Factors affecting Business Ethics

By Benjamin Graham Group

What is Business Ethics?

Business ethics is the study of appropriate business policies and practices regarding potentially
controversial subjects including corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics,
but at other times business ethics provide a basic guideline that businesses can choose to follow to
gain public approval.

Necessity

In the past several scams have taken place like Ketan Parekh Scam, Satyam Scam. Scams like Nirav
Modi Scam, Vijaya Malaya Scam, PMC Scam. These scams clearly describe the shocking episodes of
corporate misconduct. These scandals did irreparable damages to customers, creditors, employees,
shareholders without ethical standards no matter how small or big a business may be, it simply can’t
withstand generosity of time, market situation and its customers.

Factors affecting Ethics.

Factors affecting ethics are-

1. Economic Factors- Economic factors affecting business include all important trends in the
economy that can help or hinder the company in achieving its objectives. Economic factors that
commonly affect businesses include consumer behaviour, employment factors, interest rates
and banking and inflation and overall economic indicators.
a. Consumer Behavior
 belief in overall good state of economy,
 willingness to spend money and buy new products,
 level of spending
 purchasing power of potential consumers (amount of money or savings available),
 levels of market demand and supply
 bargaining power of customers,
b. Economic indicators regarding employment
 number of jobs created in the market,
 competition in job market (necessity to pay higher wages),
 high priced jobs/ low priced jobs, overall labor costs,
 number of highly skilled specialists,
 number of employees seeking jobs,
 number of people near the retirement age,
 level of income in population (income per capita),
c. 3. Economic factors regarding money, interest rate, banking
 interest rates (determines costs of financing of business and investment activity),
 overall level of debt,
 level of government debt,
 inflation rate, and inflation perspectives,
 monetary policy, supply of money,
 rating agency evaluation of country,
 banking facilities and level of services (e-banking, Internet banking, etc.)
  financial market condition, asset prices, freedom in trading

2. Cultural Factors

 Culture describes a collective way of life, or way of doing things. It is the sum of
attitudes, values, goals, and practices shared by individuals in a group, organization,
or society.
 According to cultural relativists this means that there is no singular truth on which
to base ethical or moral behavior for all time and geographic space, as our
interpretations of truths are influenced by our own culture.
 This approach is in contrast to universalism, which holds the position that moral
values are the same for everyone.

3. Political Factors

Political factors are activities related to governmental policies that can have an effect on
something. Most businesses will keep a watchful eye on political factors which might have an
impact on the company’s bottom line.

 Laws and Regulations

Various laws and regulations made by governments set minimal a standard of behaviour while
ethics set higher norms. Autonomous bodies like SEBI and the government strengthen this demand
through codes of conduct and laws.

 Political Leader’s Value and Political Party

A political leader’s value can also affect the ethical behaviour of firms and individuals. For example,
under the leadership of our current Prime Minister we have a renewed focus on cleanliness and
sanitation.

 Political Pressures

Political pressure means any attempt directly or indirectly to influence a personnel or other input-
related decision of a chief officer vested in a chief officer under this or any other law, or to change
advice tendered by a chief officer to the Governor, the Cabinet, a Minister or an Official Member
from what it would have been had the influence not been applied

4. Technological Factors

Technological factors in business ethics are variables which relate to the existence, availability, and
development of technology. Technology hugely dictates the way many things are done in business or
otherwise.

Technological factors affecting business ethics are: -

 Increased reach: using information technology a marketer can reach an enormous number
of people with just the click of a button. Networked technologies give millions of people
instant access to each other. Example: Flip kart , Amazon.
  Speed and flexibility: technology allows advertisers to respond quickly to changes in the
marketplace.

 Automation: the automation of many unskilled tasks can allow companies to replace human
production lines with entirely machine ones. This can reduce costs for manufacturers,
distributors, supermarkets, and many other different businesses.

 Internet connectivity: It’s undoubtable that in recent years global internet connectivity has
been on the rise. This presents an even larger market for many companies who use the
internet to connect with their customers.

Benjamin Graham Group Members

Ayush Chaurasia

Gaauri Mathur

Khanak Tiwari

Siddhart Suri

Vishal Advani