Business Ethics

And

Corporate Governance

What is Ethics ?
Ethics is a branch of philosophy. Its objective is to study both moral and immoral behavior in order to make well-founded judgments and to arrive at adequate recommendations. Ethics has two-fold objectives: Evaluate human practices (implying analysis and evaluation) by calling on Moral Standards, give Prescriptive advice on how to act morally in a specific kind of situation. Ethics is defined by the Websters dictionary as the discipline dealing with what is good and bad and with moral duty and obligation.

Discipline and Object of Ethics

We distinguish the study of discipline of ethics or the ethical reflections, from its object or field of study. This distinction shows that ethics has its own approach towards morality. It is not swallowed by the subject matter. In practice, the distinction between ethical reflections and conventional moral behavior is often blurred, as the best examples of applied ethical thought are found amongst practitioners. In particular, those who live in situations where different cultural conventions make different conflicting claims , develop ethical reflections. If we are immersed in one moral code, we often take its moral standards for granted.

Rising Expectations
The organizations were not only expected to follow certain ethical standards but also demonstrate a level of social responsibilities and accountability to all its stakeholders as well as the society. Integration of ethics into business depends on its values and leadership, Important values for the top management in the context of conduct of business include Integrity, Responsibility , and Corporate Reputation.

The Concept of Business Ethics

The concept of business Ethics evolved in 1960s when social awareness movements raised expectations from business to use their financial strength to solve social problems such as crime, environmental protection, equal rights, poverty, public health , and providing education. Some businesses were making profits by using resources provided by society, the expectations were that they should work to improve society.

Introduction to Business Ethics

Business Ethics refers to the application of ethical judgments to business activities. Business Ethics concerns itself with what is wrong or right in the workplace. It is said to be normative study of moral standards as they apply to business policies, institutions, and human behavior. It is also an ethical analysis of business practices. Business ethics explains that business can generate profits being ethical. Any business that wants to survive and grow in the long run must strike a balance between its social obligations and economic objectives. It studies specific moral standards that apply to the issue of morality in business. Hence it studies both profit and non-profit corporations.

An Ideal Ethical Decision

An ideal ethical decision comprises of virtues like Right morally correct, Equitable, just & equal; Good highest good for all concerned, proper appropriate and acceptable; Fair honesty, Just -action. Important values for top management in the context of conduct of business include Integrity, Responsibility, Corporate Reputation. Clear vision and picture of integrity throughout the organization are characteristics of a high integrity organization.

Corporate Organizations
A corporation has been described by American Heritage Dictionary as a body of persons granted a charter legally recognizing them as a separate entity having its own rights, privileges, and liabilities distinct from those of its members. The need for greater number of investors to support larger firms, economy of scale and mass production, acceptance of private ownership of private property as a social norm have led to the evolution of Corporations. Characteristics of corporation are : limited liability, transferability of stake in stocks, legal personality and centralized management .

Corporate Governance
Ethical behavior and business should be integrated in a new area called business ethics. Business has the right to make profits but it should discharge its social obligations. Fundamental objective of corporate governance is the enhancement of long term share holder value while, at the same time, protecting the interests of other stake holders.(Kumarmangalam Committee on Corporate
Governance- 1999)

Corporate values are, therefore, classified as Espoused values and Values in Practice.