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.
ETHICAL PRINCIPLES IN BUSINESSES FROM AN INDIAN
PERSPECTIVE
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.
ETHICS
 Custom or character
 Code of behavior which are considered correct
 Normative sciences, moral questioning
 Concept of right or wrong behavior in human
Interaction
BUSINESS ETHICS
 Truth in business
 Commitment to justice
 Public integrity
 Set or moral rules that govern how businesses
generates
 Set or moral rules that govern how business decisions FOUR FORMS OF BUSINESS ORGANIZATIONS
are made SOLE PROPRIETORSHIP -owned by one person
 Set or moral rules that govern how people in the
business are treated. ADVANTAGES
 total undivided authority low organizational cost and
IN WHAT WAYS CAN BUSINESS HAVE A SET OF MORAL license fees tax savings no restrictions on type of
PRINCIPLES THAT THEY FOLLOW? business (as long as it is legal)
Displaying Business Ethics DISADVANTAGES
 Creating safe products  Unlimited liability
 Creating jobs  Limitation on size and on fund raising power
 Fair treatment of employees  Limited by management’s ability to be jack-of-all-trades
 Environmental protection
 Truthful about financial status PARTNERSHIP -Owned by two or more people

WHY STUDY BUSINESS ETHICS? ADVANTAGES

 Help develop skills to identify ethical issues.  Less formal with fewer legal obligations
 Help understand why or how people act unethically  Easy to get started
 Help us create ethical organizations  Sharing burden
 Help resist the pressures and temptations of the  Access to knowledge skills, experience and contacts
Environment.  Better decision-making
 Privacy
THE ETHICAL DECISION-MAKING PROCESS  Ownership and control are combined
Use these steps to solve ethical problems…  More partners more capital
1. Identify the ethical dilemma.  Prospective partners
2. Discover alternative actions.  Easy access to profits
3. Decide who might be affected.
4. List the probable effects of the alternative. DISADVANTAGES
5. Select the best alternative.  No independent legal status
 Unlimited liability
LEVELS OF BUSINESS ETHICS  Perceived lack of prestige
1. Law  Limited access to capital Potential for differences and
2. Policies conflict
3. Individuals  Slower, more difficult decision making
4. Consequences  Profit must be shared
 Personally demanding
BUSINESS is an organization or an enterprising entity which is  Taxation
engaged in economic inputs or resources involving material  Limits on business development
and labor to provide products or services for customers.
 Major activities like PURCHASING, MANUFACTURING, CORPORATION -Owned by stockholders, an entity created
MARKETING ADVERTISING, SELLING and ACCOUNTING by law
are greatly considered.
 The term also refers to organized efforts and activities ADVANTAGES
of individuals to produce and sell for profit.  Person liability protection
 Business security and perpetuity
PROFIT is the difference between the amount earned and the  Access to capital
amount spent in buying, operating or producing something. It  Tax benefits
is considered as the business’ financial gain or the bottom  Subject to numerous government regulations Separate
line. legal existence form owners
 Transfer ownership rights
WHY DO WE NEED TO EXAMINE BUSINESS ACTIVITIES  Continuous life
BASED ON THE MORAL PERSPECTIVE?
The answer is for us to make sure that an enterprise comes in DISADVANTAGES
as an aid in promoting the common good and in protecting  Lengthy application process Rigid formalities, protocols
any person’s rights and interests. and structure
 Double taxation
TYPE OF BUSINESS  Expensive
Service Business
Provides services rather than products Limited Liability Company (LLC) -Owned by ‘members’
Merchandising Business
Sell products they purchase from other businesses to ADVANTAGES
customers  Fewer corporate formalities
Manufacturing Business  No ownership restrictions
Change basic inputs into products that are sold to customers.  Ability to use the cash method of accounting
 Ability to place membership interest in a living trust
 Ability to deduct losses
 Tax flexibility
 Members controlled
 Avoid double taxation
DISADVANTAGES
 Profits subject to social security and medicare taxes
 Owners must immediately recognize profits
 Fewer fringe benefits
 Difficult to raise capital
ASSET Things of value owned by the business. Examples
include cash, machines, and buildings. To their owners, assets
possess service potential or utility that can be measured and
expressed in money terms.
BUSINESS ENTITY is any business organization that exists as
an economic unit.
LIABILITIES DEBTS owed by a business—or creditors’ equity.
Examples: notes payable, accounts payable.
STOCKHOLDERS’ EQUITY The owners’ interest in
corporation.
SOLE PROPRIETORSHIPS are business entities owned by one
single person.
PARTNERSHIPS are business entities owned by at least two
people.
CORPORATIONS are business entities owned by one person
or many people called shareholders.
SERVICE COMPANY is a business entity that provides services
to the public and does not sell a product.
MERCHANDISING COMPANIES are business entities selling a
product and possibly a service to the public.  A merchandising
company purchases the products to be sold from outside
vendors.
MANUFACTURING COMPANIES are business entities selling a
product to the public that is made by the company using raw
materials, direct labor and overhead.
BUSINESS ETHICS study, evaluation, analysis and questioning
of ethical standards, policies, moral norms, and ethical
theories that managers use in resolving moral issues and
ethical dilemmas affecting business.
BUSINESS ETHICS is considered as the study, evaluation,
analysis and questioning of ethical standards, policies, moral
norms, and ethical theories that managers use in resolving
moral issues and ethical dilemmas affecting business.
MORALLY RESPONSIBLE
 Employees
 Society
MORAL RESPONSIBILITY
 Care, welfare or treatment of others
 One’s capacity for making moral or rational decisions
BUSINESS LEADERSHIP affects the moral capability and
performance of organizations. They influence the scope and
character of formal ethics programs and the integration of
ethics into everyday organizational life.
CORE PRINCIPLES OF FAIRNESS, ACCOUNTABILITY AND
TRANSPARENCY
GOOD BUSINESS=GOOD GOVERNANCE
KEY DIMENSIONS OF INTEGRITY CAPACITY
 Process
 Judgement
 Development
 System
There is a need to convince managements that they should
develop their “integrity capacity” which is the individual
and/or collective capability for repeated process alignment of
moral awareness, deliberation, character and conduct.
PROCESS, JUDGEMENT, DEVELOPMENT AND SYSTEM should
a present challenges for business leaders so that they become
more aware of moral concerns and respond more effectively
to the problems that arise.
FAIRNESS Involves balancing the interests involved in all
decision-making. (hiring, firing, compensation,reward
system)
 EQUITY (ex. income distribution)
 OPTIMIZATION (trade off between equity and
efficiency)
 RECIPROCITY (effect of action returned)
JUSTICE : (a) justice which looks at the balance of benefits
and burdens distributed among members
(b) justice which can result from the application of rules,
policies or laws that apply to a society or a group.
ACCOUNTABILITY
 Obligation or willingness to accept responsibility or to
account for one’s action
 Answer ability for one’s actions or behavior
 Is to be liable to explain or justify one’s actions and
decisions. It is the process of holding into account which
requires TESTING, FORMING A JUDGEMENT and TAKING
ACTION. It is not synonymous with responsibility and
does not imply a management relationship. It is an
obligation or willingness to accept responsibility for
something that you have done.
1. Justify
2. Sanction
TRANSPARENCY
 Openness, communication which help in building trust
and integrity
 Visibility or accessibility of information concerning
business and financial activities
 Take decision rationally and objectively. It helps one to
take decision in a rational manner and in an objective
way.
1. Free access
2. Rules and regulation Traitorious violators or Heroic defenders of values
3. Prevent corruption

CODE OF ETHICS AND BUSINESS CONDUCT

SOCIAL FUNCTION OF BUSINESS
BENSON, 1989
POVERTY ALLEVIATION “legalistic” and “more likely to talk about the reputation of
 Programs and projects are made to improve the living the company..
conditions in underdeveloped communities.
 People become more capable workers. STEVENS, 1996
 Professionals were able to take advantage of the goods written documents which attempt to state the major
and services that businesses have to offer. philosophical principles and articulate the values embraced
 “When business thrive, So does the entire community” by the organization.

CONTINUING EXTREME POVERTY KAPTEIN AND WEMPE, 2002

 Economic growth is rarely uniformly distributed across
the country
 Persistent poverty exist because of failure of
government
 People experience cultural discrimination in legal and
political systems
OVERCOMING POVERTY TRAP
 All good things tend to move together… higher capital,
greater specialization, more advanced technology and
lower fertility.
policy documents defining responsibilities of the organization
to stakeholders and articulating the conduct expected of
employees
NIJHOF ET AL., 2003
Open guidelines describing behaviors and close guidelines
prohibiting certain behaviors
KAPTEIN, 2004
Instrument to enhance responsibility.. Clarify the norms and
values the organization seeks to uphold.

AREAS OF BUSINESS MOST IN NEED OF ETHICAL ATTENTION STEVENS, 1994

a. Employees Mission statements … Goals of the organization…
b. Customers
c. Suppliers CODE OF ETHICS
d. Stakeholders  Values statement
e. Society at large  Ethical principles that govern decisions and behavior at
a company or organization.
PHILIPPINE SET UP  Managing tool for setting out organization values,
The Social Responsibilities of Capitalist Business Practices responsibilities and ethical obligations
 Specific guidance for handling issues like harassment,
A. Business organizations have four levels of responsibility. safety and conflicts of interests..
1. Earning a profit
2. Legal responsibility CODE OF ETHICS (Inclusions)
3. Ethical responsibility
4. Discretionary responsibility ETHICAL PRINCIPLES
-workplace behavior
B. Morality of Advertising -protocols
DECEPTIVE ADS = X
R.A. 7394 VALUES
-honest, unbiased and unprejudiced work environment..
C. Basic employee rights, job discrimination, other labor-
related ethical issues ACCOUNTABILITY
PRESIDENTIAL DECREE NO. 442 -taking responsibility to your own actions, ensuring
Labor Code of The Philippines = Health, Safety and Social appropriate use of information, exercising diligence, duty and
Welfare Benefits obligations.

REPUBLIC ACT 6727 STANDARD OF CONDUCT

Wage Rationalization Act -job description, commitment to the organization

D. Insider trading STANDARD OF PRACTICE

Buying and selling of stocks -current policies and procedures and business operational
manual
E. Pollution and resource depletion
Take care of Earth’s resources DISCIPLINARY ACTIONS
-complaints handling and specific penalties for any violation
F. Whistle blowing of the code.

VALUES strengthen by CODE OF ETHICS
 Trustworthiness
 Respect
 Responsibility
 Fairness
 Care
 Citizenship
BUSINESS ETHICS and SOCIAL RESPONSIBILITYBUSINESS
ETHICS and SOCIAL RESPONSIBILITY
Corporate Culture:
How to create an Ethical Corporate Culture through code of
ethics
SAUSER AND SIMS (2013)
• an organizational culture grounded in moral character is
the ideal corporate culture
•Positive moral values are ingrained throughout the
organization
HOW DO WE BUILD A GOOD SET OF THE CODES?
 Creating Corporate Code of Ethics
 Adopt an existing Code of Ethics
 Provide Ethics Training
 Hire and Promote Ethical People
 Correct unethical behavior
 Take a PROACTIVE Strategy
 Conduct a Social Audit
 Protect Whistle Blowers
 Empower the guardians of integrity
 Assure commitment to the top
 Communicate the standards of conduct widely
throughout the organization and the industry.
 Designate an ethics officer with clear responsibility for
enforcing ethical standards.
 Establish a process for reporting violations of ethical
standards
 Actively investigate all reported violations
 Assure due diligence by the organization’s board of
directors
 Establish good relationship with stakeholders and
employees.
 LEAD BY EXAMPLE
CODE OF ETHICS
A code of ethics and professional conduct outlines the ethical
principles that govern decisions and behavior at a company
or organization. They give general outlines of how employees
should behave, as well as specific guidance for handling
issues like harassment, safety, and conflicts of interest.
HERE IS AN EXAMPLE SET OF CODE OF ETHICS AND
CONDUCT:
THE WORK ENVIRONMENT
Employees should act with integrity, comply with laws,
maintain a professional work environment and comply with
company policies. They should treat customers, colleagues,
and partners ethically at all times.
CONFLICTS OF INTEREST
A company's reputation depends on the actions and integrity
of its employees. It is essential that they avoid relationships
and activities that hurt, or appears to hurt, their ability to
make objective and fair decisions.
PROTECTING COMPANY ASSETS
Employees should always act to protect company assets,
including physical, intellectual, and electronic or digital
properties.
ANTI-BRIBERY AND CORRUPTION
A company's integrity is essential for maintaining
trustworthiness and reputation.
Employees should always do their work fairly, honestly, and
legally.
ATTENDANCE AND PUNCTUALITY
Employees are expected to be regular and punctual in
attendance. This means being in the office, ready to work, at
starting time each day. Absenteeism and tardiness burden
other employees and the company.
ABSENCE WITHOUT NOTICE
Employees who are unable to work due to illness or an
accident should notify their supervisor. This allows the
company to arrange for coverage of their duties and helps
others continue to work in their absence. If an employee
does a report for work and the company is not notified of an
employee's status for 3 days, it is typically considered a job
abandonment.
GENERAL HARASSMENT AND SEXUAL HARASSMENT
This company is committed to providing a work environment
free of discrimination and unlawful harassment. Actions,
words, jokes, or comments based on an individual’s sex, race,
ethnicity, age, religion, or any other legally protected
characteristic are not tolerated.
CELL PHONE USE AT WORK
Personal cell phone usage during work hours is discouraged,
except in extreme cases such as an emergency.
DRESS CODE
A professional appearance is important when employees
work with customers or potential customers. Employees
should be well groomed and dressed appropriately for the
business and for their position.
SUBSTANCE ABUSE
The manufacture, distribution, possession, sale, or purchase
of controlled substances of abuse on company property is
prohibited. Being under the influence of illegal drugs, alcohol,
or substances of abuse on company property is prohibited.
Working while under the influence of prescription drugs that
impair performance is prohibited.
TOBACCO PRODUCTS
The use of tobacco products on company property, outside of
permitted areas, is specifically prohibited.
INTERNET USE AT WORK
Employees may use the Internet when appropriate to access
information needed to conduct a business company business.
Use of the Internet must not disrupt or injure the company
computer network. Use of the Internet must not interfere
with an employee's productivity.

SIX COMPONENTS OF A GREAT CORPORATE CULTURE

(COLEMAN, 2013)

1. VISION
A great culture starts with a vision or mission statement.
These simple turns of phrase guide a company’s values and
provide it with purpose. That purpose, in turn, orients every
decision employees make. When they are deeply authentic
and prominently displayed, good vision statements can even
help orient customers, suppliers, and other stakeholders.

2. VALUES
A company’s values are the core of its culture. While a vision
articulates a company’s purpose, values offer a set of
guidelines on the behaviors and mindsets needed to achieve
that vision.

3. PRACTICES
Values are of little importance unless they are enshrined in a
company’s practices. If an organization professes, “people
are our greatest asset,” it should also be ready to invest in
people in visible ways.

4. PEOPLE
No company can build a coherent culture without people
who either share its core values or possess the willingness
and ability to embrace those values.

5. NARRATIVE
Any organization has a unique history — a unique story. And
the ability to unearth that history and craft it into a narrative
is a core element of culture creation.

6. PLACE
Whether geography, architecture, or aesthetic design —
impacts the values and behaviors of people in a workplace.