businessmen who indulge in bad business practices. They boycott
poor quality, unreliable, harmful, high-priced, and counterfeit (duplicate) goods. They
even file lawsuits against bad businesses and demand huge compensation and stringent
legal action. If a business is found guilty of indulging in illegal activities, it invites huge
penalties, revoking of a license, lowers consumers' trust, downgrades market reputation,
and even hurts profits. Therefore, the only way to survive in business is, to be honest,
fair, and loyal to the consumers.
10. Consumer satisfaction: Today, the consumer is the king of the market. He can make a
business or break a business. His every wish (expectations) should be taken as a
command and must be fulfilled as early as possible. Any business simply cannot survive
without its consumers. Therefore, the main aim or objective of a business must be to
achieve the highest level of consumer satisfaction. If the consumer is not satisfied, then
there will be no sales and eventually no profits too. Consumer satisfaction must be taken
seriously. Business must be always ready to adapt itself as per the changing demands of
its consumers. The consumer will be satisfied only if the business follows all the business
ethics. Ethics helps to achieve consumer satisfaction to a great extent and hence are
highly needed.
11. Importance of labour: Labour, i.e. employees, workers, or active staff play a very
crucial role in the success of a business. They are the main wheels on which business
actually runs. A business must use business ethics while dealing with its employees. The
business must give them timely monetary compensation for their hard work by releasing
appropriate wages or salaries based on working hours. The business must also provide
good working conditions for its employees. The employer must welcome their
suggestions, reasonable demands, and complaints. Good relations between an employer
and employees is essential for the smooth functioning of a business. The employees must
also be given proper welfare facilities, holiday leaves, bonuses, etc. They must be treated
with dignity and respect.
12. Healthy competition: Today, competition is a part and parcel of our lives and business
world is no exception to this. Competition is essential because it inculcates creativity
and innovation, competitive pricing, affordable services, corporate responsibility,
consumer satisfaction, etc in the realm of business. This competition must be healthy and
should not be aggressive, fierce or cut-throat. A business must treat its competitors as
fellows and not as rival enemies. A business must never use unethical means like
provocative adverts to malign the reputation of its competitors. If a competitor is
successful his behavior, management, marketing skills, business tactics, customer
handling, etc must be carefully studied. Any suitable lackings or shortcomings identified
must be later assimilated in the business. A business must hire brilliant and energetic
minds to win this healthy competition. The business must use business ethics while
dealing with its competitors. It must give equal opportunities to small-scale
businesses. Monopoly must be avoided because it harms consumers

Ethical Practices in Management

Management Ethics’ is related to social responsiveness of a firm. It is
“the discipline dealing with what is good and bad, or right and wrong,
or with moral duty and obligation. It is a standard of behaviour that
guides individual managers in their works”.

“It is the set of moral principles that governs the actions of an

individual or a group.”

Business ethics is application of ethical principles to business

relationships and activities. When managers assume social
responsibility, it is believed they will do it ethically, that is, they know
what is right and wrong.

Managerial ethics, are standards of conduct or moral judgement used by managers of

organizations in caring out their business. Archi B Carroll, notes that three major levels of
moral or ethical, judgement characterize managers: immoral management, amoral
management, and moral management.

Immoral and Moral management

Immoral Management
Immoral management not only lacks ethical principles but also is actively opposed to ethical
behaviour. This perspective is characterized by principal or exclusive concern for company gains,
emphasis on profits and company success at virtually any price, lack of concern about the desires of
others to be treated fairly, views of laws as obstacles to be overcome, and a willingness to "cut
corners".

Moral Management
In contrast to immoral management, moral management strives to follow ethical principles and
percepts. While moral managers also desire to succeed, they seek to do so only within the parameters
of ethical standards and the ideals of fairness, justice, and due process. As a result, moral managers
pursue business objectives that involve simultaneously making a profit and engaging in legal and
ethical behaviours.

Amoral Management Definition

Amoral Management
The amoral management approach is neither immoral nor moral but, rather, ignores or is oblivious to
ethical considerations. There are two types of amoral management:

Intentional: A moral managers do not include ethical concerns in their decision -making, or
behaviour, because they basically think that general ethical standards are more appropriate to other
areas of life than to business.
Unintentional: Amoral managers also do not think about ethical issues in their business dealings, but
the reason is different. These managers are basically inattentive or incentive to the moral implications
of their decision-making, actions, and behaviour. Overall amoral managers pursue profitability as a
goal and may be generally well meaning, but intentionally or unintentionally they pay little attention
to the impacts of their behaviours on others.
Characteristics of Managerial Ethics
UNIT – IV

The Ethical Value System

Values are beliefs that affect an individual’s judgmental ideas about what is good or bad. Ethics
is the way the values are acted out. Ethical behavior is acting in ways consistent with one’s
personal values and the commonly held values of the organization and society. Ethics is a set of
moral principles or values which is concerned with the righteousness or wrongness of human
behavior and which guides your conduct in relation to others. Ethics involves learning what is
right or wrong, and then doing the right thing.
Some examples of values for a company include:
 A commitment to sustainability and to acting in an environmentally friendly way.
Companies like Patagonia and Ben & Jerry's have environmental sustainability as a
core value.
 A commitment to innovation and excellence. Apple Computer is perhaps best known for
having a commitment to innovation as a core value. This is embodied by their "Think
Different" motto.
 A commitment to doing good for the whole. Google, for example, believes in making a
great search engine and building a great company without being evil.
 A commitment to helping those less fortunate. TOMS shoe company gives away a pair
of shoes to a needy person for every pair it sells in an effort to alleviate poverty and
make life better for others.
 A commitment to building strong communities. Shell oil company donates millions of
dollars to the University of Texas to improve student education and to match employee
charitable donations.

Universalism

Universalism is the philosophical and theological concept that some ideas have universal
application or applicability. A belief in one fundamental truth is another important tenet
in Universalism.
Universalism is important because it is a view about the shared characteristics of all humans.
... Universalism is also a normative perspective – a view that there are principles of justice that
require that each person, whoever and wherever they are, is treated fairly and equally.