Business Ethics - Introduction

Ethics is a subject of social science that is related with moral principles and social values. 'Business
Ethics' can be termed as a study of proper business policies and practices regarding potentially
controversial issues, such as corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary responsibilities.
Businesses must abide by some basic principles. It should provide quality goods and services at
reasonable prices to their consumers. It must also avoid adulteration, misleading advertisements,
and other unfair malpractices.

A business must also perform other duties such as distributing fair wages, providing good working
conditions, not exploiting the workers, encouraging competition, etc.

Business Ethics – Definition

There are many definitions of business ethics, but the ones given by Andrew Crane and Raymond
C. Baumhart are considered the most appropriate ones.
According to Crane, "Business ethics is the study of business situations, activities, and decisions
where issues of right and wrong are addressed."
Baumhart defines, "The ethics of business is the ethics of responsibility. The business man must
promise that he will not harm knowingly."

Features of Business Ethics

There are eight major features of business ethics −
• Code of Conduct − Business ethics is actually a form of codes of conduct. It lets us know
what to do and what not to do. Businesses must follow this code of conduct.
• Based on Moral and Social Values − Business ethics is a subject that is based on moral
and social values. It offers some moral and social principles (rules) for conducting a
business.
• Protection to Social Groups − Business ethics protect various social groups including
consumers, employees, small businesspersons, government, shareholders, creditors, etc.
• Offers a Basic Framework − Business ethics is the basic framework for doing business
properly. It constructs the social, cultural, legal, economic, and other limits in which a
business must operate.
• Voluntary − Business ethics is meant to be voluntary. It should be self-practiced and must
not be enforced by law.
 • Requires Education & Guidance − Businessmen should get proper education and
guidance about business ethics. Trade Associations and Chambers of Commerce should
be active enough in this matter.
• Relative Term − Business ethics is a relative term. It changes from one business to another
and from one country to another.
• New Concept − Business ethics is a relatively newer concept. Developed countries have
more exposure to business ethics, while poor and developing countries are relatively
backward in applying the principles of business ethics.

Principles of Business Ethics

The principles of business ethics are related to social groups that comprise of consumers,
employees, investors, and the local community. The important rules or principles of business ethics
are as follows −
• Avoid Exploitation of Consumers − Do not cheat and exploit consumer with measures
such as artificial price rise and adulteration.
• Avoid Profiteering − Unscrupulous business activities such as hoarding, black-marketing,
selling banned or harmful goods to earn exorbitant profits must be avoided.
• Encourage Healthy Competition − A healthy competitive atmosphere that offers certain
benefits to the consumers must be encouraged.
• Ensure Accuracy − Accuracy in weighing, packaging and quality of supplying goods to the
consumers has to be followed.
• Pay Taxes Regularly − Taxes and other duties to the government must be honestly and
regularly paid.
• Get the Accounts Audited − Proper business records, accounts must be managed. All
authorized persons and authorities should have access to these details.
• Fair Treatment to Employees − Fair wages or salaries, facilities and incentives must be
provided to the employees.
• Keep the Investors Informed − The shareholders and investors must know about the
financial and other important decisions of the company.
• Avoid Injustice and Discrimination − Avoid all types of injustice and partiality to
employees. Discrimination based on gender, race, religion, language, nationality, etc. should
be avoided.
• No Bribe and Corruption − Do not give expensive gifts, commissions and payoffs to people
having influence.
• Discourage Secret Agreement − Making secret agreements with other business people to
influence production, distribution, pricing etc. are unethical.
• Service before Profit − Accept the principle of "service first and profit next."
• Practice Fair Business − Businesses should be fair, humane, efficient and dynamic to offer
certain benefits to consumers.
• Avoid Monopoly − No private monopolies and concentration of economic power should be
practiced.
• Fulfil Customers’ Expectations − Adjust your business activities as per the demands,
needs and expectations of the customers.
• Respect Consumers Rights − Honor the basic rights of the consumers.
• Accept Social Responsibilities − Honor responsibilities towards the society.
 • Satisfy Consumers’ Wants − Satisfy the wants of the consumers as the main objective of
the business is to satisfy the consumer’s wants. All business operations must have this aim.
• Service Motive − Service and consumer's satisfaction should get more attention than profit-
maximization.
• Optimum Utilization of Resources − Ensure optimum utilization of resources to remove
poverty and to increase the standard of living of people.
• Intentions of Business − Use permitted legal and sacred means to do business. Avoid
Illegal, unscrupulous and evil means.
Follow Woodrow Wilson's rules − There are four important principles of business ethics. These
four rules are as follows −
• Rule of publicity − According to this principle, the business must tell the people clearly,
what it tends to do.
• Rule of equivalent price − The customer should get proper value for their money. Below
standard, outdated and inferior goods should not be sold at high prices.
• Rule of conscience in business − The businesspersons must have conscience while doing
business, i.e. a morale sense of judging what is right and what is wrong.
• Rule of spirit of service − The business must give importance to the service motive.

Example of Unethical Business Practices

Satyam Computers, a global IT company, was defamed in a notorious list of companies involved
in fraudulent financial activities. The list includes names such as Enron, WorldCom, Parmalat,
Ahold, Allied Irish, Bearings and Kidder Peabody.
Satyam’s CEO, Ramalinga Raju, accepted his role in a broad accounting impropriety that had
overstated the company’s net revenue and profit. The company had earlier reported a cash reserve
of approximately $1.04 billion that actually existed only in books but not in reality.

In his letter to his board, exposing the fraud, Satyam’s Raju showed the propensity of the fraud. He
stated that, “What started as a marginal gap between actual operating profits and ones reflected in
the books of accounts continued to grow over the years. It has attained unmanageable proportions.
…”
Later, he described the process as “like riding a tiger, not knowing how to get off without being
eaten.”
Business Ethics
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Everything you need to know about business ethics. Business ethics refers to
the application of ethical principles and moral values while conducting
business.
A company must demonstrate ethical behaviour in all internal matters as
well as in dealings with the external environment.
All stakeholders must ensure that ethical standards are adhered to while
handling business transactions. The challenge for management is to make
sure that the standards of all internal functions are reasonably maintained in
a controlled environment, and are managed through policy, procedures, and
punishments.
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According to Garrett,
“Business ethics studies the special obligation which a man and citizen accept
when he becomes a part of the world of commerce.” As a matter of fact,
business ethics deals with morality in the business environment. That is why
it is that “business ethics refers to the system of moral principles and of
conduct applied to business.”
Learn about:-

1. Introduction to Business Ethics 2. Meaning of Business Ethics 3. Definitions

4. Features 5. Examples 6. Need 7. Elements 8. Principles

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9. Factors 10. Importance 11. Golden Rules 12. Measures 13. Criteria 14.
Different Myths 15. Significance 16. Barriers and Solutions.

Business Ethics: Introduction, Meaning, Definitions,

Need, Elements, Principles, Factors and Significance

Contents:
1. Introduction to Business Ethics
2. Meaning of Business Ethics
3. Definitions of Business Ethics
 4. Features of Business Ethics
5. Examples of Business Ethics
6. Need of Business Ethics
7. Elements of Business Ethics
8. Principles of Business Ethics
9. Factors of Business Ethics
10. Importance of Business Ethics
11. Golden Rules of Business Ethics
12. Measures of Business Ethics
13. Criteria of Business Ethics
14. Different Myths of Business Ethics
15. Significance of Business Ethics
16. Barriers and Solutions of Business Ethics

Business Ethics – Introduction

The term ‘ethics’ has been derived from the Greek word ‘ethos’ which implies
character, ideas and standards of behavior practiced within a society. Personal
ethics define right and wrong behaviour for an individual. In the business
sense, ethics describe what constitutes good or bad in human conduct in
organizational context. We can also say that business ethics are concerned with
making life, not just living.
By definition, business ethics are moral ideas that guide the way a business
acts. It is the application of ethical reasoning to certain business situations and
activities, so that any moral issue emerging in business can be resolved or
clarified.
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A businessperson is said to be ethical only when his or her actions are

righteous arid in favor of the society. Ethical behavior plays a significant role in
any business and in the advancement of the society. Ethical behavior results in
better goodwill in the market, wins public confidence and success in the
business domain.
For a better understanding of the topic, some of the do’s and don’ts
of ethical conduct are listed below:
Do’s of Business Ethics:
1. Pay taxes regularly and discharge other duties of a good citizen.
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2. Ensure the products are properly labeled to provide the necessary

information to the customer.
3. Compensate employees fairly and see to it that they are justly treated.
4. Make accurate and correct business documents available to the authorized
government agencies and organizations.
Don’ts of Business Ethics:
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1. Avoid cheating the consumer by way of misleading advertisement about the

company product.
2. Do not employ unfair production practices or sell sub-standard or
adulterated goods.
3. Abstain from misappropriating company funds.
4. Do not resort to black-marketing, hoarding and profiteering.
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5. Avoid sharing confidential business information with the competitors.

6. Refrain from destroying the goodwill and reputation of competitors by using
wrong means.

Business Ethics – Meaning

Business ethics refers to the application of ethical principles and moral values
while conducting business. A company must demonstrate ethical behaviour in
all internal matters as well as in dealings with the external environment. All
stakeholders must ensure that ethical standards are adhered to while handling
business transactions. The challenge for management is to make sure that the
standards of all internal functions are reasonably maintained in a controlled
environment, and are managed through policy, procedures, and punishments.
To understand the nature of this issue in greater detail, one needs to first
understand the challenges inherent in various internal functions of a company.
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Today, the maturity in corporate practices and standards has ensured that
fairly well- established procedures are followed in competitive companies.
Usually it is seen that in companies, business ethics are always normative in
nature, that is, prescriptive about the ‘dos and don’ts’. The interest in business
ethics was accelerated dramatically during the 1980s and 1990s, both within
major corporations and within academia. This was mainly because of the
surfacing of many corporate scams and frauds, especially, with respect to
financial instruments, markets, and false reporting.
However, most major companies today lay emphasis on commitment to
promoting non-economic social values under a variety of headings such as
ethics codes, or social responsibility charters.
Infosys’ ‘code of conduct and business ethics’ has detailed guidelines to help
guide its transactions with employees, communities, customers, governments,
investors, regulators, and society. This is what the company believes will help it
achieve the highest standards of governance and help it live up to the level of
transparency and integrity it has set itself.
Similarly, Toyota Motor Corporation is another company that is well-respected
across the globe for its guiding values and code of conduct.
Another well-known company that is internationally talked about is Hewlett-
Packard (HP). It has set standards of business conduct (SBC) that form the
basis of ethics in its business. There are regular updates which reflect recent
policy, business, organizational, and legislative changes. It is believed that the
SBC provides helpful links to questions and answers, key tips, and red flags to
assist in applying it to situations encountered by an employee.

The SBC also contains links to corporate policies and other supporting
documents. The company SBC cannot contain every policy that is relevant in
every country and for every employee. In addition to the guidance contained in
SBC, there are other policies and rules that must be followed. If employees
have concerns or questions about the right thing to do, they are encouraged to
check with management.

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Hewlett-Packard recommends a test called ‘the headline test’ that encourages

an employee to evaluate the soundness and impact of decisions. It
recommends that decisions that are likely to make an employee uncomfortable
in front of colleagues should not be pursued. This is a very simplified way of
saying that the company does not want an employee to do something that is
not legal, or not in its SBC.

To summarize, the following are the guidelines that companies

must set in this regard:
1. Employees must live up to the core values and beliefs that are set up.
2. Every company sets a code of conduct and ethics, and along with other
policies and procedures, an employee is expected to strictly adhere to the
same.
3. A company does not encourage what is not legal. Even if it is legal, it should
be conducted as per policy guidelines. In case of doubt, an employee must
approach management for guidance.
4. Employees are discouraged to do anything that they would feel
uncomfortable doing in front of an audience.
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It is clear that the onus lies with employees to follow the guidelines. These
guidelines are set by management with the approval of the board, and must be
comprehensive and involve both internal and external stakeholders.
It is important to observe that though the code of conduct and ethics is written
and put into practice by a company, the inability to live by it happens, at times,
because of failure at the top. One such case is that of Mark Hurd, a former chief
executive of HP.
In a similar incident, Phaneesh Murthy resigned on 23 July 2002 from Infosys,
announcing that a sexual harassment case had been filed against him by a
former employee. Since sexual harassment issues were discussed only behind
closed doors, and because Phaneesh Murthy was a senior and successful
executive, widely acclaimed for his transparent management and ethical
corporate governance, the incident sent shock waves across corporate India.
Sexual harassment and discrimination against women are common ethical
issues. As early as 1997, the Supreme Court’s case of the NGO Vishakha versus
the State of Rajasthan, clearly delineated the concept of sexual harassment at
the workplace and set down guidelines for government departments, business
houses, and others. According to the court, it ‘includes such unwelcome
sexually-determined behaviour (whether directly or by implication) as physical
contacts and advances, a demand or request for sexual favours, sexually-
coloured remarks, showing pornography, and any other unwelcome physical,
verbal, or non-verbal conduct of sexual nature’.
However, some feel that despite the court’s insistence that these guidelines be
notified, and companies such as Infosys seriously putting such a policy in
place, actual complaints of sexual harassment are few and far between, and not
a true reflection of what goes on at the workplace.

Business Ethics – Definitions: Suggested by Baumahart, P.W. Wrigh,

Hurley,T.M. Garrett and Wheeler
The word ‘ethics’ is derived from the Greek word ‘ethos’ which refers to
character. Baumahart defines the term ‘ethical’ as concerning principles of
human conduct.

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Ethics as matter of fact, deals with certain standards of conduct and morals.
Ethics is an indirect governing force behind every human conduct, may it be
that of an individual or that of an organisation. It directs human behaviour and
differentiates between proper/improper, right/wrong or fair/unfair human
actions.
P.W. Wrigh defines, “Ethics is that branch of philosophy which is the
systematic study of reflective choice, of the standards of right or wrong by
which it is to be guided and of the goods towards which it may ultimately be
directed.

Hurley defines Ethics as a system of moral principles.

Whether there should be a separate ethics for business is a controversial issue.

For example, according to Drucker, every individual and organisation in
society should abide by certain moral codes, and that there is no separate
ethics of business. However, there are others who say that every profession is
bound by certain ethical principles and rules of conduct which reflect its
responsibility, authority and dignity.

Therefore, there should be something like business ethics. A business should

not be allowed to conduct itself in a manner which can be detrimental to the
interests of other elements of society or the business itself. They assert that
there should be business ethics so that the business may be conducted
according to certain self-recognised moral standards.

Due to the controversy referred above, on the question whether there should
be separate ethics of business or not, there is no unanimity of opinion on what
constitute business ethics. To some, business ethics is “businessman’s integrity
so far as his conduct or behaviour is concerned in all fields of business as well
as towards the society and other businesses.”

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According to Garrett, “Business ethics studies the special obligation which a

man and citizen accept when he becomes a part of the world of commerce.” As
a matter of fact, business ethics deals with morality in the business
environment. That is why it is that “business ethics refers to the system of
moral principles and of conduct applied to business.”

Here are few important definitions of business ethics:

According to Wheeler, “Business Ethics is an art and science for maintaining

harmonious relationship with society, its various groups and institutions as
well as reorganising the moral responsibility for the Tightness or wrongness of
business conduct.”

T.M. Garrett defines, “Business ethics is primarily concerned with the

relationship of business goals and techniques to specifically human ends.”
However, it should not be forgotten that the basic ethical standards are
universal; the difference lies in the application of ethical principles to business
situations. The same action may be ethically right in one situation or in a
particular society whereas that very action may be ethically wrong in another
situation or in particular in another society.

It is because of moral standards prevalent in particular society. Hence, whether

a particular business practice is fair or not will be judged from the fact that
whether it is consistent or inconsistent with the generally accepted customs of
conduct and right living in a society.

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Similarly it is not essential that an action which is legally right may also be
ethically right, because, ethics extends beyond the legal question and involves
goodness and badness of an act. For example, in a society where there may be
acute shortage of a particular commodity it may not be legally wrong to charge
even a very high price but ethically it may not be justified.

Business Ethics – 9 Features

1. Business ethics is a discipline.

2. It is considered both as science and art.

3. It tests the rules and moral standards and is dynamic in nature.

4. It is based on theological principles such as sincerity, human welfare, service

etc.

5. It is based on reality and social customs prevailing in business environment.

6. It studies the activities, decisions and behaviour which are related to human
being.

7. It has a universal application.

8. It helps in developing personal dignity.

9. It keeps harmony between different roles of businessman, with every citizen,

customer, owner and investors.
Business Ethics – 6 Examples
Every business is supposed to conduct its operations in an ethical manner or in
a socially desirable way.

The following are some examples of ethical business practices:

(i) To charge fair prices for their products.

(ii) To use correct weights for measuring merchandise.

(iii) To comply with tax laws of the country.

(iv) To make reasonable profits from business/trading and not to remain

engaged in profiteering.

(v) To supply genuine and safe products to customers.

(vi) To give fair treatment to all employees (i.e., avoid discrimination at work
place).

Amazon(dot)com has a reputation for being an ethical company and its

employees are expected to always act ethically, and in the best interest of the
company. By contrast, Indians’ trust in corporations has been strained because
of unethical behaviour of executives in a number of firms and banks. The loss
of public trust threatens the integrity of business. It is in this context that we
refer to the importance and significance of ethical behaviour in business.

Business Ethics – 6 Main Needs

The development of a business has an impact on the lifestyle of a businessman.
The behaviour of a businessman has close relationship with his lifestyle.

Hence, it is necessary to observe business ethics for the following

reasons:
1. Survival of the Business Unit:
Businessmen should consider the interest of the business unit. Unethical
practices of businessmen will lead to the closure of business unit. The closure
of a business unit does not only create problems to business but also to
employees and the society in general. Normally, good behaviour is rewarded
and bad behaviour is punished. Since, a business is an economic institution, it
aims at maximising profits.

Businessmen do not maximise the profit at the cost of existence of a business

unit. The behaviour of a businessman is affected by some of the factors such as
– leadership qualities, integrity, knowledge, skills, influence and exercising
power. Businessmen are expected to protect their units in all respects.

2. Growth of Business Unit:

The next reason for observing business ethics is that it ensures the growth of a
business. Whenever a businessman observes ethics strictly, definitely the
particular business unit will get developed. A business could not be run in such
a manner as is detrimental to the interest of society or business itself. So, it is
argued that there should be some business ethics for the growth of a business.

3. Earning Goodwill:
The prime objective of any business is to earn profit. At the same time, no
business is allowed to earn profit without following business ethics. If business
ethics are properly followed by a business, automatically that particular
business unit earns a good name among the public.

4. Improving the Confidence:

Business ethics are necessary to improve the confidence of the customers,
employees and the like. If confidence is infused, they (customers and
employees) will popularise the name or excellent consumer services of the
particular business unit. For example, by speaking well of its merits and
pointing out its flaws.

5. Maintaining Inter-Relationship:
No business functions separately or independently. Each business has close
relationship with another business even though the nature and size of the other
business differs. The proverb “No tree can be considered as a forest” attests
this fact. It is expected that each business unit should have a smooth
relationship with others. The inter-relationship of business is maintained by
adopting business ethics.

6. Solving Social Problems:

If a businessman observes ethics in his business, the public have no difficult in
having their wants fulfilled. There is no bargaining between the businessman
and public. There is a fair treatment of an employee by him. This will avoid
social problems like strike, lockout, etc.
Business Ethics – 5 Prime Elements: Top Management Commitment,
Code of Ethics, Compliance Mechanisms, Employee Involvement and
Regular Monitoring
Ethical behavior benefits both business organizations and society. Hence, a
business firm should pledge itself to nurturing business ethics in its day-to-day
working.
The prime elements of business ethics are discussed as under:
Element # 1. Top Management Commitment:
The executives at the top level play a remarkable role in guiding the
organization towards ethical behavior. The board of directors, the CEO,
Chairman and departmental heads must show the way by their dedication to
ethical conduct. They should encourage the employees in imbibing and
practicing moral values.
Element # 2. Code of Ethics:
It is a good practice for an ethical organization to have a written code of
conduct defining the principles of conduct to be followed. The code of conduct
comprises issues such as honesty, product safety, fair marketing practices, fair
business practices, health and safety at work etc.
Element # 3. Compliance Mechanisms:
A business organization should have suitable mechanisms in place to make
sure that actual decisions and actions of the employees cohere with the
company’s ethical standards. For instance, the company must see to it that the
ethical code is followed in business functions such as production, recruitment,
selection and training. There should be a reliable system of proper
communication for employees to report any incident of unethical behavior.
Element # 4. Employee Involvement:
The management must involve employees at all levels in the implementation of
ethical programs and policies because they are one of the main practitioners of
ethical policies. In addition, small groups of employees can be formed to
review the company’s ethical policies. This will help the policymakers in
gauging the thoughts of employees about such ethical policies and revise them
if it deems fit.
Element # 5. Regular Monitoring:
The results of ethical programs organised are hard to be measured
meticulously. Nonetheless, business organizations should regularly check the
degree to which the ethical practices have been followed. On the basis of the
gathered data, the top management and other personnel should review the
company’s ethical policy and initiatives.

Business Ethics – 30 Basic Principles

Following are some of the basic principles of business ethics.
They are briefly explained:
1. Service motive should be in the first place rather than profit motive, even
though the very purpose of any business is to earn profits.

2. There is no discrimination against any particular group of people, say the

rich, the poor, the high, the low, the caste, the religion, etc.

3. Fullest satisfaction should be available to consumers.

4. There is no lack of consideration for clean environment.

5. Human feelings are properly considered while rendering service.

6. There is no wastage or misuse of available scarce resources.

7. Business must be a dynamic and efficient one.

8. Business should provide quality products at reasonable price.

9. Business must maintain or improve standard of living.

10. There must be healthy competition.

11. Employees have no fear regarding the security of job. In other words, there
should be job security to employees.

12. Businessman must be sincere in payment of fair wages.

13. Better working conditions or environment should be provided.

14. Efficient employees are properly motivated and recognised.

15. Employees are requested to participate in management.

16. Monetary and non-monetary incentives must be available to employees.

17. Businessman must pay taxes promptly and obey other obligations
promptly.

18. Business unit must avoid unfair trade practices like hoarding, black-
marketing, etc.

19. There should be no formation of cartel agreements to control production,

price, etc.

20. Businessman must disclose all relevant information to needy persons.

21. Businessman must prepare genuine books of accounts and presents before
all authorized persons as and when required by them.

22. He should protect the interests of its members at the time of

amalgamations, absorption and the like.

23. He should be ready to extend mutual co-operation and mutual help.

24. Business should act as a partner in the development of nation.

25. He should follow proper communication system at all levels.

26. He should not make promises that could not be fulfilled.

27. Business assets should not be utilized by its owner or employees for
personal use.

28. Employees are allowed free speech in the work place.

29. Business unit should follow proper personnel policy with regard to
promotion, transfer and the like.

30. Businessman should not indulge in politics.

Business Ethics – 5 Major Factors: Legislative Framework, Regulatory

Framework of the Government, Corporates Ethical Codes, Societal
Obligations and a Few Others
Following factors affecting the level of business ethics:
Factor # 1. Legislative Framework:
Ethics is a voluntary phenomenon. It cannot be forced but it should be
persuaded. However, if businesses are not giving due weightage to ethics in
their behaviour it is for the laws to intervene in the process. Laws are generally
passed as result of low ethical standards or the failure to recognise social
issues.
Legal action or government directives are the result of social pressure. A
practice can be made illegal if society views it as being unethical. For example,
if contributions to political parties by corporates are being viewed as excessive
and unethical then the practice can be banned.
Factor # 2. Regulatory Framework of the Government:
From time to time, government regulates the working conditions, product
safety, statutory warnings (on cigarettes and other harmful products) etc.
These are all supported by laws or guidelines. These guidelines help the
entrepreneurs in determining the working behaviour as per the acceptable
standards and practices.
Similarly, Jago Grahak Jago is another persuading strategy among the
potential consumers about the corporate business practices. This has also been
launched by the Ministry of Consumer Affairs to improve awareness about
corporate defaults in their marketing practices.
Factor # 3. Corporates Ethical Codes:
Many times business provides specific guidelines to their managers and
employees about the ethical codes of behaviour. One important question in
such instances is whether individuals within organizations are really governed
by the code of ethics or give lip services to the guidelines.
Factor # 4. Societal Obligations:
Social forces and pressure have considerable influence on ethics in business.
Job reservation to the handicapped in business is an important example of
societal obligations being fulfilled by them. Society in fact, forces the
entrepreneurs to alter their decisions by taking a broader view of the
environment and the needs of society.
Factor # 5. Vision and Mission of Business:
Every day ethical decisions are usually made between the lesser of the two evils
rather than obvious right and wrong dimension of the judgment. These
judgments generally include different types of values being persued by the
industrial house in the vision and mission of the group companies. In this
context, we can include the norms of ethical standards formulated by the Tata
and Birla group of companies.

Business Ethics – 6 Importance: Basic Human Needs, Improve

Creditability, Improve Coordination, Better Decision Making and a Few
Others
Importance’s of corporate ethics are as follows:
1. Basic Human Needs:
Ethics corresponds to basic human needs. It is human trait that man desires to
be ethical: not only in his private life but also in his business affairs where,
being a manager, he knows his decisions may affect the lives of thousands of
employees or customers.
2. Improve Creditability:
Values create credibility with the public. A business perceived by the public to
be ethically and socially responsive would be honoured and respected even by
those who have no intimate knowledge of its actual working. There will be an
instinctive prejudice in favour of its product; since people believes that the
business offers value for their money. Public issues attract an immediate
response from the business as it affects its credibility.
3. Improve Coordination:
Values give credibility to the management by coordinating the language of
value from the top to the lower level in the organisations. Organisational
ethics, when perceived by the employees as genuine and create common goals,
improves ethical environment.
The entrepreneur has credibility with its employees precisely because it has
credibility with the public. Neither sound business strategy, nor a generous
compensation policy and fringe benefits can win the employee credibility.
Perceived moral and social uprightness about the business by its employees
can be the basis for credibility among the employees.
4. Better Decision Making:
Values help better decision making. An ethical attitude helps the management
to make better decisions, i.e., decisions which are in the interest of the public,
their employees, and the business own long good, even though the decision
making is slower. Ethics force a management to take various aspects of
economic, social decisions keeping in mind their ethical implications.
5. Trade Off between Ethics and Profits:
Ethic and profit can go together. A company, which is inspired by ethical
conducts, is also profitable one. Value driven companies are sure to be
successful in long run, though in the short run they can loose money. Ethics
help the business to develop long term brand equity in the society which
ultimately improves sales and profit.
6. Humanitarian Approach:
An ethical oriented management takes measures to prevent pollution and
protects workers health. Leading business houses had already initiated social
responsibility initiatives to protect the environment, provides social welfare
amenities to the workers etc. These business houses are incurring huge
expenditures without any mandatory initiative of the government. It is a
sharing of wealth by the business in favour of society at large.

Business Ethics – Golden Rules of Ethics

1. Everything you want others to do to you, you shall do to others.
2. Do not do to others that you do not want them to do to you.
3. Do not do anything to others that if done to you, would cause harm to you.
These rules have universal application.
Work Related Indian Ethos in Management:
i. All work is opportunity for doing well to the world and thus, giving materially
and spiritually in our lives.
ii. Strength and inspiration for excelling in work comes from Divine, God
within, through prayer, reading and unselfish work.
iii. He who works with calm and even mind, achieves the most.
iv. By mutual co-operation, respect and fellow- feeling, all of us will enjoy the
highest goal, both material and spiritual.

Business Ethics – 8 Important Techniques Used for Promotion of

Ethics: Vision and Mission Statements, Core Values, Business Policies
and Rules and a Few Others
Some of the techniques that can be used for promotion of ethics in
business are given below:
Technique # 1. Vision and Mission Statements:
A mission statement is a written statement of “what the business wants to be
and in which direction it will move.” Ethical principles can be incorporated in
the mission statement that will guide everybody in the enterprise for a long
period.
Technique # 2. Core Values:
These values specify the limits of ethical conduct and the priorities of a
business firm. If core values are ethical behaviour of people in the firm is likely
to be moralistic. For example, during the 1970s, the Articles of Association of
the major companies in the Tata Group stated “the company shall be mindful
of its moral and social responsibilities to the consumers, employees,
shareholders, community, and the society.”
Technique # 3. Business Policies and Rules:
The policies and rules are formulated to implement the core values. These
policies and rules should be just and fair so that ethical conduct becomes a
routine practice.
Technique # 4. Code of Conduct:
Code of ethics specifies standards that guide employees how to behave with
respect to certain matters and uncertain circumstances. It helps in maintaining
ethical behaviour in business.
Technique # 5. Grievance Redressal System:
Proper mechanisms are needed for the implementation of policies and rules in
the organisation. Grievance redressal system is one such mechanism. Any
employee who is not satisfied with any issue can appeal to the prescribed
authority. The authority shall redress the grievance within the prescribed time
period.
Technique # 6. Workshop for Resolution of Ethical Dilemma:
All ethical dilemmas cannot be anticipated and provided for in advance.
Therefore, periodic workshops should be conducted to help employees in
resolving the ethical dilemmas that occur from time to time.
Technique # 7. Training in Ethics:
Well-designed training programmes help to develop sensitivity to ethical
issues.
Technique # 8. Incentives and Penalties:
Ethical acts should be widely publicised and publicly rewarded. Similarly,
violation of ethical norms should be punished to discourage their occurrence.

Business Ethics – Criteria of Optimum Business Ethics

It is viewed, in the recent times, that business ethics should propose an
optimum mix of values taking into consideration real life situations. The greed
of human beings in general and business people in particular, needs to be
controlled.
1. Criteria of Truth:
Another universally accepted ethical principle is speaking and presenting the
truth. However, Indian tradition exempts from strictly speaking the truth, if it
adversely affects the greatest number of people and or the basic life of even a
few people. Speaking truth, in its turn emphasize transparency in business and
honesty in carrying out business transactions.
2. Criteria of Charity and Compassion:
Charity and compassion are regarded as essential ethical values by various
major religions like Buddhism, Christianity, Islam and Hinduism. Though
capitalist markets do not believe in these values, organisations in practice,
particularly in India, are more concerned with these ethical values.
3. Criteria of Trust and Co-Operation:
The values of trust and cooperation should be deep rooted and spread in all
directions of the business in order to run the business prudently and with care.
Adaptation of these values enhances business efficiency, trust of the customers
and all other stakeholders of a business organisation.

Business Ethics – Different Myths: Business and Ethics do not Mix with
Each Other, Ethics is Personal and Confined to Self and a Few Others
There are different views and concepts about ethics referred in business
performance.
Some of the myths as briefly described here:
Myth 1- Business and Ethics do not Mix with Each Other:
This concept is relevant to decades back. Presently, the business tasks and
operations are an integral part of society. The principles, concepts and values
of society is invariably applicable to business also. These social values are
based on ethics and as such, the business and ethics may be mixed each other
with their separate entity.
Myth 2- Ethics is Personal and Confined to Self:
An individual has a right to decide what is right and what is wrong within the
purview of social standards. All the legal aspects also recognises and confers
rights on our citizens to make choices and preferences. But it is not absolute to
make choices of right and wrong.
Individuals are the integral part of any group or organisation, which have some
norms, standards and values to govern what is acceptable and not
acceptable. So, probably the ethical norms, values and aspects are not
absolutely individual, there are certainly curbed to be restricted by groups and
as such, these are established, governed and directed by the group or any
organisation.
Myth 3- Good Business is Good Ethics:
Some time we can say that good business is called good ethics. Most of the
business firms acquired different achievements like productivity upgradation,
quality standards, customers’ satisfaction, product image and earn more profit.
They are not much concerned with ethics at their work places. Probably, it is
more likely to ascertain that good business is good ethics which may not be
correct. We can say that it is difficult to make a correlation between goodness
and some material and substance successes’.
Myth 4- Ethics in Business is Relative:
It is the most popular myth about business ethics that it is relative. The ethical
standards may have a different opinions. What is right in one place may be
wrong in another, and only the ethical standards for judging the criteria at a
particular situation is in which it has taken place. The relativity between
business and ethics are not acceptable at different situations.
Myth 5- Ethics Denotes a Conceptual Biased Only:
Many thinkers and philosophers believed that ethics had been a fad or
movement. Long ago ethics denotes conceptual ideas and beliefs. It was only a
complex philosophical debate or an issue. But now a days the ethics are being
practical submissions and relevance’s towards making goodness in society.
Myth 6- Business Ethics and Social Responsibilities are the Same
Thing:
Within business scenario, the concepts and appliances of social responsibilities
are based on social values and responsiveness. But the formulation of ethical
norms, code of conducts and value based approaches have a broader scenario
than the concept of social responsibility. Moreover, ethical norms provide the
directions and stimulate to fulfilment of social responsibilities. So ethics and
social responsibility have separate concepts and they are not the same thing.
Myth 7- Ethics cannot be Managed:
In our society, those persons who have oriented by traditional concepts and
indifferent attitudes argued that ethics cannot be implemented and managed.
But, those who believed in spiritual wisdoms and are having strong morale
influences may create and develop the ethical norms. Ethical values channelise
the individual energies into pursuits that are benign to others and beneficial to
the society. So, ethics can be managed.
Myth 8- Business Ethics is more a Matter of Religion and Culture,
than Management:
Some of the persons who are more oriented with ideologies of religion and
cultural values, have the concept that ethics are related with religion and
culture, not concerned with management. But with open and well concept, we
can say that ethics are needful to every part of human life. Moreover, in order
to make more perfections in management as well as in business also, there is
need to make ethical norms and behaviour.
Myth 9- Ethics is a Recent Phenomenon and it is Just Emerged:
It is fact that the term ethics was emerged long before i.e. almost before 2000
A.D. It was contributed the ideology and basic norms to create the
humanitarian grounds in society. Though, ethics is not a new concept but it has
recently emerged in dynamic forms to achieve perfections in human life within
the purview of business and management.

Business Ethics – Significance

The term, ‘ethics’ refers to the study of standards of conduct and morality. In
practice ethics is descriptive of the conduct one may expect from a reasonable
person under normal circumstances. In addition, many trade groups have
established codes of ethics that address specific areas peculiar to their business
or industry.
Ethics assists business persons in deciding when an act is moral or immoral,
socially desirable or not. Ethical behaviour in business is critical. When
business firms, large and small, are charged with various infractions and when
employees of those firms come under legal investigations there is a concern
raised about moral behaviour in business. Hence, the level of mutual trust,
which is the foundation of a modern market-based economy, is threatened.
Ethical behaviour does not cost money. Instead it adds to it. In contrast,
unethical behaviour, even if it seems to work in the short, does financial
damage for a long period. Those cheated are the shareholders themselves. So
managers need to be aware of what constitutes ethics and how organisations
can promote ethics.
Business ethics has gained importance for the business for the
following reasons:
(i) Ethics set standard as to what is good or bad in conduct and decision
making. An ethical issue is present in a situation when the actions of a person
or an organisation may harm or benefit others. There is no doubt that ethical
behaviour is worthwhile. Studies have shown a positive relationship between
ethical behaviour and leadership effectiveness. And unethical behaviour is
damaging at various levels.
The unethical behaviour of Enron, Union Carbide and other companies not
only cost many other organisations (its suppliers and distributors) and people
a great deal of money directly but it also hurts every investor and the whole
economy in more ways than one. This is why Mahatma Gandhi called business
without morality a sin.
Values and ethics are vitally important to effective leadership. People trust
others they believe have integrity. Today employees don’t feel safe to trust
managers. As R.N. Lussier has opined, “A broken promise or a lie results in a
loss of trust which is extremely difficult to regain. Honesty is the best policy
and some executives are building truth-telling cultures, as ethics impact the
bottom line.”
(ii) If a business is not ethical government intervention and legal actions
against it are inevitable.
One of the most important roles of managers is to practice ethical leadership.
Ethical leadership means that managers are honest and trustworthy, fair in
their dealings with employees and customers, and behave ethically at least in
professional lives. Managers and first-line supervisors are important role
models for ethical behaviour. So they strongly influence the ethical climate in
the organisation by adhering to high ethical standards in their own behaviour
and decisions. In addition, managers are proactive in influencing employees to
embody and reflect ethical values.
Finally, managers can also implement organisational mechanisms to help
employees and the company stays on an ethical footing. This is crucially
important for the company.

Business Ethics – Barriers and Solutions

Barriers to Business Ethics:
James A. Waters describes three “organisational blocks” that come
in the way of management ethics:
1. Chain of Command:
If employees know their managers are not following ethical behaviour, they
hesitate in reporting the matter to managers up in the hierarchy for fear of
being misunderstood and penalised. The chain of command is, thus, a barrier
where subordinates do not report unethical activities of superiors to top
executives.
2. Group Membership:
Informal groups in the formal organisation structure develops a group code of
ethics. The group members are so strongly bonded by their loyalty and respect
for each other that unethical behaviour of any member of the group is ignored
by others.
3. Ambiguous Priorities:
When company’s policies are unclear and ambiguous, employees’ behaviour
cannot be directed in a unified direction. It is difficult to understand what is
ethical and what is unethical in such situations.
Solutions to Barriers:
The following steps can improve the climate for ethical behaviour:
1. Organisational objectives and policies should be clearly laid down so that
every member of the organisation ethically works towards effective attainment
of the goals.
2. The behaviour of top managers is a precedent followed by others in the
organisation. Ethical actions of top managers will promote ethical behaviour
throughout the organisation.
3. Penalties and threats for non-conformance to ethical behaviour help in
reducing unethical activities in the organisation. Formal procedures of lodging
complaints will promote subordinates to report unethical behaviour of
superiors to the concerned committees.
4. Educational institutions can offer courses and training in business ethics to
create conscientious business managers.
https://www.toppr.com/guides/business-communication-and-
ethics/business-ethics/meaning-and-ethical-principles-in-
business/

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.

Quick summarywith stories

Concept of Business Ethics

3 mins read

Elements of Business Ethics

2 mins read
Browse more Topics under Business Ethics

• Essential Elements of Business Ethics Management

• Ethical Dilemma
• Ethics in various Departments
Ethics in Various Departments

Ethical Principles in Businesses from an Indian Perspective

Essentially, any businesses that run in India comprises of these 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.

Essential Elements of Business Ethics

Questions on Business Ethics
Q. The buzzword in ethics in the corporate world is because of:

A. Explosion in communication

B. Globalization

C. Both of the above

D. Either of the above

Answer: D. Either of the above

Q. The business should have which of the following approach?

A. Social responsibility

B. Earnings

C. Both a and b

D. None of the above

Answer: C. Both a and b