Business

Environment

B.N. Ghosh

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 Chapter 7

Ethical Environment in
Business

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 Learning Objectives
• The meaning, nature, purpose, and importance of business ethics

• The historical evolution of business ethics

• Why contemporary business environment is considered unethical

• The factors determining ethical environment in business

• The basic ethical principles to make business decisions

• How to make and general ethical tests to ensure good ethical decisions
in business

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 Meaning and nature of business
ethics
• Business ethics is essentially a normative science where one can
find various ethical norms and standard practices as prevalent in a
particular country

• Business ethics is relative in nature.

• Business ethics is diagnostic, evaluative, and prescriptive.

• The subject of business ethics makes a systematic analysis,
description, and prescription in business, industry, commerce, trade
and other related activities, institutions, beliefs, and practices in the
light of those cognitive ethical principles.

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 Is there any relationship between
ethics and business ethics?
• Ethics and business ethics are interdependent in many ways, both
theoretically and empirically.

• Business ethics is the application of various theories, normative

rules, principles, concepts and precepts of ethics.

• Pure ethics provides the necessary direction and trajectory to the

subject of business ethics.

• The theories of ethics provide the basic moral standard, a set of

analytical guidelines and norms for references, and comparison for
the purpose of action and business policy making.

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Purpose and importance of business
ethics

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Major Purposes of Business Ethics
• Knowledge of business ethics is essential for the manager who
wants to apply the principles of ethics in his organization
• A study of business ethics makes it very convenient for the
business manager to understand and apply all those ethical
rules and principles
• Business ethics can be helpful to a firm in the application of
ethical rules in making business decisions and strategies of a firm
that are morally upright, fair, consistent, and just

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Major Purposes of Business Ethics
• On the basis of the rules of business ethics, a business firm can
identify the areas that are running through ethical deficit

• In case a firm wants to make itself ethically competent,

contestable, peaceful, and progressive, it can apply the
principles of business ethics.

• The application of the principles of business ethics has become

quite necessary now in the business world

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 Importance of Business Ethics
• There is no doubt that profit maximization may be the most
important objective of a commercial firm, but the basic message
of BE is that the earning of profit should be in a fair, just, and
righteous way.

• The micro aspect of business ethics is related to a particular

segment of the business, or the personal or professional life of a
manager or director. The macro dimension of business ethics
covers all the areas of business world that encompasses policy
formulation, strategy making and implementation, resolution of
conflicts, and so forth.

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 Importance of Business Ethics
• The trusts and relations have to grow automatically on the basis of
some natural laws, tacit normative principles, and moral values, all
of which are the stock-in-trade of business ethics.
• A company that is working on ethical principles gains the
confidence and trust of all stakeholders including suppliers,
employees, customers, and the public.

• Ethically inspired employees and management are helpful to

consciously or unconsciously change the work culture of the
company.

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 Historical evolution of business
ethics
• The idea of the importance of ethics in the realm of business,
trade, and commerce goes back to the Greek period and more
precisely, can be related to the time of Socrates.

• During the period of Aristotle and the medieval philosophers, an

ideal life was interpreted as the life of contemplation, and during the
period of the Scholastic economy, trade was looked down upon.

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 Why is contemporary business
environment considered unethical?
• There is enough historical evidence to show that for the prosperity
in business, many business groups or clans had to go against many
established socio-ethical norms and standards.

• These groups in the course of time were declared the out-groups

and had to suffer from social stigma and pass through the painful
period of social ostracism.

• In developing countries, as a general empirical fact, one can note

that the public servants, the police, and the business people are
engaged in unethical practices.

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Frequently Encountered Unethical Business
Activities
Slavery, forced, or bonded labour
Sweat shops and inhuman working conditions

Immoral treatment and harassment

Cheating and fraudulent behaviour

Theft and pilferage

Favouritism, discrimination, and unequal treatment

Corruption and bribery

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Factors determining ethical environment in
business
• Organizational Value Premise
The corporate culture emanating from the value premises of the
company, its moral principles, and corporate objectives are more or
less permanent in nature.

• Ethical Intensity, Ethical Grounding, and Superstructure

Ethical intensity is the degree of significance of the ethical issue
related to the case (problem) and also in the decision-making.

• Personal Predisposition and Proclivities

• Personal Values in Decision-making

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Personal Predisposition and Proclivities

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Personal Predisposition and Proclivities

Education level

Gender values

Age structure

Ethical leadership

Rules vs discretion

Esoteric and exoteric factors

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 Personal Values in Decision-making
• Personal commitment and preferences
• Ethical rooting and intensity
• Sense of duty
• Nature of personality traits
• Commitment to perform social responsibilities
• Love for fairness, justice, and righteousness
• Sense of trusteeship
• Eagerness to have good citizenship
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Basic ethical principles (theories or models) for
making business decisions
Deontic Principle (Kantian Universalism)

Consequentialist Principle

Principle of Justice

Principle of Rights

Principle of Virtues

Principle of Common Good

Principle of Care and Compassion

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 How to make good ethical decisions in
business
• There is no universal recipe for making good ethical decisions.

• Each ethical problem has its own unique problem, and hence,
one solution is not applicable everywhere.

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General Ethical Tests to Ensure Good
Ethical Decisions

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