CORPORATE GOVERNANCE AND BUSINESS ETHICS

UNIT-I

Meaning of ethics

Raymond Baumhort interviewed more than 100 business people to know

“what does ethical mean?” 50 % defined ethical as what my feelings tell me is
right. 25% defined it in religious terms as “what is in according with my
religious beliefs” and 18% of them defined it as “what conforms to the golden
rule”.

1. According to the dictionary the term ethics means ‘the principles of

conduct governing on individual or a group”. Another important
meaning of ethics is “it is the study of morality’.

Nature of business ethics

Although ethics deals with morality, it is not the same as morality. Ethics is a
kind of investigation and include both the activity of investigating as well as the
results of that investigation.

In this process of investigation and being ethical, a person starts answering and
analysing the following questions.

 What do these ethical standards imply for the situation in which I find
myself?
 Do these standards really make sense?
 What are the reasons which are for & against these standards?
 Why should I continue to believe in them?
 What can be said in favour and what can be said against these
standards?
 Are they really reasonable for me to hold?
 Are the implications in this particular situation are reasonable?

Once the individuals’ conscious is convinced with answers to the above

investigative questions, then his/her actions or words will be right for him/her,
and if many people accept it, it becomes ethical.
 Business ethics is a specialized study of moral right or wrong. It
concentrates on moral standards as they apply to business policies, institutions
and behaviour.

Business ethics is a study of moral standards and how these apply to the
systems and organisations through which modern societies produce and
distribute goods & services, and to the people who work within the
organisation.

Thus business ethics is a form of applied ethics.

According to some “Business Gurus”, business ethics is a contradictory term

having inherent conflict between ethics and self-interest.

Example: As a customer are you more likely to buy from a business that you
know is honest &trust worthy than from a business that you know is dishonest
and crooked.

Similarly as an employee, you are more likely to be loyal & serve the
company whose actions towards you are faire & respectful. So, it is quite clear
that, when companies are competing against each other for customers & for
the best human resources, the company with a reputation of ethical behaviour
has an advantage over the company of being unethical.

Thus ethical behaviour & business is the best long –term business strategy
for a company. Although ethics may be the best policy, the ethical course of
action is not always clear. Gaining better understanding of ethics will help the
manager deal with ethical uncertainties in a more adequate & informal
manner.