Lecture No.

06 – Types of Business Ethics

Academic Script

Ethics is a branch of social science. It deals with moral principles and social values. It
helps us to classify, what is good and what is bad? It tells us to do good things and
avoid doing bad things.
Ethics separate good and bad, right and wrong, fair and unfair, moral and immoral and
proper and improper human action. In short, ethics means a code of conduct. It is like
the 10 commandments of holy Bible. It tells a person how to behave with another
person.
The businessmen must give a regular supply of good quality goods and services at
reasonable prices to their consumers. They must avoid indulging in unfair trade
practices like adulteration, promoting misleading advertisements, cheating in weights
and measures, black marketing, etc. They must give fair wages and provide good
working conditions to their workers. They must not exploit the workers. They must
encourage competition in the market. They must protect the interest of small
businessmen. They must avoid unfair competition. They must avoid monopolies. They
must pay all their taxes regularly to the government.
In short, business ethics means to conduct business with a human touch in order to
give welfare to the society.
Now, let us try and understand the need and importance of business 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 duplicate and harmful products, hoarding, etc. These
business malpractices are harmful to the consumers. Business ethics help to
stop these business malpractices.
2. Improve customer confidence: Business ethics are needed to improve the
customers' confidence about the quality, quantity, price, etc. of the products.
The customers have more trust and confidence in the businessmen who follow
ethical rules. They feel that such businessmen will not cheat them.
3. Survival of business: Business ethics are mandatory for the survival of business.
The businessmen who do not follow it will have short-term success, but they
will fail in the long run. This is because they can cheat a consumer only once.
After that, the consumer will not buy goods from that businessman. He will
also tell others not to buy from that businessman. So this will defame his
image and provoke a negative publicity. This will result in failure 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 market.
4. Protecting consumer rights: The consumer has many rights such as right to
health and safety, right to be informed, right to choose, right to be heard, right
to redress, etc. But many businessmen do not respect and protect these rights.
Business ethics are must to safeguard these rights of the consumers.
5. Protecting employees, shareholders etc.: Business ethics are required to
protect the interest of employees, shareholders, competitors, dealers,
suppliers, etc. It protects them from exploitation through unfair trade
practices.
6. Develops good relations between business and society: 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 profits for the businesses thereby
resulting in growth of economy.
7. Creates good image of business: 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 the society. The society will
always support those businessmen who follow this necessary code of conduct.
8. Smooth functioning of business: 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
smooth functioning of the business. So, the business will grow, expand and
diversify easily and quickly. It will have more sales and more profits.
9. Consumer movement: Business ethics are gaining importance because of the
growth of the consumer movement. Today, the consumers are aware of their
rights. Now they are more organized and hence cannot be cheated easily. They
take actions against those businessmen who indulge in bad business practices.
 They boycott poor quality, harmful, high-priced and counterfeit (duplicate)
goods. Therefore, the only way to survive in business is to be honest and fair.
10.Consumer Satisfaction: Today, the consumer is the king of the market. Any
business simply cannot survive without the consumers. Therefore, the main
aim or objective of business is consumer satisfaction. If the consumer is not
satisfied, then there will be no sales and thus no profits too. Consumer will be
satisfied only if the business follows all the business ethics, and hence are
highly needed.
11.Importance of labor: Labour, i.e. employees or workers play a very crucial role
in the success of a business. Therefore, business must use business ethics while
dealing with the employees. The business must give them proper wages and
salaries and provide them with better working conditions. There must be good
relations between employer and employees. The employees must also be
given proper welfare facilities.
12.Healthy competition: The business must use business ethics while dealing with
the competitors. They must have healthy competition with the competitors.
They must not do cut-throat competition. Similarly, they must give equal
opportunities to small-scale business. They must avoid monopoly. This is
because a monopoly is harmful to the consumers.

Nature of Ethics
Ethics is a subject that deals with human beings. Humans by their nature are capable
of judging between right and wrong, good and bad behaviour. Thus, the question of
ethics arises, as the human beings are associated with values and morals.
 The study of ethics has become a set of systematic knowledge about moral
behaviour and conduct. Study is a social science.
 There was an argument whether ethics is a science or an art. But experts were
of the opinion that ethics is more of science than an art. Because it is a
systematic knowledge about moral behaviour and conduct of human beings.
 Ethics is a normative science. The term normative implies a guide or control of
action. So, normative ethics tells us what we ought to do.
 Ethics deals with human conduct that is voluntary and not formed by any
persons or circumstances.
 Business ethics is nothing, but the application of ethics in business.
Nature of Personal Ethics
Personal ethics refer to a person’s personal or self-created values and codes of
conduct. From the very beginning, these ethics are instilled in an individual, with a
large part having been played by their parents, friends and family. Common examples
may include honesty, openness, commitment, unbiased behaviour and sense of
responsibility. What a person develops regarding fairness or learns during childhood
remains with him all through his life and is reflected by his actions and words. No
matter if he is talking to a friend or his relatives or an elderly, his ethics would be clear
from what he says and how he says it. A person’s personal ethics are revealed in a
professional situation through his behaviour.
Personal values are the conception of what an individual or a group regards as
desirable. Personal ethics refers to the application of these values in everything one
does. Personal ethics might also be called morality, since they reflect general
expectations of any person in any society, acting in any capacity. These are the
principles we try to instill in our children, and expect to one another without needing
to articulate the expectation or formalise it in any way
Personal ethics is a category of philosophy that determines what an individual believes
about morality and right and wrong.
The principles of personal ethics are:
 Concerns and respect for the autonomy of others
 Honest and the willingness to comply with the law
 Fairness and the ability not to take undue advantage of others
 Benevolence and preventing harm to any creature
People are motivated to be ethical for the following reasons:
 Most people want to maintain a clear conscience and would like to act ethically
under normal circumstances.
 It is natural for people to ensure that their actions do not cause any injury,
whether physical or mental, to others.
 People are obliged to obey the laws of the land.
 Social and material well-being depends on one’s ethical behaviour in society.
Nature of Professional Ethics
A profession is a vocation or calling, especially one that involves a specific branch of
advanced learning or a branch of science, for example, the profession of a doctor,
advocate, professor, scientist for a business manager. A professional who is engaged in
a specified activity as one’s paid occupation like a salaried business manager who is
paid for his specific skill in managing the affairs of the business enterprise he is
engaged in. Professional ethics are those values and principles that are introduced to
an individual in a professional organization. Each professional is expected to strictly
follow these principles. This approach is imperative in professional settings as it brings
a sense of discipline in people as well as helps to maintain office decorum.
Professional ethics are those values and principles that are introduced to an individual
in a professional organization. Each employee is meant to strictly follow these
principles. They do not have a choice. Also, this approach is imperative in professional
settings as it brings a sense of discipline in people as well as helps to maintain decorum
in offices. Some examples may include confidentiality, fairness, transparency and
proficiency. These ethics make employees responsible.
There are certain basic principles professionals are expected to follow in their
professional career. These are the following:
 Impartial and objective
 Openness: full disclosure
 Confidentiality: trust
 Due diligence
 Duty of care
 Fidelity to professional responsibilities; and
 Avoid potential or apparent conflict of interest.
What is the difference between personal and professional ethics?
The ethics that you adhere to in your personal life and those that you comply with in
your professional life are different in certain aspects. Without certain ethics, human
beings would be incomplete and shallow. Thus, they have different systems of ethics in
different places.
The biggest difference between personal and professional codes of conduct is perhaps
the strictness with which people conform to them. The values that you define for
yourself are up to you to be followed or not to be followed. However, those defined in
a company or by a profession must be followed by you, since breach of these principles
or rules may harm your reputation and status. But if you do not adhere to your
personal ethics, it might hardly make a difference, depending on the circumstances.
Even then, you must keep in mind that violation of your own rules may harm others
around you.

Personal Ethics vs. Professional Ethics

Personal Ethics Professional Ethics

Includes personal values and moral Rules imposed on an employee in a

qualities. company, or as member of a
profession, e.g., doctor or lawyer.

Incorporated by family, friends and Learnt when are a part of a professional

surroundings since childhood. setting or when are being trained or
educated for working there.

Examples: honesty, care and sincerity. Examples: no gossiping, time

management, punctuality,
confidentiality, transparency, etc.

Not conforming to these may harm or Not adhering to these may harm
hurt others. professional reputation

Personal needs are satisfied by Professional needs are satisfied by

following these. following these.

There are three important types of ethics, namely, transactional ethics, participatory
ethics, and recognition ethics
1. Transactional ethics: Man is a social animal. He has to act and react with others
through different transactions. The practices of ethics in all these transactions
are called as transactional ethics. In order to let each party’s transaction, run
smoothly, all parties have to accept the principle of equality, implying that every
agent should allow every other the same amount of freedom or action he claims
for himself. The moral principle of equality tells us where to refrain from
 intrusions in the freedom of action of others while following one’s own affairs,
which is negative principle as well as basic. For Example: I need vegetables from
vegetable vendor. The vendor wants customer like me for survival, as we both
are dependent on each other, as long as both of us contribute appropriately,
together we generate surplus that none of us on our own are able to produce. In
order to let things, run smoothly, again adherence to two specific moral
principles is required:
a. Principle of honesty
b. Principle of reciprocity
The domain of ethics covering transactions that are performed on the basis
of simultaneous or connected interest and that are general by the principles
of equality, honesty and reciprocity if indicated as the domain of
transactional ethics.
2. Participatory Ethics: Participatory ethics is a privileged part of business ethics.
Parties cooperate in order to produce more distant common good that has three
characteristic features:
a. The good can only be realized through the participation of all parties.
b. Participation cannot be enforced into explicit moral obligation to take part
in the project.
c. Principle of decency where a real opportunity to contribute to the general
welfare presents itself and no insurmountable obstacle arise, one should
have solid moral reasons not to go for it.
The important thing is that parties in the alliance voluntarily, committing
themselves to a self-imposed and non-enforceable obligation. This entails a
specific type of social relations that is guided, once more, by two particular
moral principles:
a. Principle of decency
b. Principle of enunciation
Participatory ethics is about the shape of solidarity in an age of individualization. It is
the ethics of the civil society, recently rediscovered as a solid ground for collective
arrangements where both the market and the state fail. By participating in a regular
basis, in common projects on behalf of general welfare, a corporation demonstrates
that it can take seriously its corporate citizenship.
3. Recognition Ethics: As human beings, people are endowed with the ability to
understand the problems of others. This quality leads to the recognition of individuals,
institutions and societies. Conflicting situations can be solved by the correct
recognition of the situation. For Example: The employees aged 57-60 years morally
obliged to retire to give way to some younger colleagues, who being in the midst of
their careers, can raise a more weighty claim to a job. The domain of recognition
politics covers a large part of traditional ethics interventions. Ethics, in fact, is about
asymmetrical relations about the rights of interest of the one generating a duty for
another. Recognition ethics clarifies and supports this type of discussion applying the
two principles mentioned above and other moral convictions that are considered
appropriate.