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Business Ethics PDF
Business Ethics PDF
Business Ethics
CHAPTER 1
Ethics
Ethics is the branch of study dealing with what is the proper course of action for man.
It answers the question, "What do I do?".It is the study of right and wrong in human
endeavours. At a more fundamental level, it is the method by which we categorize our values
and pursue them. Do we pursue our own happiness, or do we sacrifice ourselves to a greater
cause? Is that foundation of ethics based on the Bible, or on the very nature of man him, or
neither?
Why is Ethics important?
Ethics is a requirement for human life. It is our means of deciding a course of action.
Without it, our actions would be random and aimless. There would be no way to work
towards a goal because there would be no way to pick between a limitless numbers of goals.
Even with an ethical standard, we may be unable to pursue our goals with the possibility of
success. To the degree which a rational ethical standard is taken, we are able to correctly
organize our goals and actions to accomplish our most important values. Any flaw in our
ethics will reduce our ability to be successful in our endeavours.
What are the key elements of a proper Ethics?
A proper foundation of ethics requires a standard of value to which all goals and
actions can be compared to. This standard is our own lives, and the happiness which makes
them liveable. This is our ultimate standard of value, the goal in which an ethical man must
always aim. It is arrived at by an examination of man's nature, and recognizing his peculiar
needs. A system of ethics must further consist of not only emergency situations, but the day
to day choices we make constantly. It must include our relations to others, and recognize their
importance not only to our physical survival, but to our well-being and happiness. It must
recognize that our lives are an end in themselves, and that sacrifice is not only not necessary,
but destructive.
What is Ethics
A few years ago, sociologist Raymond Baumhart asked business people, "What do
ethics mean to you?" Among their replies were the following:
"Ethics has to do with what my feelings tell me is right or wrong."
"Ethics has to do with my religious beliefs."
"Being ethical is doing what the law requires."
"Ethics consists of the standards of behaviour our society accepts."
"I don't know what the word means."
These replies might be typical of our own. The meaning of "ethics" is hard to pin
down, and the views many people have about ethics are shaky.
Like Baumhart's first respondent, many people tend to equate ethics with their
feelings. But being ethical is clearly not a matter of following one's feelings. A person
following his or her feelings may recoil from doing what is right. In fact, feelings frequently
deviate from what is ethical.
Nor should one identify ethics with religion. Most religions, of course, advocate high
ethical standards. Yet if ethics were confined to religion, then ethics would apply only to
religious people. But ethics applies as much to the behaviour of the atheist as to that of the
saint. Religion can set high ethical standards and can provide intense motivations for ethical
behaviour. Ethics, however, cannot be confined to religion nor is it the same as religion.
Being ethical is also not the same as following the law. The law often incorporates
ethical standards to which most citizens subscribe. But laws, like feelings, can deviate from
what is ethical. Our own pre-Civil War slavery laws and the apartheid laws of present-day
South Africa are grotesquely obvious examples of laws that deviate from what is ethical.
Finally, being ethical is not the same as doing "whatever society accepts." In any
society, most people accept standards that are, in fact, ethical. But standards of behaviour in
society can deviate from what is ethical. An entire society can become ethically corrupt. Nazi
Germany is a good example of a morally corrupt society.
Moreover, if being ethical were doing "whatever society accepts," then to find out
what is ethical, one would have to find out what society accepts. To decide what I should
think about abortion, for example, I would have to take a survey of American society and
then conform my beliefs to whatever society accepts. But no one ever tries to decide an
ethical issue by doing a survey. Further, the lack of social consensus on many issues makes it
impossible to equate ethics with whatever society accepts. Some people accept abortion but
many others do not. If being ethical were doing whatever society accepts, one would have to
find an agreement on issues which does not, in fact, exist.
What, then, is ethics? Ethics is two things. First, ethics refers to well based standards
of right and wrong that prescribe what humans ought to do, usually in terms of rights,
obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to
those standards that impose the reasonable obligations to refrain from rape, stealing, murder,
assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty,
compassion, and loyalty. And, ethical standards include standards relating to rights, such as
the right to life, the right to freedom from injury, and the right to privacy. Such standards are
adequate standards of ethics because they are supported by consistent and well founded
reasons.
Secondly, ethics refers to the study and development of one's ethical standards. As
mentioned above, feelings, laws, and social norms can deviate from what is ethical. So it is
necessary to constantly examine one's standards to ensure that they are reasonable and well-
founded. Ethics also means, then, the continuous effort of studying our own moral beliefs and
our moral conduct, and striving to ensure that we, and the institutions we help to shape, live
up to standards that are reasonable and solidly-based
Business ethics
Ethics in business are nothing but the do’s and don’ts by the business users in the
business. In other words it could be referred as set of principles a business man ought to
follow. ”There should be business ethics” means that the business should be conducted
according to certain self recognized moral standards. Few unethical elements in the present
day business are cheating, stealing, lying, bribing, corrupting etc.
A business man should be aware of the ethics in the business and should follow them
in order to maintain ecological balance in the society.
Definition:
The study and examination of moral and social responsibility in relation to business
practice and decision making in business is known as “Business Ethics”.
The term “business” is commonly referred to the commercial activities achieved at
making profit. But gradually there is a substantial change in the way in which people viewed
the business.
In the past primary objective of a business was profit maximization but the present
perspectives on business objectives are not maximization.
It is profit maximization in long run besides fulfilling the ethics in the business. A
business is regarded as social institution forming integral part of social systems .The business
is viewed as subsystem to the social system.
This is because any type of social system is influenced by
1. The way the business functions
2. The organization of the business
3. Innovations
4. Transmission and diffusion of information.
5. New ideas etc.
Need and Importance of Business Ethics:
The following points explain the need for and importance of business ethics:
I. Protection of Consumer rights:
Consumer is the centre of all business activities. In fact, business is essentially meant
for satisfaction of consumer wants. Unfortunately, consumers are the most neglected and
exploited group. The application of business ethics will help to confer and implement
consumer rights. Business ethics can be used to check malpractices like adulteration, unfair
trade practices and to make the working of business consumer oriented.
II. Social Responsibility:
Business ethics is a means of making business socially responsible for its actions.
Exploitation of consumers, employees, discriminate use of natural resources, etc; is quite
common in all types of business. Compliance to ethical standards will ensure (a) protection of
consumer rights, (b) public accountability, (c) protection of worker’s interests, and (d) proper
utilization of natural resources.
III. Concept of Socialism:
The concept of socialism in business states that gains of a business must be shared by
all and just by the owner of business. Profit is a sing of business skill and talent. Profit is also
a result of group efforts. Employees, shareholders, consumers, Suppliers and others
contribute to the success of the business. Therefore, success should be shared by all
concerned.
IV. Interest of Industry:
Business ethics are necessary to safeguard the interests of small scale business firms.
The tendency of big business firms is always to dominate the market and drive away the
small scale industries out of the market. Small scale units can establish their position and
fight for their rights if the industry follows a code of ethics.
V. Consumer Movement:
The growth in consumer movement is also another important factor that has
necessitated the need for business ethics. The spread of education and awareness among
consumers about their rights has made the business community to conduct business on ethical
principles.
VI. Better Relations with the Society:
Business ethics is needed to develop good relations between business and society. The
relationship of business with society has various dimensions such as its relations with
sshareholder, employees, consumers, distributors, competitors and government. Business
ethics will help to promote and protect the interest to various groups.
VII. Buyer’s Market:
There has been a structural change in the concept of business. The concept of profit has been
gradually taken over by consumer satisfaction. The large scale production and increased
competition in the market has changed the business scene from a seller’s market to a buyer’s
market. In a changed situation, business ethics is needed to redefine the traditional concept of
profit and replace it by a balance between profit and consumer satisfaction.
VIII. Beneficial to Business and Society:
Ethics suggests what is good and bad, right and wrong, ethical and unethical, etc; to
businessmen. It also brings an element of honesty, sincerity, fairness, and human touch to
business activities. Society is also benefited by the introduction of business ethics. It ensures
healthy and competitive business atmosphere, consumer and labor welfare, and improvement
in social, economic and cultural values of the society. They have either direct or indirect
effect on the society.
Social Responsibilities of Business:
A firm expresses its responsibility to the society by reacting in either or both of the following
two ways.
1. The manner in which it carries out its own business activities
2. The welfare activities it takes upon itself as an additional function
Responsibility to Share Holders:
1. To make the shareholders feel secured by protecting their investments
2. To be transparent
3. To allow them to participate in decision making
4. To ensure them good dividends
Responsibility to Employees:
1. To offer employees fair wages
2. To establish better working conditions
3. To provide them fair work standards and norms.
4. To provide labour welfare activities
5. To educate the employees by adopting proper training methods.
6. To recognize and appreciate the work of the employees and reward them or to promote
them.
7. To install grievance handling cell.
8. To enable them to involve in decision making.
Responsibility to Consumers
To improve the efficiency of the business by
a) Increasing productivity.
b) Improving quality.
c) Smoothening distribution system.
1. To offer the products at reasonable prices.
2. To provide pre-purchase and post purchase service to the consumers.
3. To facilitate research and development to meet the customer requirements.
4. To maximize imperfections in distribution systems
5. To provide sufficient and unnecessary information about the product.
Responsibility to Community:
1. To be pollution free and maintain ecological balance.
2. To invest more in research and development so as to improve the standard of living of the
society.
3. To develop alternative recourses thereby preventing current resources being used from
exhaustion.
4. To improve the efficiency of business operations.
5. To include in social welfare activities
6. To contribute to national effort to build up a better society
If a firm full fills all the above mentioned responsibilities then it is said to be following the
business ethics. But in practice such an ideal business doesn’t exist.
FEW ENVIRONMENTAL CONCERNS:
One important factor a business man must not neglect is his responsibility to environment.
The abundant natural resources are getting exhausted after 19th century due to rapid
industrialization.
LAND:
The worst effected are as their cattle starve and they travel even increasing distance for
grazing due to industrialization and urbanization.
WATER:
Through people are keen in this issue by constructing dams and reservoirs the bi products and
industry waste couldn’t find a better discharge channel than this. Hence sure measure must be
take in this context to keep the water free from pollution.
DEFORESTATION:
The results of deforestation for industrialization and urbanization are vulnerable. It is
resulting in destruction of wild life, increase in price of wood, air production etc.
HABITAT:
The people who are living in forests and remote areas love their shelter and livelihood in the
vent of industrialization.
HEALTH:
The business users must be conscious about the health of the society and behave
responsibility for their health.
IMPORTANT ETHICAL PRICIPLES THAT A BUSINESS SHOULD FOLLOW:
1. Do not deceive or cheat the customers by selling substandard or defective products by
under measurement or any other means.
EXAMPLE: Textile merchants in general clear the defective stock under the guise of
discounts.
2. Do not report to hoarding, black marketing or profiteering.
EXAMPLE: Management of theatres sell the tickets for higher prices during the
initial days of release of a film starred by a crazy hero and heroine.
3. Do not destroy or distort competition.
4. Treasure sincerity and accuracy in advertising, labelling and packaging.
EXAMPLE: Ads of automobiles in general provide false details in every aspect.
5. Do not furnish the image of competitors by unfair practices.
EXAMPLE: Publishing false information about competitors, bribing the retailers etc.
6. Make accurate business records so that transparency to the share holders can be
achieved.
7. Pay taxes and discharge other obligation promptly.
8. Do not form castle agreements, even informal, to control production, prices etc to the
common detriment.
EXAMPLE: cellular network providers will be in informal castle agreements to
control the traffic.
9. Refrain from secret kick backs or pay logs to customers, suppliers, administrators,
politicians etc.
10. Ensure payment of fair wages and fair treatment to the internal customers as well as
external customers and share holders.
VALUES:
Human and ethical values constitute the wealth of characters. Values express dharma or
divine nature as understood in the East, particularly in the Indian ethos and insight and the
ideas of integrity as understood in the West.
Integrity: Integrity is wholeness, goodness, courage, and self-discipline to live by your inner
truth.
Wholeness: Wholeness implies totality, soundness, perfection and completeness. In the West,
spirit in Wholeness is given only a slight reference. It is nearly forgotten. In all of ours heart’s
chamber lives the unworshipped God. We are not aware of the divine presence within
thought the divine is constantly looking at the person. Our ego has become the pretended
ruler. Ego is the false notion of our mind, because it is ignorant of the reality.
Goodness: It covers all essential values such as honesty, morality, kindness, fairness, charity,
truthfulness, generosity etc. we need goodness in our thoughts, our speeches, and our actions.
‘Be Good. Do Good’ leads to purification of thoughts, talks and actions associated with good
thoughts. Good things do not happen easily. You have to make them happen.
Courage: In the world of management, courage points out acts of bravery, e.g. deciding not
to conceal something one knows, and needs to be expressed openly. Courage is telling the
truth in the face of danger. You have the guts to go ahead, do something which is risky.
Self-discipline: Self-discipline and self-control indicates that the soul is the boss who takes
control of the mind and directs the mind and the senses to move on the journey to reach the
goal known to the master. When the soul, the individual consciousness, wakes up, we have
self-discipline and self-control to deal with life. The quality of life will now be different. That
quality of life will give you greater harmony, happiness and moderation. Please remember
that we need discipline and courage together to reach our objectives in time.
Living by Inner Truth: Living by inner truth or by inner mind, which is the right instrument
within us but which is not known to us unless we go within, may be regarded as the last
ingredient of integrity. It is the most important of all.
Inner mind or truth communicates through faint whispers, intuitive thoughts, feeling buried
deep within us. Each one of us possesses this fine instrument and has the capacity to call it
forth. We need practice to tap this cache. It is rediscovery of one’s subtle but true awareness
which generally lies in the secret hiding place. We must turn inwards to interact with our
inner mind and live by inner truth as per its direction. The voice of inner mind can be heard
only in silence.
To live by inner truth at work amounts to remain yourself incorruptible, clean and inviolable
in this world, which at present is invaded by total crisis oh human and ethical values. In the
business world we have kickbacks, double dealings, shady behavior and all forms of
corruption and fraudulent dealings. Corruption is world-wide. Let your mind be ruled and
guided by your Conscience.
DHARMA:
Dharma is the law of right living the observance of which secures the double object of
happiness in your own life and also the happiness in life of others. It stands for all those
ideals, purposes, influences, institutions, and the ways of life and conduct that shapes the
character and evolution of man both as an individual and as member of the society.
Dharma is the Indian Concept almost synonymous with integrity. However it has a
wider scope. It includes openly spirit, righteousness (godliness) and fearlessness. Let us
review these three divine elements.
Spirit: Man is the soul. He is essentially divine. Dharma directly evolves from spirit.
Integrity seems to shy away from it. There is no shyness regarding spirituality in dharma.
Dharma is spirit in Indian Ethos. The Western society is secularized. Indian society has a
happy union between spiritualism and materialism. Although integrity honors all moral
values, it gives only lips sympathy to the spirit through the notion of wholeness. Integrity
defines wholeness leaving out spirit. It is the spirit which can bring out a true sense of
wholeness. It is the spirit which makes us whole (Poornatva). The inclusion of dharma is like
rediscovering a vacant upstairs’ room in one’s heart chamber. The spirit, our boss, lives there.
We imagine that spirit is not within us and the upper floor seems to be empty. . Indian ethos
openly recognizes the spirit as our boss and declares ‘Do right, do good, and be good’ and the
whole chamber of our heart shines with the Light of Consciousness.
Righteousness: Dharma demands right action. Do the right thing. In dharma, not
mere action but rightness is given great emphasis.
Fearlessness: integrity means courage. Dharma stresses fearlessness. When the divine
is present within you and you experience his presence, what is there that can touch you or
whom you need fear when He is offering His protection to you? Even a little of His
awareness will carry you through all risks and uncertainties.
Remember that the Divine Touch is enough to convert difficulties into opportunities.
Of course, you should know the truth about yourself. Dharma is the inner law of one’s life.
Follow your Dharma and it will protect you or stand by you. We have to comply with our
own dharma. Nobody has ever violated dharma without ultimately courting disaster.
Adharma ultimately brings certain irremediable fall. Each one has his/her own Dharma.
The idea of an individual’s own dharma is the insight that shines through Indian insight. The
moment we are unconscious or ignore that inner law, our life is paralyzed. We feel isolated.
Or degeneration is sure. No wonder we feel missing and incomplete. Dharma is ethics and
spiritualism combined.
A manager/worker with these values can mobilize his energies as well as of those
around him and canalize in to productive purposes to accomplish greater tasks.
The proof of sincerity and seriousness is a strong emphasis on integrity of character in
a job. A man might have too little knowledge, perform poorly, lack judgement or analytical
ability and yet may not do much harm. But a man who lacks character and integrity may
cause much greater harm.
E.g. A salesman who does not possess good communication/ negotiating skills may at
the most cause low sales. But a salesman who makes tall claims, false promises with regards
to the product will cause disrepute the organization; which will be fatal to the company in the
long run.
Significance of Values:
Our effectiveness at work depends on our moral and ethical values. These human
values support established business values such as service, communication, excellence,
credibility, and innovation etc. these human values help self-development. Even the
managerial functions of direction, control, supervision etc become much easier, thus leading
to goodwill and harmony in the organization.
We need to look at success with a holistic view. Outer fulfilment must be combined
with inner fulfilment. Inner fulfilment relates to our spiritual, mental and emotional
enrichment. While the outer achievement concerns meeting set targets, using your talents to
the fullest extent etc.
One would be very pleased at being appointed as the CEO or MD of a company but if
you cannot spare time for your family or can’t enjoy a peaceful Sunday with your kids then
your success is not complete.
Golden Rule of Ethics:
Earlier, the business community and society at large neglected ethics. But over the years
people have realized its importance for the welfare of an organization.
The golden rules, which find its mention in the Bible, are:
Everything you want others to do to you, you shall do to others.
Do not do to others that which you do not wish them to do to you.
Do not do anything that if done to you, would cause harm to you.
In a nutshell, treat others, as you would like to be treated. So if you do not want to be spoken
to rudely then you must not speak rudely. So if don’t want to use flawed goods you must also
refrain from adulteration.
Values and Skills:
Values help us to ‘become’ while we need skills to ‘do’.
Values act as a base for the skills and hence proceed skills in their importance.
Values are internal –deal with purity of mind and soul. While skills are external –
deal with functioning well at job.
Values bring about universal good (software aspect). Skills bring about
achievement of tasks (hardware aspect).
Values are enduring and do not change with time. But skills have to be updated
regularly and change with passage of time.
E.g. excellent service to the customer may be a value of the company. Personal visits may be
the method used by the company. With the advent of technology, the company may use
personalized e-mails etc. here the skill is changing but the service orientation (value) remains
constant.
Values and the Work Place:
The modern world has brought about many developments at the workplace. This has
lead to a lot of comforts, luxuries and money in the hands of people. But it has also lead to
moral, ethical and spiritual degeneration.
Enterprises worldwide have been disregarding the importance of values. Cheating,
corruption and malpractices are rampant in the companies. Fortunately we are gradually
awakening to redeem ourselves. More and more corporate are awakening to the fact that it is
not necessary to indulge in malpractices to make money. Illustrious men like Narayan Murthy
are setting examples that ethical management practices can yield results. Infact, even today
when we think of great people like Jamshedji Tata we do not associate him only with his steel
plant but the entire township of Jamshednagar and the various Tata hospitals.
Values and ethics must be an integral part of management and work culture. We have
created unwanted stress and unrest in the society. An organization that cares for its people
cannot ignore such unhealthy developments and must take steps to see to it that our value
system is in place.
Human Response Management:
People constitute the greatest dynamic inputs in any organization. They are the center
and must be regarded as the vital and integral part of organization. Every individual is the
representation of a divine essence. People should be developed not only in skills but also in
moral, ethical and spiritual values. Morality and rationality are combined at the same time in
HRD.
Value
Orientation
Pure Mind
The above chart indicates the four traditional methods of mind purification.
Jnan Yoga- Path of knowledge
Raja Yoga- Path of Mind Control
Bhakti Yoga- Path of Devotion
Karma Yoga- Path of Action
All these help to develop a pure mind. Pure mind is the origin of all values. Values emerge
only from a purified mind i.e. from the inner mind or higher consciousness. This is a key
factor for managerial effectiveness. ]
CHAPTER 4
Numerous laws have been enacted to protect employees against what society
perceives as unethical behavior in the workplace. These laws are administered by the United
States Department of Labor. Generally, these laws reflect the ethical standards of the majority
of society. An example is the Americans with Disabilities Act of 1990 (ADA). According to
the ADA:
"No covered entity shall discriminate against a qualified individual with a disability because
of the disability of such individual in regard to job application procedures, the hiring,
advancement, or discharge of employees, employee compensation, job training, and other
terms, conditions, and privileges of employment."
Most citizens would agree that it would be unethical to deny employment or
promotion to a disabled applicant, solely on the basis of that disability, especially when that
disability would not affect their work performance. Legislators reacted and have enacted the
ADA in order to make it illegal to engage in such discrimination. Yet even with this
legislation, the Supreme Court continues to evaluate provisions of the ADA and its definition
of disability.
Executive branch employees are subject to statutes and regulations commonly referred to as
"ethics" standards. Through these statutes, the government has established legally enforceable
rules on ethical behavior. The two basic sources of these standards are the criminal conflict of
interest statutes and the administrative standards of ethical conduct.
Chapter 11 of Title 18, United States Code is an example of a Criminal Conflict of Interest
Statute. The conflict of interest statutes prohibit a Federal employee from engaging in certain
types of activities that would place the employee’s own personal interests above the Federal
Government’s interests. According to this Statute, a Federal employee:
• Is prohibited from acting in an official capacity on a matter in which the employee (or
certain others) has a financial interest;
• May not represent the interests of private parties in matters in which the United States
is a party or has an interest;
• Is prohibited after leaving the Government from engaging in certain activities on
behalf of other persons or entities;
• May not accept private compensation for performing official duties.
• misuse of position
• outside activities
INTRODUCTION:
A relationship exists between law and ethics. In some instances, law and ethics overlap
and what is perceived as unethical is also illegal. In other situations, they do not overlap. In some
cases, what is perceived as unethical is still legal, and in others, what is illegal is perceived as
ethical. A behavior may be perceived as ethical to one person or group but might not be perceived as
ethical by another. Further complicating this dichotomy of behavior, laws may have been legislated,
effectively stating the government’s position, and presumably the majority opinion, on the behavior.
As a result, in today’s diverse business environment, one must consider that law and ethics are not
necessarily the same thing.
Law can be defined as a consistent set of universal rules that are widely published,
generally accepted, and usually enforced. These rules describe the ways in which people are
required to act in their relationships with others in a society. They are requirements to act in a given
way, not just expectations or suggestions to act in that way. Since the government establishes law,
the government can use police powers to enforce laws. The following chart defines the terms in the
definition of law above.
Consistent – If two requirements contradict each other, both cannot be termed a law, because
people cannot obey both.
Universal – The requirements must be applicable to everyone with similar characteristics
facing the same set of circumstances.
Published – The requirements have to be published, in written form, so that they are
accessible to everyone within the society.
Accepted – The requirements have to be generally obeyed.
Enforced – Members of society must be compelled to obey the law if they do not choose to
do so voluntarily.
The word ethics is derived from the Greek word ethos (character), and from the Latin word
mores (customs). Together they combine to define how individuals choose to interact with
one another. In philosophy, ethics defines what is good for the individual and for society and
establishes the nature of duties that people owe themselves and one another. The following
items are characteristics of ethics:
Ethics involves learning what is right and wrong, and then doing the right thing.
Most ethical decisions have extended consequences.
Most ethical decisions have multiple alternatives.
Most ethical decisions have mixed outcomes.
Most ethical decisions have uncertain consequences.
Most ethical decisions have personal implications.
It is important to note that there is also a difference between ethics and morality. Morality
refers both to the standards of behavior by which individuals are judged, and to the standards
of behavior by which people in general are judged in their relationships with others. Ethics,
on the other hand, encompasses the system of beliefs that supports a particular view of
morality.
Ethical values and legal principles are usually closely related, but ethical obligations
typically exceed legal duties. In some cases, the law mandates ethical conduct. Examples of
the application of law or policy to ethics include employment law, federal regulations, and
codes of ethics.
Though law often embodies ethical principles, law and ethics are far from co-
extensive. The law does not prohibit many acts that would be widely condemned as unethical.
And the contrary is true as well. The law also prohibits acts that some groups would perceive
as ethical. For example lying or betraying the confidence of a friend is not illegal, but most
people would consider it unethical. Yet, speeding is illegal, but many people do not have an
ethical conflict with exceeding the speed limit. Law is more than simply codifying ethical
norms.
Establishing a set of ethical guidelines for detecting, resolving, and forestalling ethical
breaches often prevents a company from getting into subsequent legal conflicts. Having
demonstrated a more positive approach to the problem may also ensure that punishment for
legal violations will be less severe. Federal sentencing guidelines passed in 1991 permit
judges to reduce fines and jail time for executives proportionate to the ethical measures a
company has taken.
BUSINESS LAWS.
Some of the important business laws which aims to regulate business behaviour are
This Act enacted in 1951 with the main objective of giving practical effect to the industrial
policy, gave the government sweeping powers to control industries.
It empowers the central government to develop and regulate the industrial sector in India,
through suitable and appropriate means. However this has benefited the richer section than
the poorer section of the society. A report on the operations of licensing under this Act by the
planning commission in 1966 stated that-
1. The working of the planned economy had contributed to the growth of big companies
2. The working of the industrial licensing system enabled the large industrial houses to obtain
a disproportionate large shares of the license issued.
3. The operation of the industrial licensing system was not successful in achieving the
objective of regional dispersal of industries.
4. The large industrial houses were the major beneficiaries of public financial institutions.
Thus this Act has not only failed to compel business to behave ethically, it has on the other
hand encouraged unethical behaviour of big business house.
Thus many controls of the government which were sought to be enforced through legislation
were no doubt introduced with good intentions, but they not only failed to achieve the
objectives but resulted in much unethical behaviour particularly big business houses.
LABOUR LAWS:
Labour laws represent a community's attitude to the labour class. The basic philosophy of
labour legislation is to ensure regulation of employee-employer relationship to prevent
exploitation of employees and, more positively to ensure social justice, labour welfare, needs
of national economy and international uniformity as far as possible without compromising
national interest and ignoring social problems.
The legislation is fundamentally based on the principle of social justice where the workmen is
not exploited labour legislation can be classified under the following categories-
1. Laws relating to weaker Section (ie, children and women)
a. The Factories Act, 1948
b. The Mines Act, 1952
c. The Plantation Labour Act, 1951
d. The employment of children Act, 1938
e. Maternity Benefit Act, 1961
2. Laws relating to specific Industries
3. Laws relating to Specific Matters-
3. 1.Wages.
a. The payment of wages Act, 1963
b. The minimum Wages Act, 1948
c. The Equal Remuneration Act, 1976
3.2Social Security-
a. Workmen Compensation Act, 1923
b. Retrenchment Benefit Act
c. The payment of Bonus Act, 1965
d. Employee State Insurance Act, 1948
e. Fatal Accident Act, 1955
3.3 .Bonded labour
a. Bonded Labour system(Abolition)Act, 1976
4. Laws relating to
Trade union Act, 1926
Industrial dispute Act, 1947
The workmen compensation Act, 1923
CHAPTER 5
CODES OF ETHICS:
Private Companies, organizations, and associations frequently establish their own Codes of
Ethics. These may be formally written or understood. Although the government does not
enforce these Codes, they are enforced internally. Violation of the Codes alone can, in some
instances, be grounds for termination. The following tables show examples of such Codes.
I will conduct all business dealings with fairness, honesty and integrity.
I will protect all information and resources available to me from loss, theft, and misuse.
I will avoid even the appearance of conflict of interest or any other impropriety.
I will treat my fellow employees fairly and with dignity and respect.
I will help create and sustain an atmosphere conducive to the spirit of this code.
Clearly, there is a relationship between law and ethics, and this relationship is important in
management. Managers must evaluate not only what is legal, but what they, their employees,
and society consider ethical as well. Important here is that companies must also consider
what behaviors their customers will and will not accept. The news is full of stories regarding
the ethical issues with which companies are being confronted, such as the practices of Nike,
as outlined above. No company wants to be forced to defend itself over ethical issues
involving wages, the environment, working issues, or human relations.
Managers play a vital role in a company's legal and ethical performance. It is in part their
responsibility to ensure that their employees are abiding by Federal, State, and Local laws, as
well as any ethical codes established at the company. But most importantly, the managers
must provide a positive example to their employees of proper behavior in light of laws and
ethical codes.
Certainly, policies and procedures will never be developed to satisfy everyone, but the
establishment of Codes of Ethics will at least provide a framework for ethical behavior, and
allow customers to evaluate the type of company with whom they are doing business. With
this knowledge, employees and customers must decide whether or not they are willing and
able to conform to these Codes, as well as to the laws that have been enacted. Managers
cannot simply limit their decisions to following the law. They must also consider the ethics of
their employees and customers.
• A code of ethics is a statement of the norms and beliefs of an organisation. Norms are
the standard of behaviour, expected from everyone in the organisation when
confronted with a particular situation consisting of ethical dilemmas. It encourages
people to think in a particular way which leads to positive attitude and consequently
to the wanted behaviour. The code of ethics generally make an employee of the
organisation aware of his or her obligation and the moral duties towards the
organisation, but these codes cannot help to solve managerial; dilemmas between
economic and social performance.
• The organisation culture governs peoples behaviour in the direction where they strive
to achieve and create excellence in corporate life. An organisation where its culture
consists of top management’s commitment to good business practices, open
communication, shared values, beliefs and norms for everyone within the
organisation stands to benefit from corporate excellence. The corporate culture
consciously created, must be value-based
• Top management must continuously communicate these values to the lower levels in
the organisation. Values produce a sense of direction for the employees and help to
guide their day to day behaviour.
ORGANISATION CULTURE:
Culture refers to the set of values, dominant beliefs and guiding norms of behaviour
for its employees. It denotes the climate, the atmosphere, the mental attitude shared by the
members of the organisation. A strong culture provides a basis for productive ethos and
ethical behaviour of an organisation. such a culture spearheads the company’s commitment to
creating excellence-through zero defect products, excellent customer support service,
quality, reliability, employee welfare commitment etc. The organisation culture plays a
dominant role in influencing employee’s ethical behaviour.