Contents

Definition Of ‘Ethics’ And ‘Business Ethics’............................................................................................................................................1

Reasons For Business Ethics......................................................................................................................................................................2
Problems in Networking.........................................................................................................................................................................2
It Is Expensive to Be Bad.......................................................................................................................................................................2
Strong Defense........................................................................................................................................................................................2
Legal Implications..................................................................................................................................................................................2
Abandonment of 'Business is Business'..................................................................................................................................................2
The Formation Of Individual Ethics...........................................................................................................................................................3
Ethical Principles........................................................................................................................................................................................4
Stakeholders................................................................................................................................................................................................5
Three Arguments for the Stakeholder.....................................................................................................................................................5
Concept...................................................................................................................................................................................................5
Stakeholder management........................................................................................................................................................................6
Stakeholder Power..................................................................................................................................................................................7
Organisation’s Responsibilities toward its Stakeholders........................................................................................................................7
Ethics in Business
Definition Of ‘Ethics’ And ‘Business Ethics’
Ethics means the set of rules or principles that the organization should follow. While in business ethics refers
to a code of conduct that businesses are expected to follow while doing business.

Through ethics, a standard is set for the organization to regulate their behavior. This helps them in
distinguishing between the wrong and the right part of the businesses.

The ethics that are formed in the organization are not rocket science. They are based on the creation of a
human mind. That is why ethics depend on the influence of the place, time, and the situation.

Code of conduct is another term that is used extensively in businesses nowadays. It is a set of rules that are
considered as binding by the people working in the organization.

Business ethics compromises of all these values and principles and helps in guiding the behavior in the
organizations. Businesses should have a balance between the needs of the stakeholders and their desire to
make profits.

While maintaining these balances, many times businesses require to do tradeoffs. To combat such scenarios,
rules and principles are formed in the organization.

This ensures that businesses gain money without affecting the individuals or society as a whole. The ethics
involved in the businesses reflect the philosophy of that organization.

One of these policies determines the fundamentals of that organization. As a result, businesses often have
ethical principles. There is a list of ethical principles involved in the businesses.

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Reasons For Business Ethics
Business ethics are a reflection of the standard of business that either an individual or business uses when
conducting transactions. Business ethics are important because they add a line of defense to protect the
company, enable company growth, save money and allow people to avoid certain legal implications.

Problems in Networking
Poor business ethics will look bad for a business. Important networks that companies need to build will
become harder to establish as no other business person, or business, will want to be associated with a
company that adopts a policy of weak business ethics.

It Is Expensive to Be Bad
After the exposure of poor business ethics, it will cost a lot to eradicate the bad publicity from the name of
the company. Networking ties will begin to dissolve and excess funds will have to be spent on a stronger
advertising campaign to clean up any public relations crisis.

Strong Defense
One of the best reasons for studying business ethics is to know your defense. Business ethics are a strong
defense. By already establishing what business ethics your company is going to adopt, this is a good defense
against bad publicity.

Legal Implications
When corporate greed takes over, there are certain legal regulations placed on each individual. If they are
violated, then indictments, trials and long prison sentences may be the only options for those businessmen
and women acting unethically.

Abandonment of 'Business is Business'

Recent studies have shown that the public no longer accepts the idea that business is amoral and that people
now hold businesses to some standard of social responsibility.

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The Formation Of Individual Ethics
The ethical view of an individual is formed by the contribution mostly of the following factors:

1. Family influences:
Family influences play a key role in determining an individual’s belief about what is right and what is wrong.
The values that are built up from the very childhood become an integral part of our lives. Children learn from
the behaviour of their parents and other members of the family. “Like father, like son” probably has a profound
meaning. In general, a person who grows up in a family with high ethical standards that are consistently
followed is likely to develop high ethical standards also.

2. Peer influences:
As the children grow older, their friends and school mates with whom they interact every day, influence their
behaviour. Peer pressure, for example, can sometimes determine if a person will engage in such questionable
activates as shoplifting, vandalism, and drug abuse and so on. It is generally perceived that private schools and
religions convent schools have higher standards of personal behaviour than public schools. That may be one
reason why most parents prefer to send their children to private schools.

3. Life experiences:
As one goes through life, one experiments with a number of situations. It is said that “life is nothing but a
collection of experiences, good and bad”. Accordingly, an experience and its consequences help in shaping a
person’s ethical or unethical behaviour.
An unethical behaviour which results in negative consequences such as feelings of guilt or legal punishment or
social condemnation may tend not to be repeated. Conversely, if a person does not feel any remorse or is
actually rewarded for an unethical activity, there would be a tendency to repeat such an activity.

4. Personal values and morals:

A person’s values and morals also contribute to his ethical standards. A person who is deeply religious is
expected to have high moral values. There are persons on the other hand who place top priority on financial
gains and will accordingly do whatever is necessary to achieve their goals irrespective of ethics of the actions.
A person’s respect for his family’s honor would also shape his ethical beliefs.

5. Situational factors:
Situational factors are certain events, sometimes random, that have a potential to determine behaviour that may
or may not be consistent with a person’s ethics. For example, an otherwise honest, God fearing person may
steal in a situation of financial crisis. On the other hand, a drug dealer may become a saint by listening to a
preacher or seeing a friend die of drug overdose. Accordingly, a person’s behaviour may change from ethical to
unethical and from unethical to ethical if the situation forces him to do so.

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Ethical Principles

Integrity
Whenever there is great pressure to do right instead of maximizing profits, this principle is tested. The
executives need to demonstrate courage and personal integrity, by doing what-what think is right. These
are the principles, which are upright, honorable. They need to fight for their beliefs. For these
principles, they will not back down and be hypocritical or experience.

Loyalty
No ethical behavior can be promoted without trust. And for trust, loyalty needs to be demonstrated. The
executives need to be worthy of this trust while remaining loyal to the institutions and the person. There
should be friendship in the time of adversity and support and devotion for the duty.They should not use
or disclose personal information. This leads to confidence in the organization. They should safeguard
the ability of a professional to make an independent decision by avoiding any kind of influence or the
conflicts of interest. So, they should remain loyal to their company and their colleagues. When they
accept the other employees, they need to provide a reasonable time to the firm and respect the
proprietary information attach to the previous firm. Thus, they should refuse to take part in any activity
that might take the undue advantage of the firm.

Honesty
The ethical executives are honest while dealing with their regular work. They also need to be truthful
and do not deliberately deceive or mislead the information to others. There should be an avoidance of
the partial truths, overstatements, misrepresentations, etc. Thus, they should not have selective omission
by any means possible.

Respect and Concern

These are two necessarily different forms of behavior in the organization. But they go in tandem that is
why they have been put under one principle. When the executive is ethical he is compassionate, kind,
and caring. There is one golden rule which states that help those who are in need. Further, seek their
accomplishments in such a manner that the business objectives of the firm are achieved. The executives
also need to show respect towards the employee’s dignity, privacy, autonomy, and rights. He needs to
maintain the interests of all those whose decisions are at stake. They need to be courteous and treat the
person equally and rightly.

Fairness
The executives need not be just fair in all the dealings, but they also should not exercise the wrong use
of their power. They should not try to use over each or other indecent manners to gain any sort of
advantage. Also, they should not take undue advantage of anything or other people’s mistakes. Fair
people are inclined more towards justice and ensure that the people are equally treated. They should be
tolerant, open-minded, willing to admit their own mistakes. The executives should also be able to
change their beliefs and positions based on the situation.

Leadership
Any executive, if ethical, should be a leader to others. They should be able to handle the
responsibilities. They should be aware of the opportunities due to their position. The executives need to
be a proper role model for others.

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Stakeholders

Stakeholders are those people with a legitimate interest in the firm, which is to say, people who stand to gain
from the successful operation of the business. In other words, they have a stake in its success. Using this
criterion, it’s easy to see how most interpretations of the term include: shareholders, lenders, employees,
suppliers, distributors, customers, and even the members of the communities in which the business operates.
Competitors are usually left out of the mix for this reason, but I would argue the growing importance of
coopetition is making even this distinction less clear.

The stakeholder perspective differs from the traditional view of business, which is sometimes pictured as an
“input-output” model, where investors, suppliers and employees contribute inputs into the firm, with the
resulting outputs going out to the customer:

Three Arguments for the Stakeholder

There are many ways of thinking about stakeholder theory, but that most fall into one of three buckets – each
with very different arguments for why it matters.

Descriptive approaches:
Descriptive approaches explain it by showing how it maps to the way business actually works today. It
might be opinion research showing that most management believes a sole focus on shareholder interests
is unethical. Or it might be studies showing that a growing number of court cases and governmental
regulations now give managers greater leeway in taking factors aside shareholder interests into account
in their management decisions. With descriptive approaches, you care about stakeholder theory because
it better describes the actual way business works.

Instrumental approaches:
Instrumental approaches essentially frame it as a means to increased efficiency, better business
performance and ultimately higher profits. With instrumental approaches, you care about stakeholder
theory because it will make more money for your business.

Normative approaches:
Normative approaches see it as a moral or ethical issue. This frame usually rests on the idea that each
stakeholder group has intrinsic value, and that no group’s interests are more or less important than any
other. With normative approaches, you care about stakeholder theory because it is just and because it is
fair.

Concept

The core concept of the stakeholder theory is that a corporation enables people to come together to create
economic value. The voluntary participation and cooperation of different people and organizations allow all
participants to improve their own circumstances. To achieve success, stakeholder theory stresses that a
corporation’s leaders must identify what factors and values bring all of the company’s principal stakeholders
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together. They can then define the corporation’s purpose, decide how they want to conduct business and
develop the types of relationships they need with different stakeholders. By fostering a shared sense of the
value that the business creates, management can persuade stakeholders to help the company achieve its goals.

Stakeholder management

Stakeholder management is the systematic identification, analysis, planning and implementation of actions
designed to engage with stakeholders.
Stakeholders are individuals or groups with an interest in the project, programme or portfolio because they are
involved in the work or affected by the outcomes.

Most projects, programmes and portfolios will have a variety of stakeholders with different, and sometimes
competing, interests. These individuals and groups can have significant influence over the eventual success or
failure of the work.

Stakeholder management is a set of techniques that harnesses the positive influences and minimises the effect
of the negative influences. It comprises four main steps:

 identify stakeholders;
 assess their interest and influence;
 develop communication management plans;
 engage and influence stakeholders.

Identifying stakeholders will be done using research, interviews, brainstorming, checklists, lessons learned and
so on. The stakeholders and their areas of interest are usually shown in a table known as a stakeholder map.

Typical types of stakeholders will include:

 individuals and groups performing the work;

 individuals and groups affected by the work;
 owners, shareholders and customers;
 statutory and regulatory bodies.

Each stakeholder will then be classified according to potential impact. This is usually shown in a matrix that
estimates interest and influence on a simple scale such as low/medium/high. Those with an ability to directly
affect the outputs or benefits are sometimes referred to as key stakeholders.

Questions to consider when assessing stakeholders are:

 How will they be affected by the work?

 Will they be openly supportive, negative or ambivalent?
 What are their expectations and how can these be managed?
 Who and/or what influences the stakeholder’s view of the project?
 Who would be the best person to engage with the stakeholder?
 This analysis is used to develop a communication management plan. Appropriate strategies and actions
are then defined to engage with stakeholders in different parts of the matrix.

Communications with stakeholders who have high levels of interest and influence will be managed differently
from those with stakeholders of low interest and influence. Similarly, communications with stakeholders who
are inherently positive about the work will be different from those with stakeholders who are negative.

P3 managers must identify who should engage with each stakeholder. In many cases the P3 manager will take
on the task, but it is also useful to call upon peers, senior managers or others who may be better placed.
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As a dynamic document, the communication management plan must link to other plans such as the risk
management plan and key milestones within the schedule.

Stakeholder management becomes more complex when stakeholders’ views, roles or allegiances, etc. change
throughout the life cycle. For that reason, the stakeholder management steps must be repeated throughout the
life cycle.

Stakeholder Power

Stakeholder Power -means the ability to use resources to make an eventhappen or to secure a desired outcome.
Stakeholders have 5 different kinds of power: voting power, economic power, political power, legal power, and
informational power.

1.Voting Power- means that the stakeholder has a legitimate right to cast a vote. Shareholders typically
have voting power proportionate to the percentage of the company’s stock they own. They typically
have an opportunity to vote on major decisions like mergers and acquisitions, the composition of the
board of directors, and other issues that may come before the annual meeting. (Shareholder voting
power is NOT the same as voting power exercised by citizens).

2.Economic Power- suppliers, customers, employees, and other stakeholders have economic power
within the company. Suppliers can withhold supplies or refuse to fill orders if a company fails to meet
its contractual responsibilities. Customers may refuse to buy a company’s products/services if the
company acts improperly. They can boycott products if they believe the goods are too expensive, poorly
made, or unsafe. Employees can refuse to work under certain conditions, a form of economic power
known as a strike or slowdown. Economic power depends on how well organized a stakeholder group
is.

3.Political Power -governments exercise political power through legislation, regulations, or lawsuits.
While government agencies act directly, other stakeholders use their political power indirectly by
urging government to use its powers by passing new laws or enacting regulations. Citizens may vote for
candidates that support their views with respect to government laws and regulations affecting business.

4.Legal Power -Stakeholders have legal power when they bring suit against a company for damages,
based on harm caused by the firm. For instance, lawsuits brought by customers for damages caused by
defective products, brought by employees for damages caused by workplace injury, or brought by
environmentalists for damages caused by pollution or harm to species or habitat.

5.Informational Power - stakeholders have informational power when they have access to valuable data,
fact, or details and are able to bring their own information and perspectives to the attention of the public
or key decision makers.

Organisation’s Responsibilities toward its Stakeholders

Stakeholders are the individuals or groups to whom a business has a responsibility. The stakeholders of a
business are its employees, its customers, the general public, and its investors.

Responsibility to Employees
An organization’s first responsibility is to provide a job to employees. Keeping people employed and
letting them have time to enjoy the fruits of their labor is the finest thing business can do for society.
Beyond this fundamental responsibility, employers must provide a clean, safe working environment

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 that is free from all forms of discrimination. Companies should also strive to provide job security
whenever possible.

Responsibility to Customers
To be successful in today’s business environment, a company must satisfy its customers. A firm must
deliver what it promises, as well as be honest and forthright in everyday interactions with customers,
suppliers, and others. Recent research suggests that many consumers, particularly millennials, prefer
to do business with companies and brands that communicate socially responsible messages, utilize
sustainable manufacturing processes, and practice ethical business standards.

Responsibility to Society
A business must also be responsible to society. A business provides a community with jobs, goods, and
services. It also pays taxes that go to support schools, hospitals, and better roads.

Environmental Protection
Business is also responsible for protecting and improving the world’s fragile environment. The world’s
forests are being destroyed fast. Every second, an area the size of a football field is laid bare. Plant and
animal species are becoming extinct at the rate of 17 per hour. A continent-size hole is opening up in
the earth’s protective ozone shield. Each year we throw out 80 percent more refuse than we did in
1960; as a result, more than half of the nation’s landfills are filled to capacity.

Responsibilities to Investors
Companies’ relationships with investors also entail social responsibility. Although a company’s
economic responsibility to make a profit might seem to be its main obligation to its shareholders,
some investors increasingly are putting more emphasis on other aspects of social responsibility.